ATLAS ENERGY, S-1/A Filing by ATLS-Agreements

VIEWS: 18 PAGES: 386

									                                  As filed with the Securities and Exchange Commission on March 17, 2004
                                                          Registration No. 333-112653

                                     SECURITIES AND EXCHANGE COMMISSION
                                                             Washington, D.C. 20549



                                                               FORM S-1
                                                  REGISTRATION STATEMENT UNDER
                                                    THE SECURITIES ACT OF 1933

                                                            Amendment No. 1

                                                ATLAS AMERICA, INC.
                                               (Exact name of registrant as specified in its charter)

                 Delaware                                           1311                                           51-0404430
       (State or other jurisdiction of                       (Primary Standard                                  (I.R.S. Employer
      incorporation or organization)                      Industrial Classification                            Identification No.)
                                                               Code Number)

                                                              311 Rouser Road
                                                        Moon Township, PA 15108
                                                               (412) 262-2830
                                (Address, including zip code, and telephone number, including area code, of
                                                   registrant’s principal executive office)

                                                              Edward E. Cohen
                                                             Atlas America, Inc.
                                                              311 Rouser Road
                                                        Moon Township, PA 15108
                                                               (412) 262-2830
                       (Address, including zip code, and telephone number, including area code, of agent for service)

                                                  Please send copies of communications to:

                             J. Baur Whittlesey, Esq.                            Emanuel Faust, Jr., Esq.
                             Lisa A. Ernst, Esq                                  Dickstein Shapiro Morin &
                             Ledgewood Law Firm, P.C.                            Oshinsky LLP
                             1521 Locust Street                                  2101 L Street, N.W.
                             Philadelphia, PA 19102                              Washington, D.C. 20037
                             (215) 731-9450                                      (202) 785-9700

    Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes
effective.

    If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.

    If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

    If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.

    If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
    If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.

     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Back to Contents

     The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.

                                                 Subject to Completion, dated March 17, 2004

                                                      2,300,000 Shares of Common Stock

                                                          ATLAS AMERICA, INC.

   This is our initial public offering. We expect the public offering price to be between $14.00 and $16.00 per share. Currently, no public
market exists for the shares. We have applied to have our common stock approved for quotation on the Nasdaq Stock Market under the symbol
―ATLS.‖

    You should read ―Risk Factors‖ beginning on page 7 for a discussion of important factors that you should consider before buying
our common stock.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                                                                                                                 Per share          Total
Public offering price                                                                                        $                 $
Underwriting discounts                                                                                       $                 $
Proceeds, before expenses                                                                                    $                 $

    The underwriters may purchase up to an additional 345,000 shares from us at the public offering price, less the underwriting discount, to
cover over-allotments.

     The shares will be ready for delivery on or about _______ ___, 2004

Friedman Billings Ramsey                                                                             McDonald Investments Inc.


                                                    Prospectus dated _____________ , 2004
                            TABLE OF CONTENTS

SUMMARY                                                            2
RISK FACTORS                                                       7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS                 16
USE OF PROCEEDS                                                   17
CAPITALIZATION                                                    18
SELECTED CONSOLIDATED FINANCIAL DATA                              19
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS                                            22
BUSINESS                                                           35
MANAGEMENT                                                         51
RELATIONSHIP WITH RESOURCE AMERICA                                 57
PRINCIPAL STOCKHOLDER                                              64
DESCRIPTION OF CAPITAL STOCK                                       65
SHARES ELIGIBLE FOR FUTURE SALE                                    68
UNDERWRITING                                                       70
LEGAL MATTERS                                                      73
ENGINEERS                                                          73
EXPERTS                                                            73
WHERE YOU CAN FIND MORE INFORMATION                                73
GLOSSARY                                                           74
INDEX TO FINANCIAL STATEMENTS                                     F-1
Back to Contents

                                                                   SUMMARY

    This summary highlights selected information from this prospectus. You should carefully read the entire prospectus before making an
investment decision. Unless otherwise indicated, this prospectus reflects no exercise of the underwriters’ over-allotment option. We have
provided definitions for some of the oil and gas industry terms used in this prospectus in the “Glossary” beginning on page 74.

    In this prospectus, we refer to Atlas America, Inc, its subsidiaries and predecessors as “we,” “our” or “our company.” Our fiscal year
end is September 30.

                                                                  Our Company

     We are an independent energy company engaged in the development, production and transportation of natural gas and, to a lesser extent,
oil in the Appalachian Basin. Our objective is to increase stockholder value by:

    •    expanding our reserve base through developmental drilling primarily funded by growth in our sponsorship of drilling investment
         partnerships;

    •    increasing our fee-based revenue through the management of our drilling investment partnerships and the wells we drill for them; and

    •    increasing our distributions from our general and limited partner interests and incentive distribution rights in Atlas Pipeline Partners,
         L.P.

     We have been involved in the energy industry since 1968. We began to expand our operations at the end of fiscal 1998 when we acquired
The Atlas Group, Inc., an energy finance and production company located in Pittsburgh, Pennsylvania. Since fiscal 1998, we have achieved
consistent growth in our reserve base through developmental drilling activities, acquisitions of properties and, in 1999, the acquisition of
Viking Resources Corporation, a North Canton, Ohio exploration and production company. From October 1, 1998 through September 30,
2003, proved reserves net to our interest grew from 93.3 Bcfe to 144.4 Bcfe, and the PV-10 value of these reserves grew from $49.2 million to
$191.4 million. During the same period, proved reserves we manage for our drilling investment partnerships grew from 142.0 Bcfe to 187.8
Bcfe, and the PV-10 value of these reserves grew from $97.6 million to $273.5 million. As of December 31, 2003, we had an acreage position
of approximately 463,000 gross (411,000 net) acres, of which 235,000 gross (220,000 net) acres were undeveloped. We have also achieved
substantial growth in our drilling activities. The number of wells we have drilled, net to both our interest and that of our sponsored drilling
investment partnerships, increased from 145 wells in fiscal 1999 to 282 wells in fiscal 2003. We expect that we will drill approximately 530 of
such net wells in fiscal 2004, of which 111 were drilled during the three months ended December 31, 2003. Of the 1,234 gross wells we have
drilled since fiscal 1999, we have completed approximately 99% as producing.

    We conduct our natural gas transportation operations through Atlas Pipeline Partners, L.P., whose common units are publicly traded
(AMEX: APL). As of December 31, 2003, Atlas Pipeline Partners owned approximately 1,380 miles of intrastate gathering systems located in
our core New York, Ohio and Pennsylvania operating area to which approximately 4,500 natural gas wells were connected. The general partner
of Atlas Pipeline Partners, Atlas Pipeline Partners GP, LLC, is our wholly-owned subsidiary and conducts its operations using our personnel.
Atlas Pipeline Partners GP owns a substantial interest in Atlas Pipeline Partners, as follows:

    •    a combined 2% general partner interest in Atlas Pipeline Partners and its operating partnership;

                                                                         2
Back to Contents

    •    a 37% limited partner interest consisting of 1,641,026 subordinated units, all of which will convert to common units on January 1,
         2005 provided certain financial tests are met; and

    •    incentive distribution rights entitling it to an increasing share of distributions as target levels are met.

     Atlas Pipeline Partners has grown its gathering systems through both extensions to its existing systems to connect to wells drilled for our
drilling investment partnerships and acquisitions. Since its formation, Atlas Pipeline Partners has completed two acquisitions of 120 miles of
gathering systems: in January 2001 it acquired 100 miles of gathering systems in southeastern Ohio from Kingston Oil Corporation and in
March 2001 it acquired 20 miles of gathering systems in Fayette County, Pennsylvania from American Refining and Exploration Company.
Recently, Atlas Pipeline Partners entered into a purchase agreement with SEMCO Energy, Inc. (NYSE: SEN) to acquire Alaska Pipeline
Company for $95 million. Alaska Pipeline Company is the owner of an intrastate transmission system which delivers natural gas to
metropolitan Anchorage.

     We fund our drilling activities through the sponsorship of drilling investment partnerships. Although we have been raising capital through
drilling investment partnerships since 1968, the amount of capital raised through these partnerships has increased substantially since 1998. On a
calendar year basis, which is historically the basis of our fund-raising cycle, the amount of capital we have raised has increased from
$25.1 million in calendar 1998 to $75.1 million in calendar 2003. We act as the general partner of our sponsored drilling investment
partnerships and receive both an interest proportionate to the amount of capital and the value of the properties we contribute, typically 25%,
and a carried interest, typically 7%, both of which are subordinated to specified returns to the investor partners. In addition to providing capital
for our drilling activities, our drilling investment partnerships are a source of fee-based revenue. We drill all of the partnership wells under
―cost plus‖ contracts for which we are paid the costs of drilling the wells plus a fee equal to 15% of those costs. We also act as well operator
and partnership manager, for which we receive specified monthly per well operating and administrative fees.

                                                       Relationship with Resource America

    We are currently owned by a wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI). After the completion of this
offering, Resource America will own approximately 82.3% of the outstanding shares of our common stock, or 80.2% if the underwriters
exercise their over-allotment option.

    Resource America has advised us that it intends to distribute its remaining ownership interest in us to its common stockholders. Resource
America expects the distribution to take the form of a spin-off by means of a special dividend to Resource America common stockholders of all
of our common stock owned by Resource America. Resource America has advised us that it anticipates that the distribution will occur by the
end of 2004. Resource America has sole discretion if and when to complete the distribution and its terms. Resource America does not intend to
complete the distribution unless it receives a ruling from the Internal Revenue Service and/or an opinion from its tax counsel as to the tax-free
nature of the distribution to Resource America and its stockholders for U.S. federal income tax purposes. The Internal Revenue Service
requirements for tax-free distributions of this nature are complex and the Internal Revenue Service has broad discretion, so there is significant
uncertainty as to whether Resource America will be able to obtain such a ruling. Because of this uncertainty and the fact that the timing and
completion of the distribution is in Resource America’s sole discretion, we cannot assure you that the distribution will occur by the
contemplated time or at all. For a discussion of the distribution, see ―Risk Factors — Risks Relating to Our Relationship With Resource
America‖ and ―Relationship with Resource America.‖

                                                                           3
Back to Contents

    We believe that our separation from Resource America will enable us to realize the following benefits:

    •    Focused energy company . Our separation from Resource America will allow us to focus managerial attention solely on the needs of
         our business.

    •    Direct access to capital markets . As a separate public company, we will have direct access to the capital markets to issue equity or
         debt securities.

    •    Market recognition of the value of our business . As a separate, stand-alone company, we will offer a more focused investment
         opportunity than that currently presented by a more diversified Resource America. We expect that this will promote a more efficient
         equity valuation of our company.

    •    Increased ability to pursue strategic acquisitions . With the ability to issue our own stock as consideration for an acquisition, we
         expect to be better positioned to pursue strategic acquisitions to grow our business.

    •    Incentives for employees more directly linked to our performance . Our separation from Resource America will enable us to offer our
         employees incentive compensation more directly linked to the performance of our business. We believe that these incentives will also
         enhance our ability to attract and retain qualified personnel.

     Before the completion of this offering, we will enter into agreements with Resource America related to the separation of our business
operations from Resource America. These agreements will govern various interim and ongoing relationships between us. All of the agreements
relating to our separation from Resource America will be made in the context of a parent-subsidiary relationship and will be entered into in the
overall context of our separation from Resource America. Because of Resource America’s control of us, the terms of these agreements may be
more or less favorable to us than if they had been negotiated with unaffiliated third parties. See ―Risk Factors—Risks Relating to Our
Relationship with Resource America‖ and ―Relationship with Resource America.‖

                                                             Company Information

    We were incorporated in Delaware in September 2000 in order to become a holding company for Resource America’s energy assets and
subsidiaries. Our principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania. Our telephone number is (412)
262-2830.



                                                                  The Offering

                                                                      2,300,000 shares; 2,645,000 shares if the underwriters’ over-allotment
Common stock offered                                                  option is exercised in full.

Shares outstanding after this offering                                12,988,333 shares; 13,333,333 shares if the underwriters’
                                                                      over-allotment option is exercised in full.

Use of proceeds                                                       We expect to use the net proceeds from this offering to repay
                                                                      intercompany indebtedness to Resource America and distribute the
                                                                      balance to Resource America as a special dividend.

Risk factors                                                          An investment in our shares involves risks. Please read ―Risk Factors‖
                                                                      beginning on page 7 of this prospectus.

Nasdaq symbol                                                         ATLS



                                                                        4
Back to Contents

                                                                Summary Financial Information

     The following table sets forth summary financial data as of and for the three months ended December 31, 2003 and 2002 and the fiscal
years ended September 30, 2003, 2002, 2001, 2000 and 1999. We derived the financial data as of December 31, 2003 and for the three months
ended December 31, 2003 and 2002 from our unaudited financial statements which are included in this prospectus. We derived the financial
data as of September 30, 2003 and 2002 and for the years ended September 30, 2003, 2002 and 2001 from our financial statements, which were
audited by Grant Thornton LLP, independent accountants, and are included in this prospectus. We derived the financial data as of
September 30, 2001 and 2000 and for the year ended September 30, 2000 from our financial statements, which were audited by Grant Thornton
LLP, and are not included in this prospectus. We derived the financial data as of and for the year ended September 30, 1999 from the financial
statements of our predecessors for that period, Atlas America, Resource Energy, Inc. and Viking Resources, which, except for those of Viking
Resources, were audited by Grant Thornton LLP and are not included in this prospectus. We acquired Viking Resources on August 31, 1999.

                                     Three months ended
                                       December 31,                                                   Years ended September   30,
Statement of operations data:
                                    2003                 2002             2003               2002                   2001                2000            1999

                                           (unaudited)
Revenues:                                                                   (in thousands, except per share data)
Well drilling                   $    21,959       $        6,583      $    52,879      $       55,736          $     43,464         $    31,869     $    32,422
Gas and oil production               10,195                8,069           38,639              28,916                36,681              25,231          12,233
Well services                         1,979                1,899            7,634               7,585                 7,403               6,962           6,120
Transportation                        1,599                1,407            5,901               5,389                 5,715               4,770           3,310
Gas marketing                            —                    —                —                   —                  1,030               1,384          14,181
Other                                   127                  177              636               1,670                 1,596               1,044           1,326

Total revenues                       35,859               18,135          105,689              99,296                95,889              71,260          69,592

Costs and expenses:
Well drilling                        19,095                5,725           45,982              48,443                36,602              25,806          26,312
Gas and oil production
and exploration                       1,685                1,586            8,485               8,264                  7,846              8,339           5,366
Well services                         1,004                  839            3,774               3,747                  2,961              2,444           1,378
Transportation                          596                  590            2,444               2,052                  2,001              2,842             649
Gas marketing                            —                    —                —                   —                   1,007              1,195          13,666
Provision for possible
losses                                      —                    —               —                  (117 )                 263                 —               —
General and
administrative                             948             2,246            6,532               7,074                  9,559              7,752           5,887
Depreciation, depletion
and amortization                      3,245                2,872           11,595              10,836                10,782               9,781           5,513
Interest                                487                  629            1,961               2,200                 1,714               2,898           2,064
Minority interest in Atlas
Pipeline Partners                     1,271                     645         4,439               2,605                  4,099              2,058                —

Total costs and expenses             28,331               15,132           85,212              85,104                76,834              63,115          60,835

Income from continuing
 operations before income
 taxes and cumulative
 effect of a change in
 accounting principle                 7,528                3,003           20,477              14,192                19,055               8,145           8,757
Provision for income
 taxes                                2,635                     991         6,757               4,683                  6,613              3,300           3,199

Income from continuing
 operations before
 cumulative effect of a
 change in accounting
 principle                            4,893                2,012           13,720               9,509                12,442               4,845           5,558
Income (loss) from                       —                    —               192              (1,641 )              (1,030 )              (673 )            —
discontinued operations
Cumulative effect of a
change in accounting
principle, net of taxes         —           —            —         (627 ) (1)          —           —           —

Net income                $   4,893   $   2,012   $   13,912   $   7,241        $   11,412   $   4,172   $   5,558

Basic and diluted net
income per share          $     .46   $     .19   $     1.30   $     .68        $     1.07   $     .39   $     .52


                                                         5
Back to Contents


                                    Three months ended
                                      December 31,                                            Years ended September    30,
Operating data:
                                   2003                    2002          2003          2002               2001               2000          1999

 Net production:
 Natural gas (Mmcf) (2)              1,792                   1,780         6,967         7,117                 6,343           6,440         4,342
 Oil (Mbbls)                            42                      41           160           173                   177             196            85
Total (Mmcfe)                        2,042                   2,027         7,927         8,154                 7,407           7,616         4,853
Average sales price:
 Natural gas (per Mcf) (3)    $       5.06       $            3.96   $      4.92   $      3.56       $          5.04     $      3.15   $      2.37
 Oil (per Bbl)                       26.94                   24.71         26.91         20.45                 25.56           24.50         14.57

Other financial
 information (in
 thousands):
Net cash provided by
 operating activities         $     34,705       $          15,229   $    49,174   $     5,452       $      36,190       $    17,157   $    15,630
Capital expenditures          $     10,807       $           4,100   $    28,029   $    21,291       $      14,050       $    10,935   $    11,455
EBITDA (4)                    $     11,260       $           6,504   $    34,033   $    27,228       $      31,551       $    20,824   $    16,334



                                      December       31,                                           September     30,

                                   2003                    2002          2003          2002               2001               2000          1999

                                          (unaudited)                                               (in thousands)
Balance sheet data:
Total assets                  $    230,773       $         225,185   $   232,388   $   192,614       $    199,785        $   158,503   $   155,022

Long-term debt (including
 current maturities)          $     19,180       $          58,255   $    31,194   $    49,505       $      43,284       $    23,506   $    45,511

Stockholder’s equity          $     79,572       $          74,584   $    87,511   $    73,366       $      66,347       $    54,925   $    50,773


(1) Represents write-down of goodwill, net of taxes, by our former technology subsidiary in connection with its adoption of SFAS 142.
(2) Excludes sales of residual gas and sales to landowners.
(3) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57, $5.13, $3.15 and $2.37 for the fiscal years ended 2003, 2002, 2001, 2000 and 1999, respectively.
(4) See note 3 to ―Selected Consolidated Financial Data‖ for a definition of EBITDA and a reconciliation of EBITDA to our income.

                                                                            6
Back to Contents

                                                                   RISK FACTORS

    You should carefully consider each of the risks described below, together with all of the other information contained in this prospectus,
before deciding to invest in shares of our common stock. If any of the following risks develop into actual events, our business, financial
condition or results of operations could be materially adversely affected, the trading price of your shares could decline and you may lose all or
part of your investment.

                                                            Risks Relating to Our Business

    Natural gas and oil prices are volatile. A substantial decrease in prices, particularly natural gas prices, would decrease our revenues
and the value of our natural gas and oil properties and could make it more difficult for us to obtain financing for our drilling operations
through drilling investment partnerships.

     Our future financial condition and results of operations, and the value of our natural gas and oil properties, will depend upon market prices
for natural gas and oil. Natural gas and oil prices historically have been volatile and will likely continue to be volatile in the future. Prices we
have received during our past three fiscal years for our natural gas have ranged from a high of $6.12 per Mcf in the quarter ended March 31,
2001 to a low of $3.39 per Mcf in the quarter ended December 31, 2001. Prices for natural gas and oil are dictated by supply and demand. The
factors affecting supply include:

    •    the availability of pipeline capacity;

    •    domestic and foreign governmental regulations and taxes;

    •    political instability or armed conflict in oil producing regions or other market uncertainties; and

    •    the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil prices and production
         controls.

    The factors affecting demand include:

    •    weather conditions;

    •    the price and availability of alternative fuels;

    •    the price and level of foreign imports; and

    •    the overall economic environment.

     These factors and the volatility of the energy markets make it extremely difficult to predict future oil and gas price movements with any
certainty. Price fluctuations can materially adversely affect us because:

    •    price decreases will reduce the amount of cash flow available to us for drilling and production operations and for our capital
         contributions to our drilling investment partnerships;

                                                                          7
Back to Contents

    •    price decreases may make it more difficult to obtain financing for our drilling and development operations through sponsored drilling
         investment partnerships, borrowing or otherwise;

    •    price decreases may make some reserves uneconomic to produce, reducing our reserves and cash flow; and

    •    price decreases may cause the lenders under our credit facility to reduce our borrowing base because of lower revenues or reserve
         values, reducing our liquidity and, possibly, requiring mandatory loan repayment.

    Further, oil and gas prices do not necessarily move in tandem. Because approximately 92% of our proved reserves are currently natural gas
reserves, we are more susceptible to movements in natural gas prices.

Drilling wells is highly speculative.

     The amount of recoverable natural gas and oil reserves may vary significantly from well to well. While our average estimated ultimate
recovery from our wells is 150 Mmcfe per well, recoverable natural gas from individual wells ranges up to 1.556 Bcfe. We may drill wells that,
while profitable on an operating basis, do not produce sufficient net revenues to return a profit after drilling, operating and other costs are taken
into account. The geologic data and technologies available do not allow us to know conclusively before drilling a well that natural gas or oil is
present or may be produced economically. The cost of drilling, completing and operating a well is often uncertain. For example, we have
recently experienced an increase in the cost of tubular steel as a result of rising steel prices which will increase well costs. Further, our drilling
operations may be curtailed, delayed or cancelled as a result of many factors, including:

    •    title problems;

    •    environmental or other regulatory concerns;

    •    costs of, or shortages or delays in the availability of, oil field services and equipment;

    •    unexpected drilling conditions;

    •    unexpected geological conditions;

    •    adverse weather conditions; and

    •    equipment failures or accidents.

Any one or more of the factors discussed above could reduce or delay our receipt of drilling and production revenues, thereby reducing our
earnings and could reduce revenues in one or more of our drilling investment partnerships, which may make it more difficult to finance our
drilling operations through sponsorship of future partnerships.

Properties that we acquire may not produce as projected, and we may be unable to identify liabilities associated with the properties or obtain
protection from sellers against them.

                                                                          8
Back to Contents

    As part of our business strategy, we continually seek acquisitions of gas and oil properties. We completed two such acquisitions in fiscal
2001, one from Kingston Oil Corporation and one from American Refining and Exploration Company, and have acquired two oil and gas
companies, Viking Resources in fiscal 1999 and The Atlas Group in fiscal 1998, that owned substantial natural gas and oil properties. The
successful acquisition of natural gas and oil properties requires assessment of many factors, which are inherently inexact and may be
inaccurate, including the following:

    •    future oil and natural gas prices;

    •    the amount of recoverable reserves;

    •    future operating costs;

    •    future development costs;

    •    costs and timing of plugging and abandoning wells; and

     • potential environmental and other liabilities.
     Our assessment will not necessarily reveal all existing or potential problems, nor will it permit us to become familiar enough with the
properties to assess fully their capabilities and deficiencies. With respect to properties on which there is current production, we may not inspect
every well, platform or pipeline in the course of our due diligence. Inspections may not reveal structural and environmental problems such as
pipeline corrosion or groundwater contamination. We may not be able to obtain or recover on contractual indemnities from the seller for
liabilities that it created. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the
properties may not perform in accordance with our expectations.



Estimates of proved reserves are uncertain and, as a result, revenues from production may vary significantly from our expectations.

    We base our estimates of our proved natural gas and oil reserves and future net revenues from those reserves upon analyses that rely upon
various assumptions, including those required by the Securities and Exchange Commission, as to natural gas and oil prices, taxes, development
expenses, capital expenses, operating expenses and availability of funds. Any significant variance in these assumptions, and, in our case,
assumptions concerning natural gas prices, could materially affect the estimated quantity of our reserves. As a result, our estimates of our
proved natural gas and oil reserves are inherently imprecise. Actual future production, natural gas and oil prices, taxes, development expenses,
operating expenses, availability of funds and quantities of recoverable natural gas and oil reserves may vary substantially from our estimates or
estimates contained in the reserve reports referred to elsewhere in this prospectus. Our properties also may be susceptible to hydrocarbon
drainage from production by other operators on adjacent properties. In addition, our proved reserves may be revised downward or upward
based upon production history, results of future exploration and development, prevailing natural gas and oil prices, governmental regulation
and other factors, many of which are beyond our control.

    At September 30, 2003, approximately 32% of our estimated proved reserves were undeveloped. Recovery of undeveloped reserves
generally requires significant capital expenditures and successful drilling operations. The reserve data assumes that we will obtain the
necessary capital and conduct these operations successfully which, for the reasons discussed elsewhere in this ―- Risks Relating to Our
Business‖ section, may not occur.

If we cannot replace reserves, our revenues and production will decline.

                                                                         9
Back to Contents

    Our proved reserves will decline as reserves are produced unless we acquire or lease additional properties containing proved reserves,
successfully develop new or existing properties or identify additional formations with primary or secondary reserve opportunities on our
properties. If we are not successful in expanding our reserve base, our future natural gas and oil production and drilling activities, the primary
source of our energy revenues, will decrease. Our ability to find and acquire additional reserves depends on our generating sufficient cash flow
from operations and other sources of capital, principally our sponsored drilling investment partnerships, all of which are subject to the risks
discussed elsewhere in this subsection of the prospectus.

If we are unable to acquire assets from others or obtain capital funds through our drilling investment partnerships, our revenues may
decline.

    The growth of our energy operations has resulted from both our acquisition of energy companies and assets and from our ability to obtain
capital funds through our sponsored drilling investment partnerships. If we are unable to identify acquisitions on acceptable terms, or cannot
obtain sufficient capital funds through sponsored drilling investment partnerships, we may be unable to increase or maintain our inventory of
properties and reserve base, or be forced to curtail drilling, production or other activities. This would result in a decline in our revenues.

Changes in tax laws may impair our ability to obtain capital funds through our drilling investment partnerships.

    Under current federal tax laws, there are tax benefits to investing in drilling investment partnerships such as those we sponsor, including
deductions for intangible drilling costs and depletion deductions. Changes to federal tax law that reduce or eliminate these benefits may make
investment in our drilling investment partnerships less attractive and, thus, reduce our ability to obtain funding from this significant source of
capital funds. A recent change to federal tax law that may affect us is the Jobs and Growth Tax Relief Reconciliation Act of 2003, which
reduced the maximum federal income tax rate on long-term capital gains and qualifying dividends to 15% through 2008. These changes may
make investment in our drilling investment partnerships relatively less attractive than investments in assets likely to yield capital gains or
qualifying dividends.

Competition in the oil and natural gas industry is intense, which may hinder our ability to acquire gas and oil properties and companies
and to obtain capital.

     We operate in a highly competitive environment for acquiring properties and other natural gas and oil companies and attracting capital
through our drilling investment partnerships. For example, we have been advised by the Pennsylvania Bureau of Oil and Gas Management that
there are 645 well operators currently bonded in Pennsylvania, one of our core operating areas. We also compete with the exploration and
production divisions of public utility companies for natural gas and oil property acquisitions. Our competitors may be able to pay more for
natural gas and oil properties and to evaluate, bid for and purchase a greater number of properties than our financial or personnel resources
permit. Moreover, our competitors for investment capital may have better track records in their programs, lower costs or better connections in
the securities industry segment that markets oil and gas investment programs than we do. We may not be able to compete successfully in the
future in acquiring prospective reserves and raising additional capital.

We could incur losses from our arrangements for transporting natural gas.

    We pay transportation fees, which are based on gas sales prices, to Atlas Pipeline Partners for natural gas produced by our drilling
investment partnerships and certain unaffiliated producers. If natural gas prices increase 87% or more from prices obtained in fiscal 2003, the
fees we pay to Atlas Pipeline Partners could exceed the transportation fees paid to us, reimbursements and distributions to us from our general
and limited partner interests in Atlas Pipeline Partners, and connection costs and other expenses paid by Atlas Pipeline Partners.

                                                                        10
Back to Contents

We may be exposed to financial and other liabilities as the general partner in drilling investment partnerships.

     We currently serve as the managing general partner of 84 drilling investment partnerships and will be the general partner of new drilling
investment partnerships that we sponsor. As general partner, we are contingently liable for the obligations of these partnerships to the extent
that partnership assets or insurance proceeds are insufficient.

We are subject to complex laws that can affect the cost, manner or feasibility of doing business.

    Exploration, development, production and sale of natural gas and oil are subject to extensive federal, state and local regulation. We discuss
our regulatory environment in more detail in ―Business — Governmental Regulation.‖ We may be required to make large expenditures to
comply with these regulations. Failure to comply with these regulations may result in the suspension or termination of our operations and
subject us to administrative, civil and criminal penalties. Other regulations may limit our operations. For example, ―frost laws‖ prohibit drilling
and other heavy equipment from using certain roads during winter, a principal drilling season for us, which may delay us in drilling and
completing wells. Moreover, governmental regulations could change in ways that substantially increase our costs, thereby reducing our return
on invested capital, revenues and net income.

Our operations may incur substantial liabilities to comply with environmental laws and regulations.

     Our natural gas and oil operations are subject to stringent federal, state and local laws and regulations relating to the release or disposal of
materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a
permit before drilling commences, restrict the types, quantities, and concentration of substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and
other protected areas, and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and
regulations may result in the assessment of administrative, civil, and criminal penalties, incurrence of investigatory or remedial obligations, or
the imposition of injunctive relief. Changes in environmental laws and regulations occur frequently, and any changes that result in more
stringent or costly waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to
maintain compliance or could restrict our methods or times of operation. Under these environmental laws and regulations, we could be held
strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were
responsible for the release or if our operations were standard in the industry at the time they were performed. We discuss the environmental
laws that affect our operations in more detail under ―Business—Environmental and Safety Regulation.‖

    Pollution and environmental risks generally are not fully insurable. We may elect to self-insure if we believe that insurance, although
available, is excessively costly relative to the risks presented. The occurrence of an event that is not covered, or not fully covered, by insurance
could reduce our revenues and the value of our assets.

Well blowouts, pipeline ruptures and other operating and environmental problems could result in substantial losses to us.

                                                                          11
Back to Contents

    Well blowouts, cratering, explosions, uncontrollable flows of natural gas, oil or well fluids, fires, formations with abnormal pressures,
pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks are inherent operating hazards for us. The
occurrence of any of those hazards could result in substantial losses to us, including liabilities to third parties or governmental entities for
damages resulting from the occurrence of any of those hazards and substantial investigation, litigation and remediation costs.

We may be required to write-down the carrying value of our proved properties; any such write-downs would be a charge to our earnings.

    We may be required to write-down the carrying value of our natural gas and oil properties when natural gas and oil prices are low. In
addition, write-downs may occur if we have:

    •    downward adjustments to our estimated proved reserves;

    •    increases in our estimates of development costs; or

    •    deterioration in our exploration and development results.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oil field services could delay our exploration
and development plans and decrease net revenues from drilling operations.

    Shortages of drilling rigs, equipment, supplies or personnel could delay our development and exploration plans, thereby reducing our
revenues from drilling operations and delaying our receipt of production revenues from wells we planned to drill. Moreover, increased costs,
whether due to shortages or other causes, will reduce the number of wells we can drill for existing drilling investment partnerships and, by
making our drilling investment partnerships less attractive as investments, may reduce the amount of financing for drilling operations we can
obtain from them. This may reduce our revenues not only from drilling operations but also, if fewer wells are drilled, from production of
natural gas and oil.

                                         Risks Relating to Our Relationship with Resource America

Our principal stockholder is in a position to affect our ongoing operations, corporate transactions and other matters.

    After giving effect to this offering, our principal stockholder, Resource America, will own approximately 82.3% of our outstanding shares
of common stock, or 80.2% if the underwriters exercise their over-allotment option in full. As a result, Resource America will be able to
determine the outcome of all corporate actions requiring stockholder approval. For example, Resource America will continue to control
decisions with respect to:

    •    the election and removal of directors;

    •    mergers or other business combinations involving us;

    •    future issuances of our common stock or other securities; and

    •    amendments to our certificate of incorporation and bylaws.

                                                                         12
Back to Contents

     Any exercise by Resource America of its control rights may be in its own best interest which may not be in the best interest of our other
stockholders and our company. Resource America’s ability to control our company may also make investing in our stock less attractive. These
factors in turn may have an adverse affect on the price of our common stock. Resource America’s control rights will continue until it distributes
its remaining ownership interest in us to its common stockholders or otherwise disposes of it. While Resource America intends to make the
distribution, it is not obligated to do so. See ―— Resource America may not complete its intended distribution of its holdings of our common
stock, which would result in its continued control of us.‖

Potential conflicts may arise between us and Resource America that may not be resolved in our favor.

     The relationship between us and Resource America may give rise to conflicts of interest with respect to, among other things, transactions
and agreements among us and Resource America, issuances of additional voting securities and the election of directors. When the interests of
Resource America diverge from our interests, Resource America may exercise its substantial influence and control over us in favor of its own
interests over our interests.

Our intercompany agreements with Resource America are not the result of arm’s-length negotiations.

     We have entered or will enter into agreements with Resource America which will govern various transactions between us and our ongoing
relationship following completion of this offering, including registration rights, tax separation and indemnification. All of these agreements
were or will be entered into while we are a wholly-owned subsidiary of Resource America, and were or will be negotiated in the overall context
of this offering and the proposed distribution by Resource America of its interest in us to its stockholders described in ―Relationship with
Resource America.‖ As a result of our current status as a wholly-owned subsidiary of Resource America which is subject to its control, these
agreements may have terms and conditions that may be less favorable to us than agreements that we might have negotiated at arm’s-length with
independent parties. We and Resource America and its other affiliates may enter into other material transactions and agreements from time to
time in the future which also may not be deemed to be independently negotiated.

Our agreements with Resource America may limit our ability to obtain capital or make acquisitions.

    Our business strategy anticipates future acquisitions of natural gas and oil properties and companies. Any acquisition that we undertake
could be subject to our ability to access capital from outside sources on acceptable terms through the issuance of our common stock or other
securities. However, for the proposed distribution of Resource America’s common stock in us to its stockholders to be tax-free to them,
Resource America must, among other things, own at least 80% of all of our voting power at the time of the distribution. Therefore, until such
time that Resource America informs us that it will not complete the distribution, which will be in Resource America’s discretion, we will be
limited in our ability to issue voting securities, non-voting stock or convertible debt without Resource America’s prior consent, and Resource
America may be unwilling to give that consent. In addition, our agreements with Resource America prohibit us from making acquisitions that
would jeopardize the tax-free status of the distribution. See ―Relationship with Resource America—Tax Matters Agreement.‖

Resource America may not complete its intended distribution of its holdings of our common stock, which would result in its continued
control of us.

                                                                       13
Back to Contents

     Resource America intends to distribute to its stockholders all of our common stock it owns by the end of 2004. However, Resource
America is not obligated to make the distribution at any particular time, or at all, and, as a result, the distribution may not occur at any
particular time, or at all. Resource America has advised us that it does not intend to complete the distribution unless it receives a ruling from
the Internal Revenue Service and/or an opinion from its tax counsel as to the tax-free nature of the distribution to Resource America and its
stockholders for U.S. federal income tax purposes. Because the Internal Revenue Service requirements for tax-free distributions of this nature
are complex and the Internal Revenue Service has broad discretion, there is significant uncertainty as to whether Resource America will be able
to obtain such a ruling.

    Unless and until the distribution occurs, we will face the risks discussed in this prospectus relating to Resource America’s control of us and
potential conflicts of interest between Resource America and us. If the distribution is delayed or not completed at all, the liquidity of shares of
our common stock in the market may be constrained for as long as Resource America continues to hold a significant position in our stock. A
lack of liquidity in the market for our common stock may adversely affect our stock price.

                                           Risks Relating to the Offering and Our Common Stock

The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering. In
addition, our stock price may be volatile.

     Before this offering, Resource America held all of our outstanding common stock and, therefore, there has been no public market for our
common stock. An active market for our common stock may not develop or may not be sustained after this offering. The initial public offering
price of our common stock will be determined by negotiations between us and representatives of the underwriters, based on numerous factors
which we discuss in the ―Underwriting‖ section of this prospectus. This price may not be indicative of the market price for our common stock
after this initial public offering. The market price of our common stock could be subject to significant fluctuations after this offering, and may
decline below the initial public offering price. You may not be able to resell your shares at or above the initial public offering price. The
following factors could affect our stock price:

    •    our operating and financial performance and prospects;

    •    quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

    •    changes in revenue or earnings estimates or publication of research reports by analysts;

    •    liquidity and activity in the market for our common stock;

    •    speculation in the press or investment community;

    •    sales of our common stock by Resource America or other stockholders;

    •    actions by institutional investors or by Resource America before its disposition of our common stock;

    •    general market conditions, including fluctuations in and the occurrence of events or trends affecting the price of natural gas and oil;
         and

    •    domestic and international economic, legal and regulatory factors unrelated to our performance.

                                                                        14
Back to Contents

   Stock markets in general experience volatility that often is unrelated to the operating performance of particular companies. These broad
market fluctuations may adversely affect the trading price of our common stock.

The net proceeds of this offering will be used to repay our indebtedness, and make a distribution, to Resource America and will not be
available to invest in and expand our business.

     We will use the proceeds of this offering, after underwriting discounts and commissions and offering expenses payable by us, to repay all
intercompany indebtedness that we owe to Resource America. The balance will be distributed to Resource America in accordance with the
master separation and distribution agreement discussed in ―Relationship with Resource America — Master Separation and Distribution
Agreement.‖ As a result, we will not have any of the proceeds of this offering available to us for investment in and expansion of our operations.

Provisions in our organizational documents, Delaware law and agreements we will enter into with Resource America could delay or prevent
a change in control of our company, which may result in reduced prices being obtainable for our common stock.

     The existence of some provisions in our organizational documents and under Delaware law could delay or prevent a change in control of
our company, which may result in reduced prices being obtainable for our common stock. The provisions in our certificate of incorporation and
bylaws that could delay or prevent an unsolicited change in control of our company include a staggered board of directors, board authority to
issue preferred stock, advance notice provisions for director nominations or business to be considered at a stockholder meeting and
supermajority voting requirements. In addition, Delaware law imposes some restrictions on mergers and other business combinations between
us and any holder of 15% or more of our outstanding common stock. See ―Description of Capital Stock—Preferred Stock‖ and ―Description of
Capital Stock—Delaware Anti-Takeover Law and Charter and Bylaw Provisions.‖ Also, certain terms of the agreements between us and
Resource America will have the effect of making it more difficult to effect a change in control of our company. Such terms include the right of
Resource America to prohibit transactions having the effect of diluting its ownership interest in us, and the option grant to Resource America to
participate in offerings of equity securities by us to the extent necessary to maintain its ownership interest in us. See ―Relationship With
Resource America — Master Separation and Distribution Agreement‖ and ―– Tax Matters Agreement.‖

Sales of substantial amounts of our common stock in the public markets, including by Resource America, or the perception that they might
occur could reduce the price our common stock might otherwise obtain.

     Sales by Resource America or, if Resource America completes the distribution, sales in the public market by its stockholders following the
distribution, or the perception that such sales might occur, could reduce the price that our common stock might otherwise obtain or could
impair our ability to obtain capital through an offering of equity securities. Resource America currently intends to distribute all of its remaining
interest in us to its stockholders. We do not know what impact Resource America’s planned or actual divestiture will have on our stock price in
the future. See ―Shares Eligible for Future Sale.‖

                                                                         15
Back to Contents

                                  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our
control, which may include statements about our:

    •    business strategy;

    •    reserves;

    •    properties;

    •    financial strategy;

    •    realized oil and natural gas prices;

    •    production;

    •    future operating results; and

    •    plans, objectives, expectations and intentions that are not historical.

    These statements also include statements regarding the future intentions of Resource America with respect to us or its interest in us.

     All statements, other than statements of historical fact included in this prospectus, regarding strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans and objectives of management or plans and intentions of Resource America are
forward-looking statements. When used in this prospectus, the words ―could,‖ ―believe,‖ ―anticipate,‖ ―intend,‖ ―estimate,‖ ―expect,‖ ―project‖
and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such
identifying words. All forward-looking statements speak only as of the date of this prospectus. We disclose important factors that could cause
our actual results to differ materially from our expectations under ―Risk Factors,‖ ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations‖ and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements
attributable to us, persons acting on our behalf or, where indicated, Resource America.

                                                                         16
Back to Contents

                                                             USE OF PROCEEDS

    We estimate that the net proceeds from our sale of 2,300,000 shares of common stock in this offering at an initial public offering price of
$15.00 per share, the mid-point of the expected range of offering prices set forth on the cover page of this prospectus, after deducting
underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $31.5 million and
approximately $36.3 million if the underwriters exercise in full their option to purchase 345,000 additional shares. We expect to use the net
proceeds to repay all intercompany indebtedness to Resource America, which was $790,000 at December 31, 2003, and distribute the balance
to Resource America in accordance with the master separation and distribution agreement. See ―Relationship with Resource America —
Master Separation and Distribution Agreement.‖

                                                                       17
Back to Contents

                                                               CAPITALIZATION

     The following table presents our capitalization as of December 31, 2003 on an actual basis and on a pro forma basis giving effect to this
offering at a price of $15.00 per share, the mid-point of the expected range of offering prices set forth on the cover page of this prospectus, net
of estimated offering expenses and underwriting discounts and commissions, and the distribution, upon completion of the offering, of
$31.5 million to Resource America.

    You should read this table in conjunction with our consolidated financial statements included in this prospectus.

                                                                                               As of December    31, 2003

                                                                                                                                     % of total
                                                                          Actual           Adjustments              Pro forma      capitalization

                                                                                                 (dollars in thousands)
Cash and cash equivalents                                             $        16,379                           $         16,379

Advances from parent                                                  $           790            ($790 ) (2)                  —              0.00 %
Current portion of long-term debt                                                  56               —                         56             0.06 %
Long-term debt                                                                 19,124               —                     19,124            19.21 %

  Total debt                                                                   19,970             (790 )                  19,180            19.27 %

Stockholders’ equity:
  Preferred stock $0.01 par value, 1,000,000
     authorized shares                                                             —                 —                       —                0.00 %
  Common stock, $0.01 par value, 49,000,000
     authorized shares and 10,688,333 shares
     issued and outstanding                                                       107               23 (1)                   130             0.13 %
  Additional paid-in capital                                                   38,619           31,507 (1)                70,126            70.45 %
  Retained earnings                                                            40,846          (30,740 ) (2)              10,106            10.15 %

    Total stockholders’ equity                                                 79,572              790                    80,362            80.73 %

      Total capitalization                                            $        99,542                —          $         99,542           100.00 %


(1) Reflects the issuance of 2.3 million shares in this offering.
(2) Reflects the distribution of all net proceeds to Resource America in accordance with the master separation and distribution agreement. See
    ―Use of Proceeds‖ and ―Relationship with Resource America.‖

                                                                          18
Back to Contents

                                                 SELECTED CONSOLIDATED FINANCIAL DATA

     The following table sets forth selected financial data as of and for the three months ended December 31, 2003 and 2002 and the fiscal years
ended September 30, 2003, 2002, 2001, 2000 and 1999. We derived the financial data as of December 31 2003 and 2002 and for the three
months ended December 31, 2003 and 2002 from our unaudited financial statements which are included in this prospectus. We derived the
financial data as of September 30, 2003 and 2002 and for the years ended September 30, 2003, 2002 and 2001 from our financial statements,
which were audited by Grant Thornton LLP, independent accountants, and are included in this prospectus. We derived the financial data as of
September 30, 2001 and 2000 and for the year ended September 30, 2000 from our financial statements, which were audited by Grant Thornton
LLP, and are not included in this prospectus. We derived the financial data as of and for the year ended September 30, 1999 from the financial
statements of our predecessors for that period, Atlas America, Resource Energy and Viking Resources, which, except for those of Viking
Resources, were audited by Grant Thornton LLP and are not included in this prospectus. We acquired Viking Resources on August 31, 1999.

                                     Three months ended
                                       December 31,                                                   Years ended September   30,
Statement of operations data:
                                    2003                 2002             2003               2002                   2001                2000            1999

                                           (unaudited)
Revenues:                                                                   (in thousands, except per share data)
Well drilling                   $    21,959       $        6,583      $    52,879      $       55,736          $     43,464         $    31,869     $    32,422
Gas and oil production               10,195                8,069           38,639              28,916                36,681              25,231          12,233
Well services                         1,979                1,899            7,634               7,585                 7,403               6,962           6,120
Transportation                        1,599                1,407            5,901               5,389                 5,715               4,770           3,310
Gas marketing                            —                    —                —                   —                  1,030               1,384          14,181
Other                                   127                  177              636               1,670                 1,596               1,044           1,326

Total revenues                       35,859               18,135          105,689              99,296                95,889              71,260          69,592

Costs and expenses:
Well drilling                        19,095                5,725           45,982              48,443                36,602              25,806          26,312
Gas and oil production
 and exploration                      1,685                1,586            8,485               8,264                  7,846              8,339           5,366
Well services                         1,004                  839            3,774               3,747                  2,961              2,444           1,378
Transportation                          596                  590            2,444               2,052                  2,001              2,842             649
Gas marketing                            —                    —                —                   —                   1,007              1,195          13,666
Provision for possible
losses                                      —                    —               —                  (117 )                 263                 —               —
General and
administrative                             948             2,246            6,532               7,074                  9,559              7,752           5,887
Depreciation, depletion
 and amortization                     3,245                2,872           11,595              10,836                10,782               9,781           5,513
Interest                                487                  629            1,961               2,200                 1,714               2,898           2,064
Minority interest in Atlas
 Pipeline Partners                    1,271                     645         4,439               2,605                  4,099              2,058                —

Total costs and expenses             28,331               15,132           85,212              85,104                76,834              63,115          60,835

Income from continuing
 operations before income
 taxes and cumulative
 effect of a change in
 accounting principle                 7,528                3,003           20,477              14,192                19,055               8,145           8,757
Provision for income
 taxes                                2,635                     991         6,757               4,683                  6,613              3,300           3,199

Income from continuing
 operations before
 cumulative effect of a
 change in accounting
 principle                            4,893                2,012           13,720               9,509                12,442               4,845           5,558
Income (loss) from                       —                    —               192              (1,641 )              (1,030 )              (673 )            —
discontinued operations
Cumulative effect of a
change in accounting
principle, net of taxes         —           —            —         (627 ) (1)          —           —           —

Net income                $   4,893   $   2,012   $   13,912   $   7,241        $   11,412   $   4,172   $   5,558

Basic and diluted net
income per share          $     .46   $     .19   $     1.30   $     .68        $     1.07   $     .39   $     .52


                                                         19
Back to Contents

                                     Three months ended
                                       December 31,                                               Years ended September    30,
Operating data:
                                    2003                    2002          2003             2002               2001               2000          1999

 Net production:
 Natural gas (Mmcf) (2)                1,792                  1,780         6,967             7,117                6,343           6,440         4,342
 Oil (Mbbls)                              42                     41           160               173                  177             196            85
Total (Mmcfe)                          2,042                  2,027         7,927             8,154                7,407           7,616         4,853
Average sales price:
 Natural gas (per Mcf) (3)      $       5.06      $            3.96   $      4.92     $        3.56      $          5.04     $      3.15   $      2.37
 Oil (per Bbl)                         26.94                  24.71         26.91             20.45                25.56           24.50         14.57

Other financial
 information (in
 thousands):
Net cash provided by
 operating activities           $     34,705      $          15,229   $    49,174     $       5,452      $      36,190       $    17,157   $    15,630
Capital expenditures            $     10,807      $           4,100   $    28,029     $      21,291      $      14,050       $    10,935   $    11,455
EBITDA (4)                      $     11,260      $           6,504   $    34,033     $      27,228      $      31,551       $    20,824   $    16,334

                                       December       31,                                              September     30,

                                    2003                    2002          2003             2002               2001               2000          1999

                                           (unaudited)
                                                                                    (in thousands)
Balance sheet data:
Total assets                    $   230,773       $         225,185   $   232,388     $    192,614       $    199,785        $   158,503   $   155,022

Long-term debt (including
 current maturities)            $     19,180      $          58,255   $    31,194     $      49,505      $      43,284       $    23,506   $    45,511

Stockholder’s equity            $     79,572      $          74,584   $    87,511     $      73,366      $      66,347       $    54,925   $    50,773


(1) Represents write-down of goodwill, net of taxes, by our former technology subsidiary in connection with its adoption of SFAS 142.
(2) Excludes sales of residual gas and sales to landowners.
(3) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57, $5.13, $3.15 and $2.37 for the fiscal years ended 2003, 2002, 2001, 2000 and 1999, respectively.
(4) We define EBITDA as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is not a measure of performance
    calculated in accordance with generally accepted accounting principles in the United States, or GAAP. Although not prescribed under
    GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors to understand our operating
    performance and makes it easier to compare our results with other companies that have different financing and capital structures or tax
    rates. EBITDA should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash
    flows from operating activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA measures
    reported by other companies. In addition, EBITDA does not represent funds available for discretionary use. The following reconciles
    EBITDA to our income from continuing operations for the periods indicated.

                                                                            20
Back to Contents

                                   Three months ended
                                     December 31,                                            Year ended September   30,

                                  2003             2002             2003             2002              2001               2000           1999

                                                                                (in thousands)
Income from continuing
 operations                   $     4,893     $         2,012   $    13,720     $        9,509    $      12,442      $       4,845   $      5,558
 Plus interest expense and
 other debt expenses                  487                 629         1,961              2,200            1,714              2,898          2,064
 Plus income taxes                  2,635                 991         6,757              4,683            6,613              3,300          3,199
 Plus depreciation, depletion
 and amortization                   3,245               2,872        11,595            10,836            10,782              9,781          5,513

EBITDA                       $     11,260     $         6,504   $    34,033     $      27,228     $      31,551      $      20,824   $     16,334


                                                                           21
Back to Contents

                        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                                           RESULTS OF OPERATIONS

Overview

    We were formed in September 2000 to act as the holding company for Resource America’s energy operations, which began in 1968 and
were materially expanded by acquisitions in September 1998 and August 1999. During the fiscal years ended September 30, 2003, 2002 and
2001, our energy operations continued to grow as we increased our gross revenues, number of wells drilled, number of wells operated and total
reserves. While production generally increased 7% from fiscal 2001 to fiscal 2003, production declined 3% from fiscal 2002 to fiscal 2003
principally due to a timing difference between the completion of a group of wells in fiscal 2003 and the extension of the pipeline system to
service them which did not occur until the fourth quarter of fiscal 2003.

     We finance our drilling operations principally through funds raised from investors in our public and private drilling investment
partnerships. The funds we raised in fiscal 2003 grew substantially from those we raised in fiscal 2002 and 2001. The $66.1 million raised in
fiscal 2003 represented a 60% increase over the $41.1 million raised in fiscal 2002, and a 47% increase over the $44.8 million raised in fiscal
2001. Although the funds we raised in fiscal 2002 were 8% less than those we raised in fiscal 2001, this was principally due to timing
differences between the calendar year basis of our fund raising cycle and our September 30 fiscal year-end. On a calendar year basis, we raised
$75.1 million in calendar 2003, a 47% increase over the $51.0 million raised in calendar 2002 and 2001.

     Our gross revenues depend, to a significant extent, on the price of natural gas which has fluctuated significantly in the past three fiscal
years. We seek to balance this volatility with the more stable net income from our well drilling and well servicing operations which are
principally fee-based. Our well drilling operations’ gross margin was $2.9 million and $858,000 for the three months ended December 31, 2003
and 2002 and $6.9 million, $7.3 million and $6.9 million for fiscal 2003, 2002 and 2001, respectively, while our well services gross margin
was $975,000 and $1.1 million for the three months ended December 31, 2003 and 2002 and $3.9 million, $3.8 million and $4.4 million for
fiscal 2003, 2002 and 2001, respectively.

Results of Operations

     The following tables set forth information relating to gas and oil revenues, daily production volumes, average sales prices, production costs
as a percentage of natural gas and oil sales, and production costs per Mcfe for our operations during the periods indicated:

                                                                       22
Back to Contents

                                                                        Three months ended
                                                                          December 31,                              Years ended September    30,

                                                                       2003               2002               2003               2002               2001

Revenues (in thousands):
 Gas (1)                                                          $       9,066       $      7,050       $     34,276       $    25,359        $    31,945
 Oil                                                              $       1,123       $      1,016       $      4,307       $     3,533        $     4,535

Production volumes:
 Gas (Mcf/day) (1)                                                       19,479            19,346              19,087            19,499             17,377
 Oil (Bbls/day)                                                             453               447                 438               473                486

Average sales prices:
 Gas (per Mmcf) (2)                                               $        5.06       $       3.96       $        4.92      $      3.56        $      5.04
 Oil (per Bbl)                                                    $       26.94       $      24.71       $       26.91      $     20.45        $     25.56

Production costs (3) :
 As a percent of sales                                                         16 %               19 %               18 %               23 %               17 %
 Per Mcfe                                                         $           .80 $              .76 $              .84 $              .82 $              .84


(1) Excludes sales of residual gas and sales to landowners.

(2) Our average sales price before the effects of hedging was $5.19 and $4.01 for the three months ended December 31, 2003 and 2002 and
    $5.08, $3.57 and $5.13 for the fiscal years ended 2003, 2002 and 2001, respectively.

(3) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes,
    severance taxes, insurance, gathering charges and production overhead.

    Our well drilling revenues and expenses represent the billings and costs associated with the completion of net wells for drilling investment
partnerships we sponsored. The following table sets forth information relating to these revenues and costs and expenses during the periods
indicated:

                                                                        Three months ended
                                                                          December 31,                              Years ended September    30,

                                                                       2003               2002               2003               2002               2001

                                                                                                   (dollars in thousands)
Average drilling revenue per well                                 $           198     $          178     $          187     $          230     $          186
Average drilling cost per well (1)                                            172                155                163                200                156

Average drilling gross profit per well                            $            26     $           23     $           24     $           30     $           30

Gross profit margin                                               $       2,864       $          858     $       6,898      $     7,293        $      6,862

Gross margin percent                                                           13 %               13 %               13 %               13 %               16 %

Wells drilled                                                                 111                 37                282                242                234



(1) The amounts shown do not reflect the total cost of a well. The drilling revenue and associated drilling cost reflect that portion of the total
    drilling cost that is attributed to our investor partners in each investment drilling partnership as specified in the relevant drilling contract.

                                                                          23
Back to Contents

Three months ended December        31, 2003 Compared to three months ended December          31, 2002

     Our natural gas revenues were $9.1 million in the three months ended December 31, 2003, an increase of $2.0 million (29%) from
$7.1 million in the three months ended December 31, 2002. The increase in the three months ended December 31, 2003 was attributable to an
increase in the average sales price of natural gas of 28%, and an increase in the volume of natural gas produced of 1%. The $2.0 million
increase in gas revenues in the three months ended December 31, 2003 as compared to the prior period consisted of a $1.9 million increase
attributable to increases in natural gas sales prices and $62,000 attributable to increased production volumes.

    Our oil revenues were $1.1 million in the three months ended December 31, 2003, an increase of $107,000 (11%) from $1.0 million in the
three months ended December 31, 2002, which is primarily due to an increase in the average sales price of oil of 9% for the three months ended
December 31, 2003. Oil production volumes increased 1% during the three months ended December 31, 2003 as compared to the three months
ended December 31, 2002. The $107,000 increase in oil revenues in the three months ended December 31, 2003 as compared to the prior
period consisted of increases of $92,000 attributable to increases in oil sales prices and $15,000 attributable to increased production volumes.

     Our well drilling gross margin was $2.9 million in the three months ended December 31, 2003, an increase of $2.0 million (234%) from
$858,000 in the three months ended December 31, 2002. In the three months ended December 31, 2003, the increase of $2.0 million was
attributable to an increase in the number of wells drilled ($1.9 million) and an increase in the gross profit per well ($96,000). Our gross profit
per well increased as a result of an increase in our average cost per well which, because our drilling contracts are on a ―cost plus‖ basis
(typically cost plus 15%), determines our average revenue per well. The increase in our average cost per well in the three months ended
December 31, 2003 resulted from an increase in the cost of tangible equipment used in the wells. In addition, it should be noted that ―Liabilities
associated with drilling contracts‖ on our balance sheet includes $32.3 million of funds raised in our drilling investment programs in late fiscal
2003 and the first three months of fiscal 2004 that had not been applied to drill wells as of December 31, 2003 due to the timing of drilling
operations, and thus had not been recognized as well drilling revenue. We expect to recognize this amount as revenue in the remainder of fiscal
2004. Because we raised $40.2 million in the first quarter of fiscal 2004 alone, we anticipate drilling revenues and related costs to be
substantially higher than in fiscal 2003.

    Our transportation revenues increased 14% in the three months ended December 31, 2003 as compared to the similar prior year period.
This increase resulted from higher gross volumes transported due to the additional volumes associated with new partnership wells drilled by us
and connected to our gathering system and an increase in the average prices received for the natural gas transported, upon which the fees
chargeable under a portion of our transportation arrangements are based.

     Our well services expenses were $1.0 million in the three months ended December 31, 2003, an increase of $165,000 (20%) from $839,000
in the three months ended December 31, 2002. The increase was attributable to an increase in wages and benefits associated with the increase
in the number of wells we operate for our investment partnerships.

    Our general and administrative expenses were $948,000 in the three months ended December 31, 2003, a decrease of $1.3 million (58%)
from $2.2 million for the three months ended December 31, 2002. The decrease was attributable to reimbursements we received for costs we
incurred in our partnership management and drilling activities, resulting from an increase in the number of wells we drilled and managed
during the three months ended December 31, 2003 as compared to the three months ended December 31, 2002.

                                                                       24
Back to Contents

Year Ended September       30, 2003 Compared to Year Ended September          30, 2002

    Our natural gas revenues were $34.3 million in fiscal 2003, an increase of $8.9 million (35%) from $25.4 million in fiscal 2002. The
increase was due to a 38% increase in the average sales price of natural gas partially offset by a 2% decrease in production volumes. The
$8.9 million increase in natural gas revenues consisted of $9.7 million attributable to price increases, partially offset by $740,000 attributable to
volume decreases. Production volumes decreased because normal production declines in our existing wells were not offset by the new wells we
had drilled in Crawford County, Pennsylvania, since those wells could not be brought on line until the extension of our Crawford gathering
system had been completed. The Crawford extension was completed in the fourth quarter of fiscal 2003.

     Our oil revenues were $4.3 million in fiscal 2003, an increase of $774,000 (22%) from $3.5 million in fiscal 2002. The increase resulted
from a 32% increase in the average sales price of oil partially offset by a 7% decrease in production volumes. The $774,000 increase in oil
revenues consisted of $1.1 million attributable to price increases partially offset by $342,000 attributable to volumes decreases. The decrease in
oil volumes is a result of the natural production decline inherent in the life of a well. We did not offset the decline through the addition of new
wells, as substantially all of the wells we have drilled during the past several years have targeted natural gas reserves.

     Our well drilling gross margin was $6.9 million in the year ended September 30, 2003, a decrease of $395,000 (5%) from $7.3 million in
the year ended September 30, 2002. During the period, our average cost per well decreased because we drilled many of them to a shallower
formation and, in certain areas where we have become more active, many of our wells either have not required fracture stimulation or have
needed less equipment than wells we have drilled in prior years. Since our drilling contracts are on a ―cost plus‖ basis (typically cost plus 15%),
a decrease in our average cost per well also results in a decrease in our average revenue per well. On the other hand, the decrease in our average
cost per well allowed us to drill more wells with the funds available. In addition, it should be noted that ―Liabilities associated with drilling
contracts‖ includes $14.1 million of funds raised in our drilling investment partnerships in fiscal 2003 that had not been applied to drill wells as
of September 30, 2003 due to the timing of drilling operations, and thus had not been recognized as well drilling revenues. We expect to
recognize this amount as income in fiscal 2004. Because we raised $40.0 million in the first quarter of fiscal 2004 alone, we anticipate drilling
revenues and related costs to be substantially higher than in fiscal 2003.

     Our transportation revenues, which are derived from arrangements with the drilling investment partnerships we sponsor, increased
$512,000 (10%) in fiscal 2003 to $5.9 million from $5.4 million in fiscal 2002. The increase was a result of a 6% increase in natural gas
volumes transported by Atlas Pipeline Partners and an increase in the average prices received for the natural gas transported, upon which the
fees chargeable under a portion of our transportation arrangements are based, in fiscal 2003 as compared to fiscal 2002.

    Our transportation expenses increased 19% in the year ended September 30, 2003, as compared to the similar prior year period. This
increase resulted from an increase in compressor expenses due to the addition of more compressors and increased compressor lease rates.
Compressors were added to increase the transportation capacity of our gathering systems.

    Our average production costs increased from $.82 per Mcf in fiscal 2002 to $.84 Mcf in fiscal 2003 because of a decrease in our production
volumes.

    Our exploration costs were $1.7 million in the year ended September 30, 2003, an increase of $144,000 (9%) from the year ended
September 30, 2002. The increase in the year ended September 30, 2003 as compared to the prior period was attributable to expenditures for
lease costs of $275,000 which were charged to operations upon our decision to discontinue drilling on certain leases.

                                                                         25
Back to Contents

     Our general and administrative expenses were $6.5 million in fiscal 2003, a decrease of $542,000 (8%) from $7.1 million in fiscal 2002.
These expenses include, among other things, salaries and benefits not allocated to a specific energy activity, costs of running our energy
corporate office, partnership syndication activities and outside services. These expenses were partially offset by reimbursements we received
for costs we incurred in our partnership management and drilling activities, resulting from an increase in the number of wells we drilled and
managed during the year as compared to the prior year. Reimbursements received by us related to our drilling activities increased $470,000 in
year ended September 30, 2003 as compared to the year ended September 30, 2002. In addition, we more closely allocated direct costs
associated with our other energy activities to those activities, thereby reducing non-direct expenses.

    Depletion of oil and gas properties as a percentage of oil and gas revenues was 21% in fiscal 2003 compared to 26% in fiscal 2002. The
variance from period to period is directly attributable to changes in our oil and gas reserve quantities, product prices and changes in the
depletable cost basis of oil and gas. Higher gas and oil prices caused depletion as a percentage of oil and gas revenues to decrease in fiscal 2003
as compared to fiscal 2002.

Year Ended September      30, 2002 Compared to Year Ended September          30, 2001

    Our natural gas revenues were $25.4 million in fiscal 2002, a decrease of $6.6 million (21%) from $31.9 million in fiscal 2001. The
decrease was due to a 29% decrease in the average sales price of natural gas partially offset by a 12% increase in production volumes. The
$6.6 million decrease in gas revenues consisted of $9.3 million attributable to price decreases, partially offset by $2.7 million attributable to
volume increases. Natural gas volume increases resulted from new wells drilled for our partnerships, partially offset by the natural production
decline inherent in the life of a well.

     Our oil revenues were $3.5 million in fiscal 2002, a decrease of $1.0 million (22%) from $4.5 million in fiscal 2001. The decrease resulted
from a 20% decrease in the average sales price of oil and a 3% decrease in production volumes. The $1.0 million decrease in oil revenues
consisted of $906,000 attributable to price decreases, and $96,000 attributable to volume decreases. The decrease in oil volumes is a result of
the natural production decline inherent in the life of a well. This decline was not offset by new wells added, as the majority of the wells we
have drilled during the past several years targeted gas reserves.

     Our well drilling gross margin was $7.3 million in fiscal 2002, an increase of $431,000 (6%) from $6.9 million in fiscal 2001 due to an
increase in the number of wells drilled ($241,000) and the gross profit per well ($190,000), during fiscal 2002 as compared to fiscal 2001. Both
the average revenue and cost per well, which are affected by changes in oil and gas prices and competition for drilling equipment and services,
increased $44,000 in fiscal 2002 as compared to fiscal 2001. Demand for drilling equipment and services increased in the fiscal year ended
September 30, 2002 as compared to fiscal 2001 as a result of increases in the prices obtainable for natural gas in fiscal 2001, resulting in an
increase in the cost to us of obtaining such equipment and services. In fiscal 2002, we changed the structure of our drilling contracts to a
cost-plus basis from a turnkey basis. Cost-plus contracts protect us in an inflationary environment while limiting our profit margin.

    Our well services revenues increased $182,000 (2%) in fiscal 2002 to $7.6 million as compared to $7.4 million in fiscal 2001 primarily as a
result of an increase in fee income due to an increase in the number of wells we operate. Our well service expenses were $3.7 million in fiscal
2002, an increase of $786,000 (27%) from $3.0 million in fiscal 2001. The increase in fiscal 2002 resulted from a closer allocation of direct
costs associated with our well services activities.

                                                                        26
Back to Contents

    Our transportation revenues, which derive from arrangements with the drilling investment partnerships we sponsor, decreased $326,000
(6%) in fiscal 2002 to $5.4 million from $5.7 million in fiscal 2001. The decrease was a result of a decrease in the average prices received for
natural gas transported by our pipelines because a portion of our transportation contracts are based on the price of the gas transported.

    We sold our gas marketing operation in fiscal 2000, and while we maintained a small in-house gas marketing operation in 2001, we
reduced our activities in this area to an immaterial amount in fiscal 2002.

    While we reduced our average production cost from $.84 per Mcf in fiscal 2001 to $.82 per Mcf in fiscal 2002, our production costs
increased $508,000 (8%) to $6.7 million in fiscal 2002 from $6.2 million in fiscal 2001 as a result of an increase in the number of wells in
which we have an interest and transportation expenses associated with the increased volumes we produced to our interest.

    Our general and administrative expenses were $7.1 million in fiscal 2002, a decrease of $2.5 million (26%) from $9.6 million in fiscal
2001. These expenses include, among other things, salaries and benefits not allocated to a specific energy activity, costs of running our energy
corporate office, partnership syndication activities and outside services. These expenses were partially offset by fees we earned from our
partnership management activities, resulting from an increase in the number of wells drilled and managed during the year as compared to the
prior year. In addition, we more closely allocated direct costs associated with our other energy activities to those activities, thereby reducing
non-direct expenses.

    Depletion of oil and gas properties as a percentage of oil and gas revenues was 26% in fiscal 2002 compared to 17% in fiscal 2001. The
variance from period to period is directly attributable to changes in our oil and gas reserve quantities, product prices and changes in the
depletable cost basis of oil and gas. Lower gas prices caused depletion as a percentage of oil and gas revenues to increase in fiscal 2002 as
compared to fiscal 2001.

Other Revenues, Costs and Expenses

Three Months Ended December         31, 2003 Compared to Three Months Ended December            31, 2002

    Our interest expense was $487,000 in the three months ended December 31, 2003, a decrease of $142,000 (23%) from $629,000. This
decrease resulted primarily from decreases in short-term interest rates and a decrease in the outstanding borrowings.

   Our effective tax rate increased to 35% for the three months ended December 31, 2003 as compared to 33% for the three months ended
December 31, 2002 as a result of an increase in state income taxes.

Year Ended September      30, 2003 Compared to Year Ended September          30, 2002

    Our other revenue was $636,000 in fiscal 2003, a decrease of $1.0 million (62%) as compared to $1.7 million in fiscal 2002. Interest
income decreased $466,000 (68%) to $220,000 in fiscal 2003 from $686,000 in fiscal 2002. This decrease was the result of a decrease in funds
invested as well as in the interest rates earned on those funds. In addition, gains associated with the sale of gas and oil assets decreased
$397,000 (97%) to $14,000 in fiscal 2003 from $411,000 in fiscal 2002. This decrease was the result of the sale in fiscal 2002 of certain gas
and oil assets which were not located within the Appalachian Basin and thus did not fit our business model. No such sales occurred in fiscal
2003.

                                                                        27
Back to Contents

    Our provision for possible losses was $0 in fiscal 2003 as compared to a recovery of $117,000 in fiscal 2002. This was a result of a
recovery of $117,000 of a receivable previously written off due to the bankruptcy filing of a customer. No provision for possible losses was
required in fiscal 2003.

    Our interest expense was $2.0 million in fiscal 2003, a decrease of $239,000 (11%) from $2.2 million in fiscal 2002. This decrease resulted
primarily from decreases in short-term interest rates and decreases in outstanding borrowings in fiscal 2003 as compared to fiscal 2002.

     We own 39% of the partnership interests in Atlas Pipeline Partners through both our general partner interest and the subordinated units we
received at the closing of Atlas Pipeline Partners’ initial public offering. During the year ended September 30, 2003, our ownership interest in
Atlas Pipeline Partners decreased from 51% to 39% as the result of the completion by Atlas Pipeline Partners of an offering of its common
units. Because we control the operations of Atlas Pipeline Partners, we include it in our consolidated financial statements and show the
ownership by the public as a minority interest. The minority interest in Atlas Pipeline Partners’ earnings was $4.4 million for the year ended
September 30, 2003, as compared to $2.6 million for the year ended September 30, 2002, an increase of $1.8 million (70%). This increase was
the result of an increase in Atlas Pipeline Partners’ net income, principally caused by increases in transportation volumes and rates received,
and the increase in the percentage interest of public unitholders. Atlas Pipeline Partners’ transportation rates vary, to a significant extent, with
the prices of natural gas which, on average, were higher in fiscal 2003 than fiscal 2002.

Year Ended September       30, 2002 Compared to Year Ended September          30, 2001

    Our provision for possible losses was a recovery of $117,000 in fiscal 2002 as compared to a charge of $263,000 in fiscal 2001. This was a
result of a recovery of $117,000 in fiscal 2002 of $263,000 written off in fiscal 2001 due to the bankruptcy of a customer.

    Our interest expense was $2.2 million in fiscal 2002, an increase of $486,000 (28%) from $1.7 million in fiscal 2001. This increase
resulted primarily from increases in outstanding borrowings in fiscal 2002 as compared to fiscal 2001.

      In fiscal 2002 and 2001, we owned 51% of the partnership interest in Atlas Pipeline Partners through both our general partner interest and
the subordinated units we received at the closing of Atlas Pipeline Partners’ initial public offering. The minority interest in Atlas Pipeline
Partners is the interest of Atlas Pipeline Partners’ public unitholders. Because we owned more than 50% of Atlas Pipeline Partners, we included
it in our consolidated financial statements for fiscal 2002 and 2001 and showed the ownership by the public as a minority interest. The minority
interest in Atlas Pipeline Partners earnings was $2.6 million for the year ended September 30, 2002, as compared to $4.1 million for the year
ended September 30, 2001, a decrease of $1.5 million (36%). This decrease was the result of a decrease in Atlas Pipeline Partners’ net income,
principally caused by decreases in transportation fees received. These fees vary with the prices of natural gas, which on average were lower in
fiscal 2002 than fiscal 2001.

     Our effective tax rate decreased to 33% in fiscal 2002 as compared to 35% in fiscal 2001 as a result of differences between book and
taxable income related to permanently non-deductible goodwill amortization and an increase in 2002 in statutory depletion, which were
partially offset by an increase in 2002 in state income taxes.

Discontinued Operations

    In accordance with SFAS 144, ―Accounting for the Impairment or Disposal of Long Lived Assets,‖ our decision in fiscal 2002 to dispose
of Optiron Corporation, our former energy technology subsidiary, resulted in the presentation of Optiron as a discontinued operation for the
three years ended September 30, 2003. We had held a 50% equity interest in Optiron; as a result of the disposition, we currently hold a 10%
equity interest.

                                                                         28
Back to Contents

     The plan of disposal required Optiron to pay us 10% of Optiron’s revenues if they exceeded $2.0 million in the 12-month period following
the closing of the transaction. As a result, Optiron is obligated to pay us $295,000 on March 20, 2004.

Liquidity and Capital Resources

    We fund our exploration and production operations from a combination of cash generated by operations, capital raised through drilling
investment partnerships and, if required, use of our credit facility. We fund our transportation operations, which are conducted through Atlas
Pipeline Partners, through a combination of cash generated by operations, Atlas Pipeline Partners’ credit facility and, in fiscal 2003, the sale of
Atlas Pipeline Partners’ common units.

    During the past three fiscal years, the principal capital requirements for our exploration and production operations have been to fund our
investment in our drilling investment partnerships and, in fiscal 2001, an acquisition of natural gas properties. We funded these requirements
out of cash generated by operations, using our credit facility to bridge timing differences between cash needed for investment and cash
generated by operations. We obtained an increase in our borrowing base under our credit facility to $54.2 million in fiscal 2003, of which
$33.5 million was available at December 31, 2003, and a further increase in the borrowing base in March 2004 to $65 million. For a description
of our credit facility, see ―Business — Credit Facilities.‖

     The principal capital requirements for our transportation operations during the past three fiscal years have been for pipeline extensions,
additional compression, maintenance expenses, quarterly distributions to Atlas Pipeline Partners’ unitholders and debt service. These
requirements principally have been met from cash generated by operations and borrowings under its credit facility. In May 2003, Atlas Pipeline
Partners obtained $25.2 million of additional capital through a sale of its common units and used $8.5 million of that capital to pay down
existing debt. As a result, at December 31, 2003, Atlas Pipeline Partners had credit availability under its credit facility of the full $20 million
stated amount. The remaining $16.7 million from the offering was available to fund future capital expenditures and expansions.

     In September 2003, Atlas Pipeline Partners agreed to acquire Alaska Pipeline Company. We describe this transaction and its effects on our
liquidity in ―—Pending Acquisition.‖

     Our liquidity is affected by national, regional and local economic trends and uncertainties as well as trends and uncertainties more
particular to us, including natural gas prices, interest rates and our ability to raise funds through our sponsorship of drilling investment
partnerships. While the current favorable natural gas pricing and interest rate environments have been positive contributors to our liquidity,
there are numerous risks and uncertainties involved. We describe factors affecting our liquidity in ―—Results of Operations,‖ ―—Changes in
Prices and Inflation,‖ ―—Contractual Obligations and Commercial Commitments‖ and describe risks and uncertainties in ―—Quantitative and
Qualitative Disclosures about Market Risk—Interest Rate Risk‖ and ―Risk Factors.‖

Pending Acquisition

     Atlas Pipeline Partners has agreed to acquire Alaska Pipeline Company for $95 million. The acquiring entity will be a special purpose
vehicle, or SPV, created by Atlas Pipeline Partners. Atlas Pipeline Partners anticipates that expenses in connection with the transaction will be
approximately $4 million. The acquisition is contingent upon the satisfaction of certain conditions, principally the approval of the transaction
by the Regulatory Commission of Alaska and the expiration of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act. The
Hart-Scott-Rodino waiting period terminated in January 2004. Our application for approval of the transaction by the Regulatory Commission
was filed in October 2003 and was deemed complete and filed on November 14, 2003. We have requested that the Regulatory Commission
issue a formal order approving the transaction by April 16, 2004. Once the Regulatory Commission issues its final order, there will be a 30-day
appeal period. If, as we believe will be the case, Atlas Pipeline Partners obtains the approval of the Regulatory Commission and consummates
the transaction, it intends to fund the acquisition price and expenses as follows:

                                                                        29
Back to Contents

    •    Atlas Pipeline Partners will invest $24.4 million in common equity of the SPV. It will fund this investment by borrowing all of the
         $20 million available under its existing credit facility and through $4.4 million of advances from us.

    •    Friedman, Billings, Ramsey Group, Inc. has committed to make a $25 million preferred equity investment in the SPV, which will be
         jointly owned by FBR and Atlas Pipeline Partners.

    •    The SPV has received a commitment for a $50 million credit facility to be administered by Wachovia Bank, National Association. It
         will borrow $50 million under this facility.

     All of this funding will be consolidated in our financial statements as indebtedness. Atlas Pipeline Partners may seek to replace or repay
the funding from FBR and some portion of either or both of the Wachovia Bank credit facilities with equity capital obtained through an
offering of Atlas Pipeline Partners’ common units. If Atlas Pipeline Partners determines not to make an offering of common units or seek other
alternative financing, the debt and preferred equity financings will remain in place. Although the continuation of these financings may reduce
the amount of cash from operations that would otherwise be available from Atlas Pipeline Partners’ operations, we believe that our remaining
sources of liquidity and capital resources would be more than sufficient to meet our operational needs.

Changes in Prices and Inflation

     Our revenues, the value of our assets, our ability to obtain bank loans or additional capital on attractive terms and our ability to finance our
drilling activities through drilling investment partnerships have been and will continue to be affected by changes in oil and gas prices. Natural
gas and oil prices are subject to significant fluctuations that are beyond our ability to control or predict. During the three months ended
December 31, 2003 and fiscal year 2003, we received an average of $5.06 and $4.92 per Mcf of natural gas, respectively, and $26.94 and
$26.91 per Bbl of oil as compared to $3.96 and $3.56 per Mcf, respectively, and $24.71 and $20.45 per Bbl in the three months ended
December 31, 2002 and fiscal year 2002.

    Although certain of our costs and expenses are affected by general inflation, inflation has not normally had a significant effect on us.
However, inflationary trends may occur if the price of natural gas were to increase since such an increase may increase the demand for acreage
and for energy equipment and services, thereby increasing the costs of acquiring or obtaining such equipment and services.

Environmental Regulation

    To date, compliance with environmental laws and regulations has not had a material impact on our capital expenditures, earnings or
competitive position. We cannot assure you that compliance with environmental laws and regulations will not, in the future, materially
adversely affect our operations through increased costs of doing business or restrictions on the manner in which we conduct our operations.

                                                                         30
Back to Contents

Contractual Obligations and Commercial Commitments

     The following table sets forth our obligations and commitments as of December 31, 2003.

                                                                                                                    Payments due by period
                                                                                                                        (in thousands)

Contractual cash obligations:                                                               Less than                                                      After
                                                                       Total                 1 year               1-3 Years          4-5 Years            5 years

Long-term debt                                                   $       19,180         $            56       $       19,124     $               —    $             —
Secured revolving credit facilities                                          —                       —                    —                      —                  —
Operating lease obligations                                               1,119                     554                  535                     30                 —
Capital lease obligations                                                    —                       —                    —                      —                  —
Unconditional purchase obligations                                           —                       —                    —                      —                  —
Other long-term obligations                                                  —                       —                    —                      —                  —

Total contractual cash obligations                               $       20,299         $           610       $       19,659     $               30   $             —


                                                                                                                   Payments due by period
                                                                                                                       (in thousands)

Other commercial commitments:                                                           Less than                                                          After
                                                                     Total               1 year               1-3 Years              4-5 Years            5 years

Standby letters of credit                                    $          1,695       $          1,695      $               —     $                —    $             —
Guarantees                                                                 —                      —                       —                      —                  —
Standby replacement commitments                                            —                      —                       —                      —                  —
Other commercial commitments                                            1,927                  1,927                      —                      —                  —

Total commercial commitments                                 $          3,622       $          3,622      $               —     $                —    $             —


Critical Accounting Policies

    The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, costs and
expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to
bad debts, deferred tax assets and liabilities, goodwill and identifiable intangible assets, and certain accrued liabilities. We base our estimates
on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

     We have identified the following policies as critical to our business operations and the understanding of our results of operations.

     Accounts Receivable and Allowance for Possible Losses. We engage in credit extension, monitoring, and collection. In evaluating our
allowance for possible losses, we perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and
the customer’s current creditworthiness, as determined by our review of our customer’s credit information. We extend credit on an unsecured
basis to many of our energy customers. At December 31, 2003, our credit evaluation indicated that we have no need for an allowance for
possible losses for our oil and gas receivables.

                                                                               31
Back to Contents

     Reserve Estimates. Our estimates of proved natural gas and oil reserves and future net revenues from them are based upon reserve analyses
that rely upon various assumptions, including those required by the SEC, as to natural gas and oil prices, drilling and operating expenses,
capital expenditures, taxes and availability of funds. Any significant variance in these assumptions could materially affect the estimated
quantity of our reserves. As a result, our estimates of our proved natural gas and oil reserves are inherently imprecise. Actual future production,
natural gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable natural gas and oil
reserves may vary substantially from our estimates or estimates contained in the reserve reports and may affect our ability to pay amounts due
under our credit facilities or cause a reduction in our energy credit facilities. In addition, our proved reserves may be subject to downward or
upward revision based upon production history, results of future exploration and development, prevailing natural gas and oil prices, mechanical
difficulties, governmental regulation and other factors, many of which are beyond our control.

     Impairment of Oil and Gas Properties. We review our producing oil and gas properties for impairment on an annual basis and whenever
events and circumstances indicate a decline in the recoverability of their carrying values. We estimate the expected future cash flows from our
oil and gas properties and compare such future cash flows to the carrying amount of the oil and gas properties to determine if the carrying
amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the
oil and gas properties to their fair value in the current period. The factors used to determine fair value include, but are not limited to, estimates
of reserves, future production estimates, anticipated capital expenditures, and a discount rate commensurate with the risk associated with
realizing the expected cash flows projected. Because of the complexities associated with oil and gas reserve estimates and the history of price
volatility in the oil and gas markets, events may arise that will require us to record an impairment of our oil and gas properties. Any such
impairment may affect or cause a reduction in our energy credit facilities.

     Dismantlement, Restoration, Reclamation and Abandonment Costs. On an annual basis, we estimate the costs of future dismantlement,
restoration, reclamation and abandonment of our natural gas and oil-producing properties. We also estimate the salvage value of equipment
recoverable upon abandonment. On October 1, 2002 we adopted SFAS 143, as discussed in note 2 to our consolidated financial statements for
the year ended September 30, 2003. As of December 31, 2003 and 2002, our estimate of salvage values was greater than or equal to our
estimate of the costs of future dismantlement, restoration, reclamation and abandonment. A decrease in salvage values or an increase in
dismantlement, restoration, reclamation and abandonment costs from those we have estimated, or changes in our estimates or costs, could
reduce our gross profit.

     Goodwill and Other Long-Lived Assets. As of January 1, 2002, the accounting for goodwill has changed; in prior years, goodwill was
amortized. As of January 1, 2002, goodwill and other intangibles with an indefinite useful life are no longer amortized, but instead are assessed
for impairment at least annually. We have recorded goodwill of $37.5 million in connection with several acquisitions of assets. In assessing
impairment of goodwill, we use estimates and assumptions in estimating the fair value of reporting units. If under these estimates and
assumptions we determine that the fair value of a reporting unit has been reduced, the reduction can result in an ―impairment‖ of goodwill.
However, future results could differ from the estimates and assumptions we use. Events or circumstances which might lead to an indication of
impairment of goodwill would include, but might not be limited to, prolonged decreases in expectations of long-term well servicing and/or
drilling activity or rates brought about by prolonged decreases in natural gas or oil prices, changes in government regulation of the natural gas
and oil industry or other events which could affect the level of activity of exploration and production companies.

                                                                          32
Back to Contents

    In assessing impairment of long-lived assets other than goodwill, where there has been a change in circumstances indicating that the
carrying amount of a long-lived asset may not be recoverable, we have estimated future undiscounted net cash flows from the use of the asset
based on actual historical results and expectations about future economic circumstances, including natural gas and oil prices and operating
costs. Our estimate of future net cash flows from the use of an asset could change if actual prices and costs differ due to industry conditions or
other factors affecting our performance.

     Intangible Assets. In connection with a review of the financial statements of Resource America by the staff of the SEC, we have been made
aware that an issue has arisen within the industry regarding the application of provisions of Statement of Financial Accounting Standards No.
141, ―Business Combinations,‖ and Statement of Financial Accounting Standards No. 142, ―Goodwill and Other Intangible Assets,‖ to
companies in the extractive industries, including gas and oil companies. The issue is whether SFAS No. 142 requires companies to reclassify
costs associated with mineral rights, including both proved and unproved leasehold acquisition costs, as intangible assets in the balance sheet,
apart from other capitalized gas and oil property costs. Historically, we and other gas and oil companies have included the cost of these gas and
oil leasehold interests as part of gas and oil properties. Also under consideration is whether SFAS No. 142 requires companies to provide the
additional disclosures prescribed by SFAS No. 142 for intangible assets for costs associated with mineral rights.

     If it is ultimately determined that SFAS No. 142 requires us to reclassify costs associated with mineral rights from property and equipment
to intangible assets, the amounts that would be reclassified would be immaterial to our financial position. The reclassification of these amounts
would not affect the method in which such costs are amortized or the manner in which we assess impairment of capitalized costs. As a result,
our cash flows and results of operations would not be affected by the reclassification.

Quantitative and Qualitative Disclosures About Market Risk

     Interest Rate Risk. At December 31, 2003, the amount outstanding under our credit facility had decreased to $19.0 million from
$31.0 million at September 30, 2003. The weighted average interest rate for this facility increased from 2.90% at September 30, 2003 to 2.98%
at December 31, 2003 due to an increase in market index rates used to calculate the facility’s interest rates. Holding all other variables constant,
if interest rates hypothetically increased or decreased by 10%, our net income would change by approximately $37,000.

    Commodity Price Risk. Our major market risk exposure in commodities is fluctuating prices for our natural gas and oil production.
Realized pricing is primarily driven by the prevailing worldwide prices for crude oil and spot market prices applicable to United States natural
gas production. Pricing for natural gas and oil production has been volatile and unpredictable for many years. To limit our exposure to
changing natural gas prices, we use hedges. Through our hedges, we seek to provide a measure of stability in the volatile environment of
natural gas prices. Our risk management objective is to lock in a range of pricing for expected production volumes.

     We do not hold or issue derivative instruments for trading purposes. Historically, we have entered into financial hedging activities for a
portion of our projected natural gas production. We recognize gains and losses from the settlement of these hedges in gas revenues when the
associated production occurs. The gains and losses realized as a result of hedging are substantially offset in the market when we deliver the
associated natural gas. We determine gains or losses on open and closed hedging transactions as the difference between the contract price and a
reference price, generally closing prices on NYMEX. We did not settle any contracts during the three months ended December 31, 2003. We
recognized losses of $96,000 on settled contracts during the three months ended December 31, 2002. We recognized no gains or losses during
the three months ended December 31, 2003 for hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

                                                                        33
Back to Contents

     In addition, FirstEnergy Solutions and other third party marketers to which we sell gas, also use financial hedges to hedge their pricing
exposure and make price hedging opportunities available to us. These transactions are similar to NYMEX-based futures contracts, swaps and
options, but also require firm delivery of the hedged quantity. Thus, we limit these arrangements to much smaller quantities than those
projected to be available at any delivery point. For the fiscal year ending September 30, 2004, we estimate in excess of 50% of our produced
natural gas volumes will be sold in this manner, leaving our remaining production to be sold at contract prices in the month produced or at spot
market prices. We also negotiate with certain purchasers for delivery of a portion of natural gas we will produce for the upcoming twelve
months. The prices under most of our gas sales contracts are negotiated on an annual basis and are index-based. Considering those volumes
already designated for the fiscal year ending September 30, 2004, and current indices, a theoretical 10% upward or downward change in the
price of natural gas would result in approximately a 5% change in our projected natural gas revenues.

                                                                       34
Back to Contents

                                                                       BUSINESS

General

     We are an independent energy company engaged in the development, production and transportation of natural gas and, to a lesser extent,
oil in the Appalachian Basin. Our objective is to increase stockholder value by:

    •     expanding our reserve base through developmental drilling primarily funded by growth in our sponsorship of drilling investment
          partnerships;

    •     increasing our fee-based revenue through the management of our drilling investment partnerships and the wells we drill for them; and

    •     increasing our distributions from our general and limited partner interests and incentive distribution rights in Atlas Pipeline Partners,
          L.P.

     We have been involved in the energy industry since 1968. We began to expand our operations at the end of fiscal 1998 when we acquired
The Atlas Group, an energy finance and production company located in Pittsburgh, Pennsylvania. Since fiscal 1998, we have achieved
consistent growth in our reserve base through developmental drilling activities, acquisitions of properties and, in 1999, the acquisition of
Viking Resources, a North Canton, Ohio exploration and production company. From October 1, 1998 through September 30, 2003, proved
reserves net to our interest grew from 93.3 Bcfe to 144.4 Bcfe, and the PV-10 value of these reserves grew from $49.2 million to $191.4
million. During the same period, proved reserves we manage for our drilling investment partnerships grew from 142.0 Bcfe to 187.8 Bcfe, and
the PV-10 value of these reserves grew from $97.6 million to $273.5 million. As of December 31, 2003, we had an acreage position of
approximately 463,000 gross (411,000 net) acres, of which 235,000 gross (220,000 net) acres were undeveloped. We have also achieved
substantial growth in our drilling activities. The number of wells we have drilled, net to both our interest and that of our sponsored drilling
investment partnerships, increased from 145 wells in fiscal 1999 to 282 wells in fiscal 2003. We expect that we will drill approximately 530 of
such net wells in fiscal 2004, of which 111 were drilled during the three months ended December 31, 2003. Of the 1,234 gross wells we have
drilled in the past five fiscal years, we have completed approximately 99% as producing.

    We conduct our natural gas transportation operations through Atlas Pipeline Partners, whose common units are publicly traded (AMEX:
APL). As of December 31, 2003, Atlas Pipeline Partners owned approximately 1,380 miles of intrastate gathering systems located in our core
New York, Ohio and Pennsylvania operating area to which approximately 4,500 natural gas wells were connected. The general partner of Atlas
Pipeline Partners, Atlas Pipeline Partners GP is our wholly-owned subsidiary and conducts its operations using our personnel. Atlas Pipeline
Partners GP owns a substantial interest in Atlas Pipeline Partners, as follows:

    •     a combined 2% general partner interest in Atlas Pipeline Partners and its operating partnership;

    •     a 37% limited partner interest consisting of 1,641,026 subordinated units, all of which will convert to common units on January 1,
          2005 provided certain financial tests are met; and

    •     incentive distribution rights entitling it to an increasing share of distributions as target levels are met.

                                                                            35
Back to Contents

Atlas Pipeline Partners has grown its gathering systems through both extensions to its existing systems to connect to wells drilled for our
drilling investment partnerships and from acquisitions. Since its formation, Atlas Pipeline Partners has completed two acquisitions of 120 miles
of gathering systems: in January 2001 it acquired 100 miles of gathering systems in southeastern Ohio from Kingston Oil Corporation and in
March 2001 it acquired 20 miles of gathering systems in Fayette County, Pennsylvania from American Refining and Exploration Company.
Recently, Atlas Pipeline Partners entered into a purchase agreement with SEMCO Energy (NYSE: SEN) to acquire Alaska Pipeline Company
for $95 million. Alaska Pipeline Company is the owner of an intrastate transmission system which delivers natural gas to metropolitan
Anchorage.

     We fund our drilling activities through the sponsorship of drilling investment partnerships. Although we have been raising capital through
drilling investment partnerships since 1968, the amount of the capital raised through these partnerships has increased substantially since 1998.
On a calendar year basis, which is historically the basis of our fund-raising cycle, the amount of capital we have raised has increased from
$25.1 million in calendar 1998 to $75.1 million in calendar 2003. We act as the general partner of our sponsored drilling investment
partnerships and receive both an interest proportionate to the amount of capital and the value of the properties we contribute, typically 25%,
and a carried interest, typically 7%, both of which are subordinated to specified returns to the investor partners. In addition to providing capital
for our drilling activities, our drilling investment partnerships are a source of fee-based revenue. We drill all of the partnership wells under
―cost plus‖ contracts for which we are paid the costs of drilling the wells plus a fee equal to 15% of those costs. We also act as well operator
and partnership manager, for which we receive specified monthly per well operating and administrative fees.

Business Strategy

    We plan to focus on the following in order to achieve our objectives:

     Grow our Appalachian Basin Reserve Base.          We believe that our acreage inventory will enable us to create value by drilling the
numerous identified undeveloped locations on our properties and will enable us to continue to identify new potential drilling locations. We
have identified over 790 potential drilling locations on our acreage, 355 of which were classified as proved undeveloped locations. We also
believe that our continuing business strategy of acquiring undeveloped properties, or companies with significant amounts of undeveloped
properties, presents us with additional opportunities for increasing our reserve base. In the past five fiscal years, we have completed three
acquisitions of properties consisting of 73,348 gross acres (73,348 net acres) representing approximately 7.3 Bcfe of proved reserves, and the
acquisition of Viking Resources with 29,832 gross acres (26,621 net acres) of undeveloped properties and proved reserves of approximately
24.3 Bcfe.

     Finance Growth in Our Drilling Operations by Sponsorship of Drilling Investment Partnerships.        We believe we have been one of the
most active drillers in the Appalachian Basin during the past three years. We sponsor drilling investment partnerships which we believe provide
us with a cost effective means of financing our drilling activities. From January 1, 1999 through December 31, 2003, we have sponsored ten
private and five public drilling investment partnerships, and have increased the annual amount of capital we raised through our drilling
investment partnerships by 136%. We intend to continue to finance the growth in our drilling activities through growth in our sponsored
drilling investment partnerships.

                                                                         36
Back to Contents

     Increase Our Fee-Based Revenues.        We receive fees from both the drilling and management of wells for our drilling investment
partnerships. We receive a per well fee for drilling a well and, after we complete drilling, monthly per well operating and administrative fees.
Through increases in the capital raised by our drilling investment partnerships, the number of wells we have drilled, net to our interest and that
of our sponsored investment partnerships during the past five fiscal years has increased approximately 94% to 282 net wells in fiscal 2003. We
anticipate that we will drill approximately 530 of such net wells in fiscal 2004 of which 111 were drilled during the three months ended
December 31, 2003. We expect that our fee revenues from our drilling and operating agreements with our drilling investment partnerships will
increase as the number of wells we drill annually increases and adds to the number of wells we manage.

    Increase Our Distributions from Atlas Pipeline Partners.       Since inception of operations in January 2000, Atlas Pipeline Partners has
grown by expanding its gathering system to connect to the wells drilled by our drilling investment partnerships, as well as by acquisitions. This
growth has resulted in increased distributions to the partners of Atlas Pipeline Partners, including us. Through the increase of wells drilled by
our drilling investment partnerships and connected to Atlas Pipeline Partners’ gathering systems, as well as further acquisitions such as the
recent agreement to acquire Alaska Pipeline Company, we intend to seek further growth in the distributions made by Atlas Pipeline Partners.

    Maintain Control of Operations.      We believe it is important to be the operator of wells in which we or our drilling investment
partnerships have an interest because we believe it allows us to obtain operating efficiencies and control costs. We are the operator of
approximately 85% of the properties in which we or our drilling investment partnerships had a working interest at September 30, 2003. We
have decreased our production costs from $0.99 per Mcfe in fiscal 1999 to $0.84 per Mcfe during fiscal 2003 and $0.80 per Mcfe during the
three months ended December 31, 2003. In fiscal 2004, we will be the operator on substantially all the wells we drill.

Competitive Strengths

     High Quality Reserve Base.        Our natural gas properties are located in the Appalachian Basin and are characterized by long-lived
reserves, a high success rate in drilling and completing wells, favorable pricing for our production and readily available transportation. Based
upon fiscal 2003 production and reserve levels, our proved reserves-to-production ratio, or reserve life, was 18 years. From fiscal 1999 through
fiscal 2003, we completed 99% of the wells we have drilled as producers. Moreover, because our production in the Appalachian Basin is near
markets in the northeast United States, we generally receive a premium over quoted prices on the NYMEX for the natural gas we produce. This
premium has ranged between $0.33 to $0.46 per Mcf during the past three fiscal years.

    Experienced Management Team.           We have significant technical, geologic and management experience in our core New York, Ohio and
Pennsylvania operating area. Our technical team of 13 geologists and engineers averages 22 years of industry experience, principally in the
Appalachian Basin, while our management team averages 19 years of experience. We believe we are one of the most active drillers in our core
operating area and, as a result, that we have accumulated extensive geological and geographical knowledge about the area.

     Leading Sponsor of Natural Gas Drilling Programs.            We have sponsored limited and general partnerships to raise funds from investors
to finance our development drilling activities since 1968, and we believe that we are one of the leading sponsors of such investment
partnerships in the country. We believe that our lengthy associations with many of the broker-dealers that act as placement agents for our
drilling investment partnerships provides us with a competitive advantage over entities with similar operations. Over the four-year period from
January 1, 2000 to December 31, 2003, 10 broker-dealers raised $150 million, or 71%, of the $212 million we raised from 11 partnership
offerings, and of these, eight sold interests in all of our partnership offerings.

                                                                        37
Back to Contents

     Significant Inventory of Future Drilling Locations and Undeveloped Acreage.          We have over 235,000 gross (220,000 net) undeveloped
acres, 99% of which are in the Appalachian Basin and 90% (gross acreage) or 94% (net acreage) of which are in our core operating area.
Through December 31, 2003, we have identified over 790 potential drilling locations on our acreage in our core operating area for use in future
drilling investment partnerships. We believe our inventory of proved undeveloped acreage, as well as the significant amounts of our additional
undeveloped acreage, will permit us to sustain our projected levels of drilling activities and growth for at least the next four years without
additions to our property holdings.

    Our Relationship with Atlas Pipeline Partners.        Gathering systems owned by Atlas Pipeline Partners are situated throughout the areas in
which we drill, are readily accessible by us, and are connected to major regional and interstate utility pipelines. Because a wholly- owned
subsidiary of ours is the general partner of Atlas Pipeline Partners, we control its operations. Our relationship with Atlas Pipeline Partners
permits us to have reliable access to the natural gas markets we serve.

Appalachian Basin Overview

      The Appalachian Basin includes the states of Kentucky, Maryland, New York, Ohio, Pennsylvania, Virginia, West Virginia and Tennessee.
It is the most mature oil and gas producing region in the United States, having established the first oil production in 1859. In addition, the
Appalachian Basin is strategically located near the energy-consuming regions of the mid-Atlantic and northeastern United States which has
historically resulted in Appalachian producers selling their natural gas at a premium to the benchmark price for natural gas on the NYMEX.

    According to the Energy Information Administration, a branch of the U.S. Department of Energy, in 2002 there were 23 Tcf of natural gas
consumed in the United States which represented approximately 23.6% of the total energy used. The Appalachian Basin accounted for
approximately 3.4% of total 2002 domestic natural gas production, or 642.8 Bcf. Additionally, in 2002 there were approximately 145,120 gas
wells in the Appalachian Basin which represented roughly 37.8% of the total number of gas wells in the United States. Of those wells, we and
our drilling investment partnerships own interests in approximately 4,760 proved developed producing wells, 84.5% of which we operate.

     Furthermore, according to the Natural Gas Annual 2002, an annual report published by the Energy Information Administration, Office of
Oil and Gas, the Appalachian Basin holds 10.6 Tcf of economically recoverable reserves, representing approximately 5.7% of total domestic
reserves as of December 31, 2002. World Oil magazine, in its February 2004 issue, predicted that approximately 5,576 oil and gas wells will be
drilled in the Appalachian Basin during 2004, approximately 16.7% of the total number of wells they predict to be drilled in the United States
during 2004, and an increase of 12.8% over the number of Appalachian wells estimated to have been drilled during 2003 compared to an
increase of 9.7% in the wells drilled in the United States from 2003 to 2004.

                                                                       38
Back to Contents

Production

    The following table sets forth the quantities of our natural gas and oil production, average sales prices and average production costs per
equivalent unit of production for the periods indicated.

                                                                                                                                                   Average
                                                                                                                                                  production
                                                                                                                                                   costs per
                                                                                                                                                   Mcfe (2)
                                                                            Production                       Average sales price


Period
                                                               Oil (Bbls)            Gas (Mcf)            per Bbl             per Mcf (1)

Fiscal 2004 - first quarter                                       41,676                 1,792,068    $          26.94    $           5.06    $             0.80
Fiscal 2003                                                      160,048                 6,966,899    $          26.91    $           4.92    $             0.84
Fiscal 2002                                                      172,750                 7,117,276    $          20.45    $           3.56    $             0.82
Fiscal 2001                                                      177,437                 6,342,667    $          25.56    $           5.04    $             0.84


(1) Our average sales price before the effects of hedging was $5.19 for the three months ended December 31, 2003 and $5.08, $3.57 and $5.13
    for the fiscal years ending in 2003, 2002 and 2001, respectively.

(2) Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes,
    severance taxes, insurance, gathering charges and production overhead.

Productive Wells

   The following table sets forth information as of December 31, 2003 regarding productive natural gas and oil wells in which we have a
working interest:

                                                                                                                                 Number of productive wells

                                                                                                                                Gross (1)           Net (1)

Oil wells                                                                                                                               331                 272
Gas wells                                                                                                                             4,448               2,371

   Total                                                                                                                              4,779               2,643



(1) Includes our interest in wells owned by 84 drilling investment partnerships for which we serve as general partner and various joint
    ventures. Does not include our royalty or overriding interests in 619 other wells that we do not operate.

Developed and Undeveloped Acreage

    The following table sets forth information about our developed and undeveloped natural gas and oil acreage as of December 31, 2003. The
information in this table includes our equity interest in acreage owned by drilling investment partnerships sponsored by us.

                                                                                             Developed acreage                      Undeveloped acreage

                                                                                           Gross             Net                  Gross               Net

Arkansas                                                                                      2,560                 403                  —                 —
Kansas                                                                                          160                  20                  —                 —
Kentucky                                                                                        924                 462              10,494             5,247
Louisiana                                                                                     1,819                 206                  —                 —
Mississippi                                                                                      40                   3                  —                 —
Montana                                                                                          —                   —                2,650             2,650
New York                                                                                     20,236              15,417              37,423            37,423
North Dakota                                                                                    639                  96                  —                 —
Ohio                                                                                        116,087              96,978              40,994            37,485
Oklahoma                                                                         4,323            468             —               —
Pennsylvania                                                                    75,726         75,642        132,110         132,110
Texas                                                                            4,520            329             —               —
West Virginia                                                                    1,078            539         10,806           5,403
Wyoming                                                                             —              —              80              80

                                                                               228,112        190,563        234,557         220,398



(1) The net acreage as to which leases expire in fiscal 2004, 2005 and 2006 are as follows: New York: 2006 — 287 acres; Ohio: 2004 —
    1,283 acres, 2005 — 464 acres, 2006 — 96 acres; Pennsylvania: 2004 — 6,874 acres, 2005 — 16,599 acres, 2006 — 25,071 acres. We
    evaluate acreage as to which leases are to expire in the year of expiration to determine whether we will renew them.



                                                                  39
Back to Contents

    The leases for our developed acreage generally have terms that extend for the life of the wells, while the leases on our undeveloped acreage
have terms that vary from less than one year to five years. We paid rentals of approximately $386,300 in fiscal 2003 and $86,300 during the
three months ended December 31, 2003 to maintain our leases.

     We believe that we hold good and indefeasible title to our producing properties, in accordance with standards generally accepted in the
natural gas industry, subject to exceptions stated in the opinions of counsel employed by us in the various areas in which we conduct our
activities. We do not believe that these exceptions detract substantially from our use of any property. As is customary in the natural gas
industry, we conduct only a perfunctory title examination at the time we acquire a property. Before we commence drilling operations, we
conduct an extensive title examination and we perform curative work on defects that we deem significant. We have obtained title examinations
for substantially all of our managed producing properties. No single property represents a material portion of our holdings.

    Our properties are subject to royalty, overriding royalty and other outstanding interests customary in the industry. Our properties are also
subject to burdens such as liens incident to operating agreements, taxes, development obligations under natural gas and oil leases, farm-out
arrangements and other encumbrances, easements and restrictions. We do not believe that any of these burdens will materially interfere with
our use of our properties.

Drilling Activity

    The following table sets forth information with respect to the number of wells on which we have completed drilling during the periods
indicated, regardless of when drilling was initiated.

                                                  Development wells                                              Exploratory wells

                                   Productive                            Dry                       Productive                                  Dry

Period                     Gross                Net(1)           Gross         Net(1)      Gross                Net(1)               Gross           Net(1)

Fiscal 2004 - first
quarter                      122.0                  37.4                 1           .33           —                     —                    —                —
Fiscal 2003                  295.0                  92.9                 1           .33           —                     —                    —                —
Fiscal 2002                  246.0                  78.7                 6          2.00           —                     —                    —                —
Fiscal 2001                  256.0                  76.6                 1           .27           —                     —                   1.0              .18

(1) Includes only our interest in the wells and not those of the other partners in our drilling investment partnerships.

Financing Our Drilling Activities

     We derive a substantial portion of our capital resources for drilling operations from our sponsored drilling investment partnerships.
Accordingly, the amount of development activities we undertake depends upon our ability to obtain investor subscriptions to the partnerships.
During fiscal 2003, 2002 and 2001 our drilling investment partnerships invested $68.6 million, $75.5 million and $55.1 million, respectively, in
drilling and completing wells, of which we contributed $15.7 million, $19.7 million and $14.3 million, respectively.

                                                                               40
Back to Contents

     We generally structure our drilling investment partnership so that, upon formation of a partnership, we contribute leaseholds to it, enter
into a drilling and well operating agreement with it and become its general or managing partner. As general partner, we typically receive an
interest in the partnership’s net revenues proportionate to our contributed capital, including the costs of leases contributed, plus a 7% carried
interest. Our interests in partnerships formed during the past three fiscal years generally range from 25% to 27% plus the 7% carried interest, a
portion of which we subordinate to a preferred return to our partnership investors for the first five years of distributions. We also receive
monthly operating fees of $275 per well, $187 net of our interest, and monthly administrative fees of $75 per well, $51 net of our interest.

Natural Gas and Oil Reserves

     The following tables summarize information regarding our estimated proved natural gas and oil reserves as of the dates indicated. All of
our reserves are located in the United States. We base our estimates relating to our proved natural gas and oil reserves and future net revenues
of natural gas and oil reserves upon reports prepared by Wright & Company, Inc. In accordance with SEC guidelines, we make the
standardized and PV-10 estimates of future net cash flows from proved reserves using natural gas and oil sales prices in effect as of the dates of
the estimates which are held constant throughout the life of the properties. We based our estimates of proved reserves upon the following
weighted average prices:

                                                                                                              Years ended September 30,

                                                                                                       2003              2002             2001

Natural gas (per Mcf)                                                                             $        4.96     $        3.80     $       3.81
Oil (per Bbl)                                                                                     $       26.00     $       26.76     $      19.60

    Reserve estimates are imprecise and may change as additional information becomes available. Furthermore, estimates of natural gas and oil
reserves, of necessity, are projections based on engineering data. There are uncertainties inherent in the interpretation of this data as well as the
projection of future rates of production and the timing of development expenditures. Reservoir engineering is a subjective process of estimating
underground accumulations of natural gas and oil that cannot be measured in an exact way and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers
might differ from the reports of our consultants, Wright & Company. Results of drilling, testing and production subsequent to the date of the
estimate may justify revision of this estimate. Future prices received from the sale of natural gas and oil may be different from those estimated
by Wright & Company in preparing its reports. The amounts and timing of future operating and development costs may also differ from those
used. Accordingly, the reserves set forth in the following tables ultimately may not be produced and the proved undeveloped reserves may not
be developed within the periods anticipated. You should not construe the estimated PV- 10 values as representative of the fair market value of
our proved natural gas and oil properties. PV-10 values are based upon projected cash inflows, which do not provide for changes in natural gas
and oil prices or for escalation of expenses and capital costs. The meaningfulness of these estimates depends upon the accuracy of the
assumptions upon which they were based.

     We evaluate natural gas reserves at constant temperature and pressure. A change in either of these factors can affect the measurement of
natural gas reserves. We deduct operating costs, development costs and production-related and ad valorem taxes in arriving at the estimated
future cash flows. We make no provision for income taxes, and base the estimates on operating methods and conditions prevailing as of the
dates indicated. We cannot assure you that these estimates are accurate predictions of future net cash flows from natural gas and oil reserves or
their present value. For additional information concerning our natural gas and oil reserves and estimates of future net revenues, see note 14 to
our consolidated financial statements for the year ended September 30, 2003.

                                                                         41
Back to Contents

                                                                                                   Proved natural gas and oil reserves at September 30,

                                                                                                      2003(1)               2002                2001

Natural gas reserves (Mmcf):
  Proved developed reserves                                                                              87,760              83,996              80,249
  Proved undeveloped reserves                                                                            45,533              39,226              37,868

  Total proved reserves of natural gas                                                                 133,293              123,222             118,117


Oil reserves (Mbbl):
  Proved developed reserves                                                                                1,825               1,846               1,735
  Proved undeveloped reserves                                                                                 30                  32                  66

  Total proved reserves of oil                                                                             1,855               1,878               1,801


  Total proved reserves (Mmcfe)                                                                        144,423              134,490             128,923


Standardized measure of discounted future cash flows (in thousands)                               $    144,351        $     104,126       $      98,712


PV-10 estimate of cash flows of proved reserves (thousands):
  Proved developed reserves                                                                       $    164,617        $     120,260       $     109,288
  Proved undeveloped reserves                                                                           26,802               12,209              17,971

  Total PV-10 estimate                                                                            $    191,419        $     132,469       $     127,259



    (1) Projected natural gas and oil volumes for each of fiscal 2004 and the remaining successive years are:

                                                                                                                        Remaining
                                                                                                       2004           successive years         Total

Natural gas (Mmcf)                                                                                         8,377            124,916             133,293
Oil (Mbbl)                                                                                                   147              1,708               1,855

Natural Gas Sales

     We have a natural gas supply agreement with FirstEnergy Solutions Corp. for a 10-year term which began on April 1, 1999. Subject to
certain exceptions, FirstEnergy Solutions has a last right of refusal to buy all of the natural gas produced and delivered by us and our affiliates,
including our drilling investment partnerships, at certain delivery points with the facilities of:

    •    East Ohio Gas Company, National Fuel Gas Distribution, Columbia of Ohio, and Peoples Natural Gas Company, which are local
         distribution companies; and

    •    National Fuel Gas Supply, Columbia Gas Transmission Corporation, Tennessee Gas Pipeline Company, and Texas Eastern
         Transmission Company, which are interstate pipelines.

FirstEnergy Solutions is the marketing affiliate of FirstEnergy Corp. (NYSE: FE), a large regional electric utility based in Akron, Ohio.
FirstEnergy Corp. has provided a guaranty of the monetary obligations of FirstEnergy Solutions of an amount up to $15 million until March 31,
2005, which will continue on a monthly basis thereafter unless terminated on 30 days notice.

                                                                         42
Back to Contents

     The majority of our and our drilling investment partnerships’ natural gas is subject to the agreement with FirstEnergy Solutions, with the
following exceptions:

    •    natural gas we sell to Warren Consolidated, an industrial end-user and direct delivery customer;

    •    natural gas that at the time of the agreement was already dedicated for the life of the well to another buyer;

    •    natural gas that is produced by a company which was not an affiliate of ours at the time of the agreement;

    •    natural gas sold through interconnects established subsequent to the agreement;

    •    natural gas that is delivered to interstate pipelines or local distribution companies other than those described above; and

    •    natural gas that is produced from well(s) operated by a third-party or subject to an agreement under which a third-party was to arrange
         for the gathering and sale of the natural gas.

Based on the most recent monthly production data available to us as of January 31, 2004, we anticipate that we and our affiliates, including our
drilling investment partnerships, will sell approximately 56% of our natural gas production under the FirstEnergy Solutions agreement. The
agreement also permits us to implement gas price hedges through FirstEnergy Solutions, as described below under ―—Natural Gas Hedging.‖

     The agreement established an indexed price formula for each of the delivery points during an initial period of one or two years, and
requires the parties to negotiate a new pricing arrangement at each delivery point for subsequent periods. If, at the end of any applicable period,
the parties cannot agree to a new price for any delivery point, then we may solicit offers from third-parties to buy the natural gas for that
delivery point. If FirstEnergy Solutions does not match this price, then we may sell the natural gas to the third-party. This process is repeated at
the end of each contract period which is usually one year. In order to hedge our gas prices over a longer period of time, we recently agreed
upon prices with FirstEnergy Solutions that will be effective through March 2005. We will market the remainder of our natural gas, which is
principally located in the Fayette County area, primarily to Colonial Energy, Inc. and UGI Energy Services, and possibly others.

    Our pricing arrangements with FirstEnergy Solutions and the other third-parties are tied to the NYMEX monthly futures contract price,
which is reported daily in the Wall Street Journal. The total price received for gas is a combination of the monthly NYMEX futures price plus a
negotiated fixed premium.

     The agreement with FirstEnergy Solutions may be suspended for force majeure, which means generally such things as an act of God, fire,
storm, flood, and explosion, but also includes the permanent closing of the factories of Carbide Graphite or Duferco Farrell Corporation during
the term of FirstEnergy Solutions’ agreements to sell natural gas to them. If these factories were closed, however, we believe that FirstEnergy
Solutions would be able to find alternative purchasers and would not invoke the force majeure clause.

                                                                        43
Back to Contents

     We expect that natural gas produced from wells drilled in areas of the Appalachian Basin other than described above will be primarily tied
to the spot market price and supplied to:

    •    gas marketers;

    •    local distribution companies;

    •    industrial or other end-users; and/or

    •    companies generating electricity.

Crude Oil Sales

    Crude oil produced from our wells flows directly into storage tanks where it is picked up by the oil company, a common carrier, or pipeline
companies acting for the oil company which is purchasing the crude oil. Unlike natural gas, crude oil does not present any transportation
problem. We anticipate selling any oil produced by our wells to regional oil refining companies at the prevailing spot market price for
Appalachian crude oil in spot sales.

Dismantlement, Restoration, Reclamation and Abandonment Costs

     When we determine that a well is no longer capable of producing natural gas or oil in economic quantities, we must dismantle the well and
restore and reclaim the surrounding area before we can abandon the well. We contract these operations to independent service providers to
whom we pay a fee, currently averaging approximately $7,700 per well. The contractor will also salvage the equipment on the well, which we
then sell in the used equipment market. Our proceeds from the sales of salvaged equipment currently range between $6,900 and $11,000 per
well. Under the partnership agreements of our drilling investment partnerships, which own substantially all of our wells, we are allocated
abandonment costs in proportion to our partnership interest (generally between 27% and 34%) and are allocated between 66% and 100% of the
salvage proceeds. As a consequence, we generally receive revenues from salvaged equipment at least equal to, and typically exceeding, our
share of the related costs. See note 2 of our consolidated financial statements, ―Asset Retirement Obligations.‖

Natural Gas Hedging

    Pricing for gas and oil production has been volatile and unpredictable for many years. To limit exposure to changing natural gas prices,
from time to time we use hedges. Through our hedges, we seek to provide a measure of stability in the volatile environment of natural gas
prices. These hedges may include purchases of regulated NYMEX futures and options contracts and non-regulated over-the-counter futures
contracts with qualified counterparties. The futures contracts are commitments to purchase or sell natural gas at future dates and generally
cover one-month periods for up to 24 months in the future. To assure that the financial instruments will be used solely for hedging price risks
and not for speculative purposes, we have a committee to assure that all financial trading is done in compliance with our hedging policies and
procedures. We do not intend to contract for positions that we cannot offset with actual production.

    FirstEnergy Solutions and other third-party marketers to which we sell gas, such as Colonial Energy, Inc. and UGI Energy Services, also
use NYMEX-based financial instruments to hedge their pricing exposure and make price hedging opportunities available to us. These
transactions, while providing us protection similar to NYMEX-based futures contracts, swaps and options, are not deemed hedges for
accounting purposes because they require firm delivery of natural gas. Thus, we limit these arrangements to much smaller quantities than those
projected to be available at any delivery point. The price paid by FirstEnergy Solutions, Colonial Energy, Inc., UGI Energy Services, and any
other third-party marketers for certain volumes of natural gas sold under these sales agreements may be significantly different from the
underlying monthly spot market value.

                                                                       44
Back to Contents

    The portion of natural gas that we hedge and the manner in which it is hedged (e.g., fixed pricing, floor and/or floor price with a cap, which
we refer to as costless collar) changes from time to time. As of January 31, 2004, our overall price hedging position for the future months
ending December 31, 2004 for our natural gas production was approximately as follows:

    •    45.1% was hedged with a fixed price;

    •    13.6% was hedged with a floor price and/or costless collar price; and

    •    41.3% was not hedged and was subject to market-based pricing.

We implemented approximately 79% of these hedges through FirstEnergy Solutions. For information concerning our natural gas hedging, see
―Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about
Market Risk—Commodity Price Risk.‖

Pipeline Operations

    We conduct our natural gas transportation operations through Atlas Pipeline Partners. At December 31, 2003, Atlas Pipeline Partners
owned approximately 1,400 miles of intrastate gathering systems located in eastern Ohio, western New York and western Pennsylvania, to
which approximately 4,500 natural gas wells were connected. Atlas Pipeline Partners’ gathering systems had an average daily throughput of
52.7 Mmcf , 49.7 Mmcf and 45.1 Mmcf of natural gas in fiscal 2003, 2002 and 2001, respectively. We also directly own approximately 200
miles of natural gas gathering systems in Ohio and Pennsylvania, whose throughputs are not material.

     Atlas Pipeline Partners GP, our indirect wholly owned subsidiary, is the general partner of Atlas Pipeline Partners. On a consolidated basis,
it has a 2% interest in Atlas Pipeline Partners. In addition, as of December 31, 2003, Atlas Pipeline Partners GP owned 1,641,026 subordinated
units of Atlas Pipeline Partners, constituting a 37% interest in it. Atlas Pipeline Partners GP manages the activities of Atlas Pipeline Partners
using our personnel who act as its officers and employees.

    The subordinated units in Atlas Pipeline Partners are a special class of interest under which our right to receive distributions is
subordinated to those of the publicly-held common units. The subordination period is scheduled to expire on January 1, 2005 unless certain
financial tests specified in the partnership agreement are not met. We expect that these tests will be met. Upon expiration of the subordination
period, our subordinated units will convert to an equal number of common units.

     As general partner, we have the right to receive incentive distributions if Atlas Pipeline Partners meets or exceeds its minimum quarterly
distribution obligations to the common and subordinated units. The incentive distributions are as follows:

    •    of the first $0.10 per unit available for distribution in excess of the $0.42 minimum quarterly distribution, 85% goes to all unit holders
         (including to us as a subordinated unit holder) and 15% goes to us as a general partner;

                                                                        45
Back to Contents

    •    of the next $0.08 per unit available for distribution, 75% goes to all unit holders and 25% goes to us as a general partner, and

    •    after that, 50% goes to all unit holders and 50% goes to us as a general partner.

    We have agreements with Atlas Pipeline Partners that require us to do the following:

    •    Pay gathering fees to Atlas Pipeline Partners for natural gas gathered by the gathering systems equal to the greater of $0.35 per Mcf
         ($0.40 per Mcf in certain instances) or 16% of the gross sales price of the natural gas transported. For the years ended September 30,
         2003, 2002 and 2001, these gathering fees averaged $0.75, $0.57 and $0.81 per Mcf, respectively. The cost to us of paying these fees
         is offset by the transportation fees paid to us by our drilling investment partnerships, reimbursements and distributions to us from
         Atlas Pipeline Partners and connection costs and other expenses paid by Atlas Pipeline Partners.

    •    Connect wells owned or controlled by us that are within specified distances of Atlas Pipeline Partners’ gathering systems to those
         gathering systems.

    •    Provide stand-by construction financing to Atlas Pipeline Partners, at its request, for gathering system extensions and additions, to a
         maximum of $1.5 million per year, until 2005. We have not been required to provide any construction financing under this agreement
         since Atlas Pipeline Partners’ inception.

    We believe that we comply with all the requirements of these agreements.

     On September 16, 2003, Atlas Pipeline Partners entered into an agreement to acquire the Alaska Pipeline Company for $95 million. We
describe the proposed acquisition in ―Management’s Discussion and Analysis of Financial Condition and Results of Operations – Pending
Acquisition.‖ At closing, the seller will enter into gas transportation agreements that will require the seller to pay Alaska Pipeline Company a
minimum monthly capacity reservation fee of $943,000 plus $0.075 per Mcf of gas transported for 10 years. These agreements also require the
seller to provide operational, maintenance and administrative services for five years for $334,000 per month during the first three years, subject
to inflation-based adjustments in the fourth and fifth contract years.

Availability of Oil Field Services

     We contract for drilling rigs and purchase goods and services necessary for the drilling and completion of wells from a number of drillers
and suppliers, none of which supplies a significant portion of our annual needs. During fiscal 2003, we faced no shortage of these goods and
services. We cannot predict the duration of the current supply and demand situation for drilling rigs and other goods and services with any
certainty due to numerous factors affecting the energy industry and the demand for natural gas and oil.

Other Properties

     We own a 24,000 square foot office building in Pittsburgh, Pennsylvania, a 17,000 square foot field office and warehouse facility in
Jackson Center, Pennsylvania and a field office in Deerfield, Ohio. We lease one 1,400 square foot field office in Ohio for $1,575 per month
under a lease expiring in 2009 and one 3,100 square foot field office in Pennsylvania for $3,100 per month under a lease expiring in 2005. We
also rent 9,300 square feet of office space in Uniontown, Ohio for $10,651 per month under a lease expiring in February 2006. We anticipate
that we will enter into subleases with Resource America for the office space we currently use in Philadelphia and New York City.

                                                                        46
Back to Contents

Major Customers

    During fiscal 2003, 2002 and 2001, gas sales to FirstEnergy Solutions accounted for 18%, 16% and 17%, respectively, of our total
consolidated revenues.

Competition

    The energy industry is intensely competitive in all of its aspects. Competition arises not only from numerous domestic and foreign sources
of natural gas and oil but also from other industries that supply alternative sources of energy. Competition is intense for the acquisition of
leases considered favorable for the development of natural gas and oil in commercial quantities. Product availability and price are the principal
means of competition in selling oil and natural gas. Many of our competitors possess greater financial and other resources than ours which may
enable them to identify and acquire desirable properties and market their natural gas and oil production more effectively than we do. While it is
impossible for us to accurately determine our comparative industry position, we do not consider our operations to be a significant factor in the
industry. Moreover, we also compete with a number of other companies that offer interests in drilling investment partnerships. As a result,
competition for investment capital to fund drilling investment partnerships is intense.

Markets

     The availability of a ready market for natural gas and oil produced by us, and the price obtained, depends upon numerous factors beyond
our control, as described in ―Risk Factors — Risks Relating to Our Business.‖ During fiscal 2003, 2002 and 2001, we experienced no problems
in selling our natural gas and oil, although prices have varied significantly during and after those periods.

Governmental Regulation

     Regulation of Production.       The production of natural gas and oil is subject to regulation under a wide range of local, state and federal
statutes, rules, orders and regulations. Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and
reports concerning operations. All of the states in which we own and operate properties have regulations governing conservation matters,
including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of
production from oil and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. The effect of these
regulations is to limit the amount of natural gas and oil that we can produce from our wells and to limit the number of wells or the locations at
which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing. Moreover, each state
generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and natural gas liquids within its
jurisdiction.

     The failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry
are subject to the same regulatory requirements and restrictions that affect our operations.

                                                                          47
Back to Contents

     Regulation of Transportation and Sale of Natural Gas.       While natural gas pipelines generally are subject to regulation by the Federal
Energy Regulatory Commission, or FERC, under the Natural Gas Act of 1938, because Atlas Pipeline Partners’ individual gathering systems
perform primarily a gathering function, as opposed to the transportation of natural gas in interstate commerce, Atlas Pipeline Partners believes
that it is not subject to regulation under the Natural Gas Act. However, Atlas Pipeline Partners delivers a significant portion of the natural gas it
transports to interstate pipelines subject to FERC regulation. In the past, the federal government has regulated the prices at which natural gas
could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price
controls in the future. Deregulation of wellhead natural gas sales began with the enactment of the Natural Gas Policy Act. In 1989, Congress
enacted the Natural Gas Wellhead Decontrol Act. The Decontrol Act removed all Natural Gas Act and Natural Gas Policy Act price and
non-price controls affecting wellhead sales of natural gas effective January 1, 1993.

     Since 1985, the FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and
non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate
natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with
natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. Beginning in
1992, the FERC issued Order No. 636 and a series of related orders to implement its open access policies. As a result of the Order No. 636
program, the marketing and pricing of natural gas have been significantly altered. The interstate pipelines’ traditional role as wholesalers of
natural gas has been eliminated and replaced by a structure under which pipelines provide transportation and storage service on an open access
basis to others who buy and sell natural gas. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to
foster increased competition within all phases of the natural gas industry.

     In 2000, the FERC issued Order No. 637 and subsequent orders, which imposed a number of additional reforms designed to enhance
competition in natural gas markets. Among other things, Order No. 637 revised the FERC’s pricing policy by waiving price ceilings for
short-term released capacity for a two-year experimental period, and effected changes in FERC regulations relating to scheduling procedures,
capacity segmentation, penalties, rights of first refusal and information reporting. Most pipelines’ tariff filings to implement the requirements
of Order No. 637 have been accepted by the FERC and placed into effect. While most major aspects of Order No. 637 have been upheld on
judicial review, certain issues such as capacity segmentation and right of first refusal were remanded to the FERC for further action. The FERC
recently issued an order affirming Order No. 637. We cannot predict what action the FERC will take on these matters in the future, or whether
the affected parties will seek, or the FERC’s actions will survive, further judicial review.

     Intrastate natural gas transportation is subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas
transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to
state. Insofar as regulation by a particular state will generally affect all intrastate natural gas shippers within the state on a comparable basis, we
believe that we will not be affected in any way that materially differs from the effects on our competitors.

                                                                          48
Back to Contents

     Environmental and Safety Regulation.       Under the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act, the Oil Pollution Act of 1990, the Clean Air Act, and other federal and
state laws relating to the environment, owners and operators of wells producing natural gas or oil, and pipelines, can be liable for fines,
penalties and clean-up costs for pollution caused by the wells or the pipelines. Moreover, the owners’ or operators’ liability can extend to
pollution costs from situations that occurred prior to their acquisition of the assets. Natural gas pipelines are also subject to safety regulation
under the Natural Gas Pipeline Safety Act of 1968 and the Pipeline Safety Act of 1992 which, among other things, dictate the type of pipeline,
quality of pipeline, depth, methods of welding and other construction-related standards. State public utility regulators in New York, Ohio and
Pennsylvania have either adopted federal standards or promulgated their own safety requirements consistent with the federal regulations.

    We do not anticipate that we will be required in the near future to expend amounts that are material in relation to our revenues by reason of
environmental laws and regulations, but since these laws and regulations change frequently, we cannot predict the ultimate cost of compliance.
We cannot assure you that more stringent laws and regulations protecting the environment will not be adopted or that we will not otherwise
incur material expenses in connection with environmental laws and regulations in the future.

Credit Facilities

    We have a $75.0 million credit facility administered by Wachovia Bank. The revolving credit facility is guaranteed by our subsidiaries.
Credit availability, which is principally based on the value of our assets, was $54.2 million at December 31, 2003. In March 2004, this facility
was amended to increase the credit availability to $65 million. Up to $10 million of the borrowings under the facility may be in the form of
standby letters of credit. Borrowings under the facility are secured by our assets, including the stock of our subsidiaries. At December 31, 2003,
$19.0 million was outstanding under this facility.

    Loans under the facility bear interest at one of the following two rates, at the borrower’s election:

    •    the base rate plus the applicable margin; or

    •    the adjusted LIBOR plus the applicable margin.

    The base rate for any day equals the higher of the federal funds rate plus 1/2 of 1% or the Wachovia Bank prime rate. Adjusted LIBOR is
LIBOR divided by 1.00 minus the percentage prescribed by the Federal Reserve Board for determining the reserve requirement for euro
currency funding. The applicable margin is as follows:

    •    where utilization of the borrowing base is equal to or less than 50%, the applicable margin is 0.25% for base rate loans and 1.75% for
         LIBOR loans;

    •    where utilization of the borrowing base is greater than 50%, but equal to or less than 75%, the applicable margin is 0.50% for base
         rate loans and 2.00% for LIBOR loans; and

    •    where utilization of the borrowing base is greater than 75%, the applicable margin is 0.75% for base rate loans and 2.25% for LIBOR
         loans.

    At December 31, 2003, borrowings under the Wachovia credit facility bore interest at an average interest rate of 2.98%.

                                                                        49
Back to Contents

    The Wachovia credit facility requires us to maintain a specified net worth and specified ratios of current assets to current liabilities and
debt to EBITDA, and requires us to maintain a specified interest coverage ratio. In addition, the facility limits sales, leases or transfers of assets
and the incurrence of additional indebtedness. The facility limits the dividends payable by us to 50% of our cumulative net income from
January 1, 2004 to the date of determination plus $5 million. As of March 12, 2004, we would be permitted to pay dividends of $5 million
under these restrictions. In addition, after the closing of this offering, we will be permitted to repay intercompany debt to Resource America
only as required by the tax matters agreement and the transition services agreement described under ―Relationship with Resource America.‖
We are permitted to pay Resource America the special dividend described under ―Use of Proceeds.‖ The facility terminates in March 2007,
when all outstanding borrowings must be repaid.

     Atlas Pipeline Partners has a $20 million revolving credit facility administered by Wachovia Bank. Up to $3 million of the facility may be
used for standby letters of credit. Borrowings under the facility are secured by a lien on all the property of Atlas Pipeline Partners’ assets,
including its subsidiaries. The facility has a term ending in December 2005 and bears interest, at Atlas Pipeline Partners’ election, at the base
rate plus the applicable margin or the euro rate plus the applicable margin.

    As used in the facility agreement, the base rate is the higher of:

    •    Wachovia Bank’s prime rate or

    •    the sum of the federal funds rate plus 50 basis points.

     The euro rate is the average of specified LIBORs divided by 1.00 minus the percentage prescribed by the Federal Reserve Board for
determining the reserve requirement for euro currency funding. The applicable margin varies with Atlas Pipeline Partners’ leverage ratio from
between 150 to 250 basis points, for the euro rate option, or 0 to 50 basis points, for the base rate option. Draws under any letter of credit bear
interest as specified under the first bullet point above. The credit facility requires Atlas Pipeline Partners to maintain a specified net worth, ratio
of debt to tangible assets and an interest coverage ratio. In addition, the facility limits sales, leases or transfers of assets, incurrence of other
indebtedness and guarantees, and certain investments. As of December 31, 2003, no amounts were outstanding under this facility. Atlas
Pipeline Partners expects that it will draw the full amount of this facility as part of its financing of its acquisition of Alaska Pipeline Company.

Employees

    As of December 31, 2003, we employed 201 persons.

Legal Proceedings

     One of our subsidiaries, Resource Energy, Inc., together with Resource America, is a defendant in a proposed class action originally filed
in February 2000 in the New York Supreme Court, Chautauqua County, by individuals, putatively on their own behalf and on behalf of
similarly situated individuals, who leased property to us. The complaint alleges that we are not paying landowners the proper amount of royalty
revenues derived from the natural gas produced from the wells on leased property. The complaint seeks damages in an unspecified amount for
the alleged difference between the amount of royalties actually paid and the amount of royalties that allegedly should have been paid. Plaintiffs
were certified as a class in December 2003; an appeal of that certification is pending. The action is currently in its discovery phase. We believe
the complaint is without merit and are defending ourselves vigorously.

     We are also a party to various routine legal proceedings arising out of the ordinary course of our business. Management believes that none
of these actions, individually or in the aggregate, will have a material adverse effect on our financial condition or operations.

                                                                          50
Back to Contents

                                                              MANAGEMENT

Executive Officers and Directors

    The following table sets forth information regarding our executive officers and directors as of March 16, 2004:

                         Name                                  Age                                       Position

Edward E. Cohen                                                 65          Chairman, Chief Executive Officer and President
Frank P. Carolas                                                44          Executive Vice President
Freddie M. Kotek                                                48          Executive Vice President and Chief Financial Officer
Jeffrey C. Simmons                                              45          Executive Vice President
Michael L. Staines                                              54          Executive Vice President and Secretary
Nancy J. McGurk                                                 48          Senior Vice President and Chief Accounting Officer
Jonathan Z. Cohen                                               33          Vice Chairman
Carlton M. Arrendell                                            42          Director
William R. Bagnell                                              41          Director
Donald W. Delson                                                53          Director
Nicholas DiNubile                                               51          Director
Dennis A. Holtz                                                 63          Director

     Edward E. Cohen has been the Chairman of our board of directors and our Chief Executive Officer and President since our formation in
September 2000. He has been Chairman of the board of directors of Resource America since 1990 and Chief Executive Officer of Resource
America since 1988 and was President of Resource America from September 2000 until October 2003. In addition, Mr. Cohen has been
Chairman of the managing board of Atlas Pipeline Partners GP since its formation in November 1999, a director of TRM Corporation (a
publicly-traded consumer services company) since June 1998 and Chairman of the Board of Brandywine Construction & Management, Inc. (a
property management company) since 1994. Mr. Cohen intends to resign as Chief Executive Officer at Resource America upon the completion
of this offering, but he will remain a director of Resource America. Mr. Cohen is the father of Jonathan Z. Cohen.

     Frank P. Carolas has been an Executive Vice President since January 2001 and served as a director from January 2002 until February
2004. Mr. Carolas has been a Vice President of Resource America since April 2001, and Executive Vice President—Land and Geology and a
director of Atlas Resources, since January 2001. Mr. Carolas is a certified petroleum geologist and has been employed by Atlas Resources and
its affiliates since 1981. Mr. Carolas intends to resign his position at Resource America upon the completion of this offering.

    Freddie M. Kotek has been an Executive Vice President and Chief Financial Officer since February 2004 and served as a director from
September 2001 until February 2004. Mr. Kotek has been a Senior Vice President of Resource America since 1995, President of Resource
Leasing, Inc. (a wholly-owned subsidiary of Resource America) since 1995, Chairman of Atlas Resources, Inc. (our wholly-owned subsidiary
which acts as the managing partner of our drilling investment partnerships) since September 2001 and Chief Executive Officer and President of
Atlas Resources since January 2002. Mr. Kotek was President of Resource Properties from September 2000 to October 2001 and its Executive
Vice President from 1993 to September 2000. Mr. Kotek intends to resign his positions at Resource America and all its subsidiaries which are
not our subsidiaries upon the completion of this offering.

                                                                      51
Back to Contents

    Jeffrey C. Simmons has been an Executive Vice President since January 2001 and was a director from January 2002 until February 2004.
Mr. Simmons has been a Vice President of Resource America since April 2001, and Executive Vice President—Operations and a director of
Atlas Resources, since January 2001. Mr. Simmons joined Resource America in 1986 as a senior petroleum engineer and has served in various
executive positions with its energy subsidiaries since then. Mr. Simmons intends to resign his position at Resource America upon the
completion of this offering.

    Michael L. Staines has been an Executive Vice President since our formation. Mr. Staines has been a Senior Vice President of Resource
America since 1989 and was a director from 1989 to February 2000 and Secretary from 1989 to October 1998. Mr. Staines has been President
of Atlas Pipeline Partners GP since January 2001 and its Chief Operating Officer and a member of its Managing Board since its formation in
November 1999. Mr. Staines intends to resign his position at Resource America upon the completion of this offering.

    Nancy J. McGurk has been our Chief Accounting Officer since January 2001, Senior Vice President since January 2002, and served as
our Chief Financial Officer from January 2001 until February 2004. Ms. McGurk has been a Vice President of Resource America since 1992
and its Treasurer and Chief Accounting Officer since 1989. Ms. McGurk has been Senior Vice President of Atlas Resources since January 2002
and Chief Financial Officer and Chief Accounting Officer since January 2001. Ms. McGurk intends to resign her positions at Resource
America upon the completion of this offering.

    Jonathan Z. Cohen has been Vice Chairman of our board of directors since our formation. He has been the President of Resource
America since October 2003 and Chief Operating Officer since April 2002 and a director since October 2002. Before being named President,
he served as Resource America’s Executive Vice President from April 2001 to October 2003, Senior Vice President from May 1999 to April
2001 and Vice President from July 1998 to May 1999. Mr. Cohen has been Vice Chairman of the managing board of Atlas Pipeline Partners
GP since its formation in November 1999, a Trustee and Secretary of RAIT Investment Trust (a publicly-traded real estate investment trust)
since 1997 and Vice Chairman since October 2003, and Chairman of the board of directors of The Richardson Company (a sales consulting
company) since October 1999. Mr. Cohen is the son of Edward E. Cohen.

Independent Directors

       The following directors have been determined by our board to be independent directors as defined under Nasdaq rules and the Securities
Act.

     Carlton M. Arrendell has been a director since February 2004. Mr. Arrendell has been with Investment Trust Corporation (a consultant to
the trustee of the AFL-CIO Building Investment Trust) since December 1997 and currently serves as Chief Investment Officer.

    William R. Bagnell has been a director since February 2004. Mr. Bagnell has been involved in the energy industry in various capacities
since 1990. He has been Vice President—Energy for Planalytics, Inc. (an energy industry software company) since March 2000 and was
Director of Sales for Fisher Tank Company (a national manufacturer of carbon and stainless steel bulk storage tanks) from September 1998 to
January 2000. Before that, he served as Manager of Business Development for Buckeye Pipeline Partners, L.P. (a refined petroleum products
transportation company) from October 1992 until September 1998. Mr. Bagnell has served as an independent member of the managing board
of Atlas Pipeline Partners GP since its formation in November 1999, a position from which he will resign before the completion of this
offering.

                                                                        52
Back to Contents

     Donald W. Delson has been a director since February 2004. Mr. Delson has over 20 years of experience as an investment banker
specializing in financial institutions. Mr. Delson has been a Managing Director, Corporate Finance Group, at Keefe, Bruyette & Woods, Inc.
since 1997, and before that was a Managing Director in the Corporate Finance Group at Alex. Brown & Sons from 1982 to 1997. Mr. Delson
has served as an independent member of the managing board of Atlas Pipeline Partners GP since June 2003, a position from which he will
resign before the completion of this offering.

    Nicholas DiNubile has been a director since February 2004. Dr. DiNubile has been an orthopedic surgeon specializing in sports medicine
since 1982. Dr. DiNubile has served as special advisor and medical consultant to the President’s Council on Physical Fitness and as Orthopedic
Consultant to the Philadelphia 76ers basketball team. Dr. DiNubile is also Clinical Assistant Professor of the Department of Orthopedic
Surgery at the Hospital of the University of Pennsylvania.

   Dennis A. Holtz has been a director since February 2004. Mr. Holtz has maintained a corporate law practice with D.A. Holtz, Esquire &
Associates in Philadelphia and New Jersey since 1988.

Other Key Employees

     Jack L. Hollander , 47, has been Senior Vice President—Direct Participation Programs since January 2002. Mr. Hollander has also been
Senior Vice President—Direct Participation Programs of Atlas Resources since January 2002, and before that served as Vice President from
January 2001 until December 2001. Mr. Hollander practiced law with Rattet, Hollander & Pasternak, concentrating in tax matters and real
estate transactions, from 1990 to January 2001, and served as in-house counsel for Integrated Resources, Inc. (a diversified financial services
company) from 1982 to 1990.

    Michael G. Hartzell , 47, has been Vice President—Land Administration since January 2002, and before that served as Senior Land
Coordinator from January 1999 to January 2002. Mr. Hartzell served as general manager of one of our field offices from January 1998 to
January 1999. Mr. Hartzell has also served as Vice President—Land Administration for Atlas Resources since September 2001. Mr. Hartzell
has been employed by Atlas Resources and its affiliates since 1980.

    Marci F. Bleichmar , 33, has been Vice President—Marketing since February 2001. Ms. Bleichmar has also served as Vice
President—Marketing of Atlas Resources since February 2001. From March 2000 until February 2001, Ms. Bleichmar was director of
marketing for Jacob Asset Management (a mutual fund manager) and, from March 1998 until March 2000, was an account executive at
Bloomberg Financial Services, L.P. Before that, Ms. Bleichmar had been an associate on the Derivatives Trading Desk of JPMorgan since
1994.

    Donald R. Laughlin , 55, has been Vice President—Drilling and Production since January 2002, and before that served as Senior Drilling
Engineer since May 2001. Mr. Laughlin has also served as Vice President—Drilling and Production for Atlas Resources since September 2001.
Mr. Laughlin has over 30 years experience as a petroleum engineer in the Appalachian Basin, having been employed by Columbia Gas
Transmission Corporation from October 1995 to May 2001 as a Vice President, Cabot Oil & Gas Corporation from 1989 to 1995 as Manager
of Drilling Operations and Technical Services, Doran & Associates, Inc. (an industrial engineering firm) from 1977 until 1989 as Vice
President—Operations, and Columbia Gas from 1970 to 1977 as Drilling Engineer and Gas Storage Engineer.

                                                                       53
Back to Contents

Board Committees

    Our board of directors has established the following committees: an audit committee, a compensation committee and a nominating and
governance committee. Our board may establish other committees from time to time to facilitate our management.

    The principal functions of the audit committee are to assist the board in monitoring the integrity of our financial statements, the
independent auditor’s qualifications and independence, the performance of our independent auditors and our compliance with legal and
regulatory requirements. The audit committee has the sole authority to retain and terminate our independent auditors and to approve the
compensation paid to our independent auditors. The audit committee is also responsible for overseeing our internal audit function. The audit
committee is comprised solely of independent directors, consisting of Messrs. Arrendell, Bagnell and Delson, with Mr. Arrendell acting as the
chairman. Our board has determined that Mr. Delson is an audit committee financial expert.

    The principal functions of the compensation committee are to administer our employee benefit plans (including incentive plans), annually
evaluate salary grades and ranges, establish guidelines concerning average compensation increases, establish performance criteria for and
evaluate the performance of our chief executive officer and approve compensation of all officers and directors. The compensation committee is
comprised solely of independent directors, consisting of Messrs. Delson, DiNubile and Holtz, with Mr. Delson acting as the chairman.

     The principal functions of the nominating and governance committee are to recommend persons to be selected by the board as nominees
for election as directors, recommend persons to be elected to fill any vacancies on the board, consider and recommend to the board
qualifications for the office of director and policies concerning the term of office of directors and the composition of the board and consider
and recommend to the board other actions relating to corporate governance. The nominating and governance committee is comprised solely of
independent directors, consisting Messrs. Bagnell, DiNubile and Holtz, with Mr. Holtz acting as the chairman.

Director Compensation

    Directors who are our employees or employees of Resource America receive no compensation for service as members of the board of
directors or any committees on which they may serve. Independent directors are paid a monthly retainer of $1,000 and a fee of $1,000 for each
board of directors meeting attended. The chairman of a committee receives an additional monthly retainer of $500 and other committee
members receive an additional monthly retainer of $250.

Compensation Committee Interlocks and Insider Participation

     We did not have a compensation committee of our board of directors during our last fiscal year. The compensation paid to our executive
officers has historically been determined by the compensation committee of our parent, Resource America.

Executive Officer Compensation

     We do not directly compensate Messrs. E. Cohen and J. Cohen. Rather, Resource America allocates the compensation of these executive
officers between activities on behalf of us and activities on behalf of Resource America based upon an estimate of the time spent by such
persons on activities for us and for Resource America, and we reimburse Resource America for the compensation allocated to us. Resource
America also similarly allocates compensation for Messrs. E. Cohen, J. Cohen, Carolas, Simmons and Staines and Ms. McGurk to Atlas
Pipeline Partners, which amounts are not included in the following table. The following table sets forth the compensation paid by us to our
chief executive officer and each of our four other most highly compensated executive officers for fiscal 2003.

                                                                       54
Back to Contents

                                                       Summary Compensation Table

                                                                                                                                    All other
Name and principal position                                                                     Salary          Bonus            compensation(1)

Edward E. Cohen, Chairman of the Board,
   Chief Executive Officer and President                                                    $    240,000    $    160,000     $             1,708
Jonathan Z. Cohen, Vice Chairman of the Board                                               $    140,000    $    120,000     $             1,996
Freddie M. Kotek, Executive Vice President and
   Chief Financial Officer                                                                  $    250,000    $    200,000     $            6,000
Frank P. Carolas, Executive Vice President                                                  $    141,250    $     50,000     $           10,648
Jeffrey C. Simmons, Executive Vice President                                                $    141,250    $     50,000     $           11,914


(1) Represents 401(k) match contributions.

Employment Agreements

    We currently do not have employment agreements with any of the executive officers listed in the table immediately above. We expect to
enter into an employment agreement with Edward E. Cohen, our Chairman, Chief Executive Officer and President, before the closing of this
offering.

    Under the terms of the expected agreement with Edward E. Cohen, Mr. Cohen is to serve as the chairman of our board of directors, our
chief executive officer and president. The agreement requires him to devote such time to us as is reasonably necessary to the fulfillment of his
duties, although it permits him to invest and participate in outside business endeavors. The agreement provides for initial base compensation of
$350,000 per year, which may be increased by the compensation committee of our board based upon its evaluation of Mr. Cohen’s
performance. Mr. Cohen is eligible to receive incentive bonuses and stock option grants and to participate in all employee benefit plans in
effect during his period of employment. The agreement has a term of three years and, until notice to the contrary, the term is automatically
extended so that on any day on which the agreement is in effect it has a then-current three year term.

     The agreement provides for a Supplemental Executive Retirement Plan, or SERP, pursuant to which Mr. Cohen will receive an annual
retirement benefit equal to the product of:

     •    6.5% multiplied by

     •    his base salary as of the time Mr. Cohen’s employment with us ceases, multiplied by

     •    the number of years (or portions thereof) which Mr. Cohen is employed by us.

The maximum benefit under the SERP is limited to 65% of final base salary. The benefit is guaranteed to his estate for 10 years if he should die
before receiving 10 years of SERP benefits. If there is a change of control and his employment with us is terminated, or if we terminate his
employment without cause, then the SERP benefit will be the greater of the accrued benefit pursuant to the above formula, or 35% of his final
base salary.

                                                                       55
Back to Contents

    The agreement provides the following regarding termination and termination benefits:

    •   Upon termination due to death, Mr. Cohen’s estate will receive an amount equal to his final base salary multiplied by the number of
        years (or portion thereof) that he shall have worked for us (but not to be greater than 3 years’ base salary or less than one year’s base
        salary);

    •   We may terminate Mr. Cohen if he is disabled for 180 days consecutive days during any 12-month period. If he is terminated due to
        disability, he will receive his base salary and benefits for 3 years, and such 3 year period will be deemed a portion of his employment
        term for purposes of accruing SERP benefits.

    •   We may terminate his employment without cause upon 30 days’ written notice or upon a change of control after providing at least 30
        days’ written notice. He may terminate his employment for good reason or upon a change in control. Good reason is defined as a
        reduction in his base pay, a demotion, a material reduction in his duties, relocation, his failure to be elected to our board of directors;
        or a material breach of the agreement by us. If employment is terminated by us without cause, by Mr. Cohen for good reason or by
        either party in connection with a change of control, he will be entitled to any amounts then owed to him plus either:

        •    severance benefits under our then current severance policy, if any, or

        •    if Mr. Cohen signs a release, 36 months of continued health insurance coverage and a lump sum payment equal to 3 years of his
             average compensation (which we define as the average of the 3 highest years of total compensation that he shall have earned
             under the agreement, or if the agreement is less than three years old, the highest total compensation in any year or portion
             thereof).

    •   Mr. Cohen my terminate the agreement without cause with 60 days notice to us, and if he does so after January 1, 2006, and signs a
        release, he will receive a severance benefit equal to one-half of one year’s base salary then in effect.

    •   We may terminate his employment for cause (defined as a felony conviction or conviction of a crime involving fraud, embezzlement
        or moral turpitude, intentional and continual failure to perform his material duties after notice, or violation of confidentiality
        obligations) in which case he will receive only accrued amounts then owed to him.

     In the event that any amounts payable to Mr. Cohen upon termination become subject to any excise tax imposed under Section 4999 of the
Internal Revenue Code, we must pay Mr. Cohen an additional sum such that the net amounts retained by Mr. Cohen, after payment of excise,
income and withholding taxes, equals the termination amounts payable.

                                                                        56
Back to Contents

                                              RELATIONSHIP WITH RESOURCE AMERICA

     We have provided below a summary description of the master separation and distribution agreement between Resource America and
ourselves and the other key agreements that relate to our separation from Resource America. This description, which summarizes all of the
material terms of these agreements, is not complete. We urge you to read the full text of these agreements, which are exhibits to the registration
statement of which this prospectus is a part. References in this section to Resource America include its subsidiaries and references to our
company include our subsidiaries.

Overview

    The master separation and distribution agreement contains the key provisions related to our separation from Resource America, this
offering and the distribution of our shares to Resource America’s common stockholders. The other agreements referenced in the master
separation and distribution agreement govern various interim and ongoing relationships between Resource America and us following the
closing date of this offering. These agreements include:

    •    the registration rights agreement;

    •    the tax matters agreement; and

    •    the transition services agreement.

Master Separation and Distribution Agreement

     Overview.      The master separation and distribution agreement contains the key provisions relating to the separation of our business from
Resource America’s other businesses and sets forth certain covenants we have agreed to until the distribution by Resource America to its
stockholders of the shares of our common stock held by Resource America, which we refer to as the distribution. Although Resource America
intends to complete the distribution, it has sole discretion to decide to do so, and we do not expect Resource America to complete the
distribution unless it is tax-free to Resource America and its stockholders. Because the Internal Revenue Service requirements for tax-free
distributions of this nature are complex and the Internal Revenue Service has broad discretion, Resource America may be unable to obtain such
a ruling. Consequently, we cannot assure you that the distribution will occur, or when it will occur.

    Special Dividend.    Immediately before the completion of this offering, we will declare a special dividend in an amount described above
under ―Use of Proceeds‖ to be paid to Resource America, our only stockholder at the time of the declaration, upon completion of the offering.

     Covenants.    We have agreed that, for so long as Resource America beneficially owns at least 50% of our outstanding common stock, we
will:

    •    not take any action which would limit the ability of Resource America or its transferee to transfer its shares of our common stock; and

    •    not take any actions that could reasonably result in Resource America being in breach of or in default under any contract or
         agreement.

                                                                       57
Back to Contents

     Auditors and Audits; Annual Statements and Accounting.         We have agreed that, for so long as Resource America is required to
consolidate our results of operations and financial position with its own or account for its investment in our company on the equity method of
accounting, we will not change our independent auditors without Resource America’s prior written consent (which will not be unreasonably
withheld), and we will use our best efforts to enable our independent auditors to complete their audit of our financial statements in a timely
manner so to permit timely filing of Resource America’s financial statements. We have also agreed to provide to Resource America and its
independent auditors all information required for Resource America to meet its schedule for the filing and distribution of its financial
statements and to make available to Resource America and its independent auditors all documents necessary for the annual audit of our
company as well as access to the responsible company personnel so that Resource America and its independent auditors may conduct their
audits relating to our financial statements. We have also agreed to adhere to certain specified Resource America accounting policies and to
notify and consult with Resource America regarding any changes to our accounting principles and estimates used in the preparation of our
financial statements.

    Indemnification.     Under the master separation and distribution agreement, we and Resource America will indemnify and release each
other as follows:

    •    We will indemnify and hold harmless Resource America and its affiliates and their respective officers, directors, employees, agents,
         successors and assigns against any payments, losses, liabilities, damages, claims and expenses arising out of or relating to our past,
         present and future assets, businesses and operations and other assets, businesses operated or managed by us or persons previously
         associated with us.

    •    Resource America will similarly indemnify us and our affiliates and our and their respective officers, directors, employees, agents,
         successors and assigns for Resource America’s past, present and future assets, businesses and operations, except for assets, businesses
         and operations for which we have agreed to indemnify Resource America.

    •    We will indemnify Resource America and its affiliates against all liabilities arising out of any material untrue statements and
         omissions in any prospectus and any related registration statement filed with the SEC relating to this offering or any other primary
         offering of our common stock or our other securities prior to the date of the distribution or other similar transaction. However, our
         indemnification of Resource America does not apply to information relating to Resource America, excluding information relating to
         us. Resource America has agreed to indemnify us for this information.

    •    Except for the rights and obligations of Resource America and us, which relate to the agreements between Resource America and us
         relating to this offering or the distribution, we will release Resource America and some of its subsidiaries and affiliates and their
         respective officers, directors, employees, agents, successors and assigns for all losses for any and all past actions and failures to take
         actions relating to Resource America’s and our assets, businesses and operations. Resource America will similarly release us.

    All indemnification amounts will be reduced by any insurance proceeds and other offsetting amounts recovered by the party entitled to
indemnification.

    In addition, the transition services agreement, the registration rights agreement and the tax matters agreement referred to below provide for
indemnification between us and Resource America relating to the substance of such agreements.

                                                                         58
Back to Contents

    Access to Information.     Under the master separation and distribution agreement, we and Resource America will be obligated to provide
each other access to information as follows:

    •    subject to applicable confidentiality obligations and other restrictions, we and Resource America will give each other any information
         within each other’s possession that the requesting party reasonably needs to comply with requirements imposed on the requesting
         party by a governmental authority, for use in any proceeding or to satisfy audit, accounting or similar requirements, or to comply with
         its obligations under the master separation and distribution agreement or any ancillary agreement;

    •    for so long as Resource America is required to consolidate our results of operations and financial position with its own or account for
         its investment in our company on the equity method of accounting, we will provide to Resource America, at no charge, all financial
         and other data and information that Resource America determines is necessary or advisable in order to prepare its financial statements
         and reports or filings with any governmental authority, including copies of all quarterly and annual financial information and other
         reports and documents we intend to file with the SEC before such filings (as well as final copies upon filing), and copies of our
         budgets and financial projections;

    •    we will consult with Resource America regarding the timing and content of our earnings releases and cooperate fully (and cause our
         independent auditors to cooperate fully) with Resource America in connection with any of its public filings;

    •    we and Resource America will use reasonable efforts to make available to each other’s past and present directors, officers, other
         employees and agents as witnesses in any legal, administrative or other proceedings in which the other party may become involved;

    •    the company providing information, consultant or witness services under the master separation and distribution agreement will be
         entitled to reimbursement from the other for reasonable expenses incurred in providing this assistance; and

    •    we and Resource America will each agree to hold in strict confidence all information concerning or belonging to the other for a period
         of up to 3 years.

    Employee Matters.       Effective as of the closing of this offering, we will hire specified persons who are currently employed by Resource
America and will assume all compensation and employee benefit liabilities relating to them. All of these people are currently involved in our
business and portions of their salaries have historically been allocated to us.

    The Distribution.    The master separation and distribution agreement provides that Resource America has sole discretion to determine if
and when the distribution will occur and all terms of the distribution. Resource America does not intend to make the distribution unless it
receives:

    •    a ruling by the Internal Revenue Service and/or an opinion from its tax counsel that the distribution will qualify as a reorganization
         pursuant to which no gain or loss will be recognized by Resource America or its stockholders for U.S. federal income tax purposes
         under Section 355, 368(a)(1)(D) and related provisions of the Internal Revenue Code; and

    •    any government approvals and material consents necessary to consummate the distribution.

                                                                        59
Back to Contents

     It is likely that, in order to obtain a favorable ruling from the Internal Revenue Service and an opinion of counsel, we will need to
reorganize our current corporate structure by merging into us at least one subsidiary which has conducted an active business for at least 5 years.
We do not believe that this will have a material effect on us. Even with such restructuring, there is significant uncertainty as to whether
Resource America will be able to obtain such a ruling because the Internal Revenue Service requirements for tax-free distributions of this
nature are complex and the Internal Revenue Service has broad discretion. We are required to cooperate with Resource America to accomplish
the distribution and, at Resource America’s direction, to promptly take any and all actions necessary or desirable to effect the distribution.

    Termination.     Resource America may terminate the master separation and distribution agreement at any time before completion of this
offering. The master separation and distribution agreement may be terminated after this offering by the mutual consent of Resource America
and us.

     Expenses.      In general, Resource America and our company will each be responsible for our own costs (including all associated
third-party costs) incurred in connection with the transactions contemplated by the master separation and distribution agreement.

Registration Rights Agreement

     Registration Rights.      In the event the distribution is not completed and Resource America does not divest itself of all of its shares of our
common stock, Resource America could not freely sell all these shares without registration under the Securities Act or a valid exemption under
it. Accordingly, we will enter into a registration rights agreement with Resource America to provide it with registration rights relating to the
shares of our common stock which it holds. These registration rights generally become effective when Resource America informs us that it no
longer intends to complete the distribution. Under the registration rights agreement, Resource America has the right to require us to register for
offer and sale all or a portion of our common stock held by Resource America.

    Demand Rights.       Resource America may request registration, which we refer to as a demand registration, under the Securities Act of all
or any portion of the shares covered by the registration rights agreement and we will be obligated to register the shares as requested by
Resource America. The maximum number of demand registrations that we are required to effect is 5. Resource America will designate the
terms of each offering effected pursuant to a demand registration, which may take any form, including a shelf registration, a convertible
registration or an exchange registration.

     We have the right, which may be exercised once in any 12-month period, to postpone the filing or effectiveness of any demand registration
for up to 90 days if our board of directors determines in its good faith judgment that such registration would reasonably be expected to have a
material adverse effect on any then-active proposals to engage in material transactions.

     Piggyback Rights.     If we at any time intend to file on our behalf or on behalf of any of our other security holders a registration statement
in connection with a public offering of any of our securities on a form and in a manner that would permit the registration for offer and sale of
our common stock held by Resource America, Resource America has the right to include its shares in that offering.

    Expenses.      We are responsible for the registration expenses in connection with the performance of our obligations under the registration
rights provisions in the registration rights agreement. Resource America is responsible for all of the fees and expenses of counsel to Resource
America and any applicable underwriting discounts or commissions.

                                                                         60
Back to Contents

    Indemnifications.     The registration rights agreement contains indemnification and contribution provisions by us for the benefit of
Resource America and its affiliates and representatives and, in limited situations, by Resource America for the benefit of us and any
underwriters with respect to the information included in any registration statement, prospectus or related document.

     Transfer.     Resource America may transfer shares covered by the registration rights agreement and the holders of such transferred shares
will be entitled to the benefits of the registration rights agreement, provided that each such transferee agrees to be bound by the terms of the
registration rights agreement.

    Duration.   The registration rights under the registration rights agreement will remain in effect with respect to Resource America’s shares
of our common stock until:

    •    the shares have been sold pursuant to an effective registration statement under the Securities Act;

    •    the shares have been sold to the public pursuant to Rule 144 under the Securities Act (or any successor provision);

    •    the shares have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer have been
         delivered by our company, and subsequent public distribution of the shares does not require registration or qualification of them under
         the Securities Act or any similar state law;

    •    the shares have ceased to be outstanding; or

    •    in the case of shares held by a transferee of Resource America, when the shares become eligible for sale pursuant to Rule 144(k)
         under the Securities Act (or any successor provision).

Tax Matters Agreement

     Allocation of Taxes.       In connection with this offering, Resource America and we will enter into a tax matters agreement. The tax matters
agreement will govern the respective rights, responsibilities, and obligations of Resource America and us after this offering with respect to tax
liabilities and benefits, tax attributes, tax contests and other matters regarding income taxes, non-income taxes and related tax returns.

    In general, under the tax matters agreement:

    •    Resource America is responsible for any U.S. federal income taxes of the affiliated group for U.S. federal income tax purposes of
         which Resource America is the common parent. With respect to any periods beginning after this offering, we will be responsible for
         any U.S. federal income taxes attributable to us or any of our subsidiaries.

    •    Resource America is responsible for any U.S. state or local income taxes reportable on a consolidated, combined or unitary return that
         includes Resource America or one of its subsidiaries, on the one hand, and us or one of our subsidiaries, on the other hand. However,
         in the event that we or one of our subsidiaries are included in such a group for U.S. state or local income tax purposes for periods (or
         portions thereof) beginning after the date of this offering, we are responsible for our portion of such income tax liability as if we and
         our subsidiaries had filed a separate tax return that included only us and our subsidiaries for that period (or portion of a period).

                                                                       61
Back to Contents

    •    Resource America is responsible for any U.S. state or local income taxes reportable on returns that include only Resource America
         and its subsidiaries (excluding us and our subsidiaries), and we are responsible for any U.S. state or local income taxes filed on returns
         that include only us and our subsidiaries.

    •    Resource America and we are each responsible for any non-income taxes attributable to our business for all periods.

     Resource America is primarily responsible for preparing and filing any tax return with respect to the Resource America affiliated group for
U.S. federal income tax purposes and with respect to any consolidated, combined or unitary group for U.S. state or local income tax purposes
that includes Resource America or any of its subsidiaries. Under the tax matters agreement, we generally will be responsible for preparing and
filing any tax returns that include only us and our subsidiaries.

    We generally have exclusive authority to control tax contests with respect to tax returns that include only us and our subsidiaries. Resource
America generally has exclusive authority to control tax contests related to any tax returns of the Resource America affiliated group for U.S.
federal income tax purposes and with respect to any consolidated, combined or unitary group for U.S. state or local income tax purposes that
includes Resource America or any of its subsidiaries.

    Disputes arising between Resource America and us relating to matters covered by the tax matters agreement are subject to resolution
through specific dispute resolution provisions described in the tax matters agreement.

    The tax matters agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due,
retention of records and conduct of audits, examinations or similar proceedings. In addition, the tax matters agreement provides for cooperation
and information sharing with respect to taxes.

     Preservation of the Tax-free Status of the Distribution.       Resource America and we intend the distribution to qualify as a reorganization
pursuant to which no gain or loss is recognized by Resource America or its stockholders for federal income tax purposes under Sections 355,
368(a)(1)(D) and related provisions of the Internal Revenue Code. For the distribution to be tax-free to Resource America and its stockholders,
Resource America must, among other things, own at least 80% of our voting power and at least 80% of any non-voting stock at the time of the
distribution. Resource America intends to seek a ruling from the Internal Revenue Service and/or an opinion from its outside tax advisor to the
effect that the distribution will be tax-free to it and its stockholders. Because the Internal Revenue Service requirements for tax-free
distributions of this nature are complex and the Internal Revenue Service has broad discretion, Resource America may be unable to obtain such
a ruling. If such a ruling is not obtained, we do not expect Resource America to complete the distribution. We have agreed to certain
restrictions that are intended to preserve the tax-free status of the distribution, including restrictions on our:

    •    issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory
         arrangements); and

    •    sales of assets outside the ordinary course of business.

                                                                        62
Back to Contents

    We have generally agreed to indemnify Resource America and its affiliates against any and all tax-related liabilities that may be incurred
by them relating to the distribution to the extent such liabilities are caused by our actions. This indemnification applies even if Resource
America has permitted us to take an action that would otherwise have been prohibited under the tax-related covenants as described above.

Transition Services Agreement

    The transition services agreement governs the provision by Resource America to us and by us to Resource America of support services,
such as:

    •    cash management and debt service administration;

    •    accounting and tax;

    •    investor relations;

    •    payroll and human resources administration;

    •    legal;

    •    information technology;

    •    data processing;

    •    real estate management; and

    •    other general administrative functions.

    We and Resource America will pay each other a fee for these services equal to our respective costs in providing them. The fee will be
payable monthly in arrears, 15 days after the close of each month. We have also agreed to pay or reimburse each other for any out-of- pocket
payments, costs and expenses associated with these services.

                                                                       63
Back to Contents

                                                        PRINCIPAL STOCKHOLDER

    Before this offering, all of the outstanding shares of our common stock have been owned by Resource America. The voting and investment
power for Resource America resides in its board of directors. The current members of its board of directors are Andrew M. Lubin, P. Sherrill
Neff, Carlos C. Campbell, Jonathan Z. Cohen (a son of Edward E. Cohen), John S. White and Edward E. Cohen. Mr. E. Cohen will remain as a
director of Resource America after this offering.

     After this offering, Resource America will own shares representing 82.3% of the outstanding shares of our common stock, assuming the
underwriters do not exercise their option to purchase additional shares. After completion of this offering and before the intended distribution of
its remaining ownership interest in us to its common stockholders, Resource America will be able, acting alone, to elect our entire board of
directors and to approve any action requiring stockholder approval. While Resource America intends to make the distribution, it is not
obligated to do so. See ―Risk Factors—Risks Relating to Our Relationship with Resource America—Resource America may not complete its
intended distribution of its holdings of our common stock, which would result in its continued control of us.‖ Except for Resource America, we
are not aware of any person or group that will beneficially own more than 5% of our outstanding shares of common stock following this
offering. None of our executive officers or directors currently owns any shares of our common stock.

                                                                       64
Back to Contents

                                                     DESCRIPTION OF CAPITAL STOCK

    Upon completion of this offering, our authorized capital stock will consist of 49,000,000 shares of common stock, $.01 par value per share,
and 1,000,000 shares of preferred stock, $.01 par value per share.

     The following summary of our capital stock and certificate of incorporation and bylaws does not purport to be complete and is qualified in
its entirety by reference to the provisions of applicable law and to our certificate of incorporation and bylaws, which are filed as exhibits to the
registration statement of which this prospectus is a part.

Common Stock

    There will be 12,988,333 shares of common stock outstanding after this offering, or 13,333,333 shares if the underwriters exercise their
over-allotment option in full. Resource America will own 10,688,333 shares representing 82.3% of our common stock, or 80.2% if the
underwriters exercise their over-allotment option in full.

     Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of our common stock entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of our common stock are entitled to receive proportionately any dividends if and when
such dividends are declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Upon the
liquidation, dissolution or winding up of our company, the holders of our common stock are entitled to receive ratably our net assets available
after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of our common
stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock
are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and
issue in the future.

    Our credit facility limits the dividends we can pay. See ―Business—Credit Facilities.‖ Our board of directors will determine our dividend
policy based upon its analysis of factors it deems relevant. We expect that these factors will include our results of operations, financial
condition, capital requirements and investment opportunities.

Preferred Stock

     Under the terms of our certificate of incorporation, our board of directors is authorized to designate and issue shares of preferred stock in
one or more series without stockholder approval. Our board of directors has discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of
preferred stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might
include:

    •    restricting dividends on the common stock;

    •    diluting the voting power of the common stock;

    •    impairing the liquidation rights of the common stock; and

    •    delaying or preventing a change in control of our company.

    We have no present plans to issue any shares of preferred stock.

                                                                         65
Back to Contents

Delaware Anti-Takeover Law and Charter and Bylaw Provisions

     We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a ―business combination‖ with an ―interested stockholder‖ for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the business combination or the transaction by which the person
became an interested stockholder is approved by the corporation’s board of directors and/or stockholders in a prescribed manner or the person
owns at least 85% of the corporation’s outstanding voting stock after giving effect to the transaction in which the person became an interested
stockholder. The term ―business combination‖ includes mergers, asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an ―interested stockholder‖ is a person who, together with affiliates and associates, owns,
or within three years did own, 15% or more of the corporation’s voting stock. A Delaware corporation may ―opt out‖ from the application of
Section 203 through a provision in its certificate of incorporation or bylaws. We have not ―opted out‖ from the application of Section 203.

    Under our certificate of incorporation and bylaws, our board of directors is divided into three classes, with staggered terms of three years
each. Each year the term of one class expires. Any vacancies on the board of directors may be filled only by a majority vote of the remaining
directors. Our certificate of incorporation and bylaws also provide that any director may be removed from office, but only for cause and only
by the affirmative vote of the holders of at least 66 ?% of the voting power of our then outstanding capital stock entitled to vote generally in the
election of directors.

    Our certificate of incorporation prohibits stockholders from taking action by written consent without a meeting effective as of the date
Resource America no longer owns a majority of our voting stock. It further provides that meetings of stockholders may be called only by our
chairman of the board, our president or a majority of our board of directors. Our bylaws further provide that nominations for the election of
directors and advance notice of other action to be taken at meetings of stockholders must be given in the manner provided in our bylaws, which
contain detailed notice requirements relating to nominations and other action.

   The foregoing provisions of our certificate of incorporation and bylaws and the provisions of Section 203 of the Delaware General
Corporation Law could have the effect of delaying, deferring or preventing a change of control of our company.

Liability and Indemnification of Officers and Directors

    Our certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent an exemption from liability is not permitted under the Delaware General Corporation
Law. That law currently does not permit limitation of liability:

    •    for any breach of a director’s duty of loyalty to us or our stockholders,

    •    for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law,

                                                                         66
Back to Contents

    •    under Section 174 of the Delaware General Corporation Law with respect to unlawful payment of dividends or unlawful stock
         purchases and redemptions, or

    •    for any transaction from which the director derives an improper personal benefit.

Moreover, the provisions do not apply to claims against a director for violations of certain laws, including federal securities laws. If the
Delaware General Corporation Law is amended to authorize the further elimination or limitation of directors’ liability, then the liability of our
directors shall automatically be limited to the fullest extent provided by law. Our certificate of incorporation and bylaws also contain provisions
to indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. In addition, we may enter into
indemnification agreements with our directors and officers. These provisions and agreements may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from directors and officers. We believe that these contractual agreements
and the provisions in our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers.

Transfer Agent and Registrar

    The transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company.

                                                                        67
Back to Contents

                                                  SHARES ELIGIBLE FOR FUTURE SALE

General

    Upon completion of this offering, we will have outstanding 12,988,333 shares of our common stock. All of the 2,300,000 shares sold in the
offering will be freely tradable without restriction by persons other than our ―affiliates,‖ as that term is defined under Rule 144 under the
Securities Act of 1933. Persons who may be deemed affiliates generally include individuals or entities that control, are controlled by or are
under common control with us and may include our officers, directors and significant stockholders. The remaining 10,688,333 shares of
common stock that will continue to be held by Resource America after the offering will constitute ―restricted securities‖ within the meaning of
Rule 144 and may not be sold other than through registration under the Securities Act or pursuant to an exemption from registration. See
―—Registration Rights of Resource America.‖

    Before this offering, there has been no public trading market for our common stock. Sales of substantial amounts of common stock in the
open market, or the perception that those sales could occur, could adversely affect prevailing market prices and could impair our ability to raise
capital in the future through the sale of our equity securities.

Rule 144

     In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner (other than an
affiliate of ours) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

    •     1% of the number of shares of common stock then outstanding; or

    •     the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144
          with respect to the sale.

    Sales under Rule 144 also are subject to manner of sale provisions and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of ours at any time during the three months
preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior
owner (other than an affiliate of ours) is entitled to sell those shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

Registration Rights of Resource America

    As described under ―Relationship with Resource America,‖ we will grant registration rights to Resource America pursuant to a registration
rights agreement under which Resource America may require us to register with the SEC its remaining shares of our common stock for sale.

                                                                        68
Back to Contents

Distribution

    As described under ―Relationship with Resource America,‖ Resource America has advised us that it intends to distribute its remaining
ownership interest in us to its stockholders in the form of a spin-off by means of a special dividend. Shares of our common stock distributed to
Resource America stockholders in the distribution generally will be freely transferable, except for shares of our common stock received by
persons who are our affiliates.

Lock-up Agreements

     We and our directors and officers and Resource America have agreed with the underwriters that, for a period of 180 days from the date of
this prospectus, without the prior written consent of Friedman, Billings, Ramsey on behalf of the underwriters, we will not dispose of or hedge
any shares of our common stock or any securities convertible into or exchangeable for our common stock. Friedman, Billings, Ramsey, on
behalf of the underwriters, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without
notice.

                                                                       69
Back to Contents

                                                                UNDERWRITING

     We and the underwriters named below have entered into an underwriting agreement with respect to the shares of common stock being
offered. Subject to specified conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following
table. Friedman, Billings, Ramsey & Co., Inc. and McDonald Investments Inc. are the representatives of the underwriters.

                                                                                                                                      Number of
Underwriters                                                                                                                           shares

Friedman, Billings, Ramsey & Co., Inc.
McDonald Investments Inc.

Total                                                                                                                                   2,300,000


     At our request, the underwriters have reserved from the shares we are offering 40,000 shares for sale to our directors, officers and their
affiliates, and to current stockholders of Resource America and their affiliates, at the public offering price less the selling concessions of $____
per share. No underwriting discounts and commissions are paid upon these shares. Persons who purchase reserved shares will agree not to
offer, sell or contract to sell or otherwise dispose of those shares, without the prior written consent of Friedman, Billings, Ramsey, on behalf of
the underwriters, for a period of 180 days from the date of this prospectus.

    If the underwriters sell more shares than the total number of shares set forth in the table above, the underwriters have an option to buy up to
an additional 345,000 shares from us to cover the sales. They may exercise that option for 30 days. If any shares are purchased pursuant to that
option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

    The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters, assuming both
no exercise and full exercise of the underwriters’ option to purchase additional shares.

                                                                                                                 No exercise         Full exercise

Per share                                                                                                    $                   $

   Total                                                                                                     $                   $


    Shares sold by the underwriters to the public will be offered at the public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount of up to $______ per share from the public offering price.
Securities dealers may resell any shares purchased from the underwriters to various other brokers or dealers at a discount of up to $_____ per
share from the public offering price. If all the shares are not sold at the offering price, the representatives may change the offering price and the
other selling terms.

    The public offering price of the shares in this offering will be determined by negotiations between us and the underwriters. Among the
factors considered in determining the public offering price will be:

     •     prevailing market conditions;

     •     our results of operations in recent periods;

     •     the present stage of our development;

                                                                         70
Back to Contents

    •    the market capitalizations of other companies that we and the underwriters believe to be comparable to us; and

    •    estimates of our growth potential.

    The offering of our common stock will be conducted in accordance with Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. Neither the underwriters nor any dealers will confirm sales of the common stock in this offering to accounts over which
they exercise discretionary authority without the prior specific written approval of the customer.

     In connection with the offering, the underwriters may purchase and sell shares in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in the offering. Stabilizing transactions consist of some bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress. Covered short sales are sales
made in an amount not greater than the underwriters’ option to purchase additional shares from us in this offering. The underwriters may close
out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted
to them. Naked short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward
pressure on the price of a common stock in the open market after pricing that could adversely affect investors who purchase shares in this
offering.

    The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have repurchased shares sold by or for the account of the underwriter in
stabilizing or short covering transactions.

    These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the shares. As a result, the price of the
shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. These transactions may be effected on Nasdaq or otherwise.

    We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be
approximately $555,000.

    We have agreed to indemnify the underwriters against various liabilities, including liabilities under the Securities Act.

    Fbr.com, a division of FBR Investment Services Inc., will be facilitating Internet distribution for this offering to certain of its Internet
subscription customers. Friedman, Billings, Ramsey intends to allocate a limited number of shares for sale to its online brokerage customers.
An electronic prospectus is available on the Internet Web site maintained by Friedman, Billings, Ramsey at www.fbr.com. Other than the
prospectus in electronic format, the information of the Friedman, Billings, Ramsey website is not part of this prospectus.

                                                                        71
Back to Contents

     Friedman, Billings, Ramsey and McDonald Investments have engaged in transactions with, and, from time to time, have performed
services for, Resource America in the ordinary course of business and have received customary fees for performing these services. In addition,
Friedman, Billings, Ramsey and McDonald Investments acted as the managing underwriters of Atlas Pipeline Partners’ initial public offering
and the follow-on offering in May 2003, and Friedman, Billings, Ramsey is providing advisory services to Atlas Pipeline Partners in
connection with the Alaska Pipeline Company acquisition. Further, as described under ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Pending Acquisition,‖ an affiliate of Friedman, Billing, Ramsey has committed to purchase $25 million
of the preferred equity of the SPV that will be the actual acquirer of Alaska Pipeline Company. In the future, these institutions or their affiliates
may provide investment banking and similar services to us and receive customary fees for such services.

    We have not authorized any dealer, salesperson or other person to give any information or to represent anything to you other than the
information contained in this prospectus. You must not rely on unauthorized information. This prospectus does not offer to sell or ask for offers
to buy any of the limited partner interests offered hereby in any jurisdictions where it is unlawful. The information in this prospectus is current
only as of its date.

     We and our directors and officers and Resource America have agreed with the underwriters that for a period of 180 days from the date of
this prospectus, without the prior written consent of Friedman, Billings, Ramsey, on behalf of the underwriters, we will not dispose of or hedge
any shares of our common stock or any securities convertible into or exchangeable for our common stock. Friedman, Billings, Ramsey on
behalf of the underwriters, in its sole discretion, may release any of the securities subject to these lock-up agreements at any time without
notice.

                                                                         72
Back to Contents

                                                               LEGAL MATTERS

    The validity of the common shares will be passed upon for us by Ledgewood Law Firm, P.C., Philadelphia, Pennsylvania. Specific legal
matters in connection with the shares common stock offered by this prospectus are being passed upon for the underwriters by Dickstein Shapiro
Morin & Oshinsky LLP, Washington D.C.

                                                                   ENGINEERS

    The estimated reserve evaluations and related calculations of Wright & Company, independent petroleum engineering consultants,
included and incorporated by reference in this prospectus have been included in reliance on the authority of that firm as experts in petroleum
engineering.

                                                                     EXPERTS

    The consolidated financial statements as of September 30, 2003 and 2002 and for each of the three years in the period ended September 30,
2003 included in this prospectus have been so included in reliance upon the reports of Grant Thornton LLP, independent certified public
accountants, upon the authority of such firm as experts in accounting and auditing.

                                              WHERE YOU CAN FIND MORE INFORMATION

      We have filed with the SEC under the Securities Act a registration statement on Form S-1 with respect to the common stock offered by this
prospectus. This prospectus, which constitutes part of the registration statement, does not contain all the information set forth in the registration
statement or the exhibits and schedules which are part of the registration statement, portions of which are omitted as permitted by the rules and
regulations of the SEC. Statements made in this prospectus regarding the contents of any contract or other document are summaries of the
material terms of the contract or document. With respect to each contract or document filed as an exhibit to the registration statement, reference
is made to the corresponding exhibit. For further information pertaining to us and the common stock offered by this prospectus, reference is
made to the registration statement, including the exhibits and schedules thereto, copies of which may be inspected without charge at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of all or any portion of the registration statement
may be obtained from the SEC at prescribed rates. Information on the public reference facilities may be obtained by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a web site that contains reports, proxy and information statements and other information that
is filed through the SEC’s EDGAR System. The web site can be accessed at http://www.sec.gov.

                                                                         73
Back to Contents

                                                                  GLOSSARY

The terms defined in this glossary are used throughout this prospectus.

BBL. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

BCF. One billion cubic feet of natural gas.

BCFE. One billion cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

DEVELOPMENT WELL. A well drilled within the proved boundaries of a natural gas or oil reservoir with the intention of completing the
stratigraphic horizon known to be productive.

DRY WELL. A development or exploratory well found to be incapable of producing either natural gas or oil in sufficient quantities to justify
completion as an oil or natural gas well.

EXPLORATORY WELL. A well drilled to find natural gas or oil in an unproved area, to find a new reservoir in a field previously found to
be productive of oil or natural gas in another reservoir, or to extend a known reservoir.

FERC. Federal Energy Regulatory Commission.

GROSS ACRES or GROSS WELLS. The total number of acres or wells, as the case may be, in which a working interest is owned.

MBBL. One thousand barrels of crude oil or other liquid hydrocarbons.

MCF. One thousand cubic feet of natural gas.

MCFE. One thousand cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

MMCFE. One million cubic feet of natural gas equivalents, converting one Bbl of oil to six Mcf of natural gas.

MMCF. One million cubic feet of natural gas.

NET ACRES or NET WELLS. The sum of the fractional working interests owned in gross acres or gross wells. For example, a 50%
working interest in a well is one gross well, but is a .50 net well.

NYMEX. New York Mercantile Exchange.

PRODUCING WELL, PRODUCTION WELL or PRODUCTIVE WELL. A well that is producing natural gas or oil or that is capable of
production.

PROVED DEVELOPED RESERVES. Proved developed reserves are natural gas or oil reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Additional natural gas and oil expected to be obtained through the
application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery
are included as ―proved developed reserves‖ only after testing by a pilot project or after the operation of an installed program has confirmed
through production response that increased recovery will be achieved.

                                                                          74
Back to Contents

PROVED RESERVES. The estimated quantities of natural gas, crude oil and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating
conditions.

PROVED UNDEVELOPED RESERVES. Proved undeveloped reserves are natural gas and oil reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on
undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled.
Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production
from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any
acreage for which an application of fluid injection or other improved recovery techniques is contemplated, unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.

PV-10. The present value of proved reserves is an estimate of the discounted future net cash flows from each of the properties at September
30, 2003, or as otherwise indicated. Net cash flow is defined as net revenues less, after deducting production and ad valorem taxes, future
capital costs and operating expenses, but before deducting federal income taxes. As required by rules of the SEC, the future net cash flows have
been discounted at an annual rate of 10% to determine their ―present value.‖ The present value is shown to indicate the effect of time on the
value of the revenue stream and should not be construed as being the fair market value of the properties. In accordance with SEC rules,
estimates have been made using constant oil and natural gas prices and operating costs, at September 30, 2003, or as otherwise indicated.

RECOMPLETION. A recompletion is an operation to abandon the production of oil and/or natural gas from a well in one zone within the
existing wellbore and to make the well produce oil and/or natural gas from a different, separately producible zone within the existing wellbore.

ROYALTY INTEREST. An interest in a natural gas and oil property entitling the owner to a share of natural gas and oil production free of
costs of production.

SECONDARY RECOVERY.                A method of natural gas and oil extraction in which energy sources extrinsic to the reservoir are utilized.

STANDARDIZED MEASURE. Under the standardized measure, future cash flows are estimated by applying year-end prices, adjusted for
fixed and determinable escalations, to the estimated future production of year-end proved reserves. Future cash inflows are reduced by
estimated future production and development costs based on period-end costs to determine pretax cash inflows. Future income taxes are
computed by applying the statutory tax rate to the excess of pretax cash inflows over the tax basis of the associated properties. Tax credits, net
operating loss carryforwards, and permanent differences are also considered in the future tax calculation. Future net cash inflows after income
taxes are discounted using a 10% annual discount rate to arrive at the standardized measure.

TCF. One trillion cubic feet of natural gas.

UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or completed to a point that would permit the
production of commercial quantities of natural gas and oil regardless of whether such acreage contains proved reserves.

WORKING INTEREST. The operating interest which gives the owner the right to drill, produce and conduct operating activities on the
property and to receive a share of production, subject to all royalties, overriding royalties and other burdens, to all costs of exploration,
development and operations and to all risks in connection therewith.

                                                                        75
Back to Contents

                                               ATLAS AMERICA, INC.
                                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                   Page
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants                                                 F-2
Consolidated Balance Sheets – September 30, 2003 and 2002                                          F-3
Consolidated Statements of Income – Years ended September 30, 2003, 2002 and 2001                  F-4
Consolidated Statements of Comprehensive Income – Years ended September 30, 2003, 2002 and 2001    F-5
Consolidated Statements of Changes in Stockholders’ Equity – Years ended
   September 30, 2003, 2002 and 2001                                                               F-6
Consolidated Statements of Cash Flows – Years ended September 30, 2003, 2002 and 2001              F-7
Notes to Consolidated Financial Statements                                                         F-8

INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Unaudited Consolidated Financial Statements                                        F-35
Consolidated Balance Sheet – December 31, 2003                                                     F-36
Consolidated Statements of Income – Three months ended December 31, 2003 and 2002                  F-37
Consolidated Statements of Comprehensive Income – Three months ended December 31, 2003 and 2002    F-38
Consolidated Statement of Changes in Stockholder’s Equity – Three months ended December 31, 2003   F-39
Consolidated Statements of Cash Flows – Three months ended December 31, 2003 and 2002              F-40
Notes to Consolidated Financial Statements                                                         F-41

                                                                F-1
Back to Index

                                                        ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

 Report of Independent Certified Public Accountants

Stockholder and Board of Directors
ATLAS AMERICA, INC.

    We have audited the accompanying consolidated balance sheets of Atlas America, Inc. (a Wholly-Owned Subsidiary of Atlas Energy
Holdings, Inc.) as of September 30, 2003 and 2002, and the related consolidated statements of income, comprehensive income, changes in
stockholder’s equity, and cash flows for each of the three years in the period ended September 30, 2003. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas
America, Inc. as of September 30, 2003 and 2002, and the consolidated results of its operations and cash flows for each of the three years in the
period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States of America.

    As discussed in Note 2 to the consolidated financial statements, effective October 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement Obligations , and changed its method of accounting for its plugging and
abandonment liability related to its oil and gas wells and associated pipelines and equipment.

     As discussed in Note 3 to the consolidated financial statements, effective October 1, 2001, the Company changed its method of accounting
for goodwill for the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets .



/s/ Grant Thornton LLP




Cleveland, Ohio
December 5, 2003, except for Note 16, for which the date is February 27, 2004.

                                                                        F-2
Back to Index

                                                     ATLAS AMERICA, INC.
                                       (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                                CONSOLIDATED BALANCE SHEETS
                                                  SEPTEMBER 30, 2003 AND 2002

                                                                                                         2003               2002

                                                                                                             (in thousands,
                                                                                                           except share data)
ASSETS
Current assets:
  Cash and cash equivalents                                                                          $    25,372      $          8,922
  Accounts receivable                                                                                     12,362                13,768
  Prepaid expenses                                                                                         1,131                   494

         Total current assets                                                                             38,865                23,184

Property and equipment, net                                                                              142,260            118,266
Goodwill                                                                                                  37,470             37,470
Intangible assets                                                                                          8,239              9,305
Other assets                                                                                               5,554              4,389

                                                                                                     $   232,388      $     192,614


LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
  Current portion of long-term debt                                                                  $        56      $            160
  Accounts payable                                                                                        14,663                12,054
  Liabilities associated with drilling contracts                                                          22,157                 4,948
  Accrued liabilities                                                                                      4,151                 2,089

         Total current liabilities                                                                        41,027                19,251

Long-term debt                                                                                            31,138                49,345
Advances from parent                                                                                       4,498                12,070
Deferred tax liability                                                                                    21,031                18,960
Other liabilities                                                                                          3,207                   228

Minority interest                                                                                         43,976                19,394

Commitments and contingencies                                                                                   —                   —

Stockholder’s equity:
   Preferred stock $.01 par value: 1,000,000 authorized shares:                                               —                     —
   Common stock, $0.01 par value: 49,000,000 authorized shares                                               107                   107
   Additional paid-in capital                                                                             38,619                38,619
   Accumulated other comprehensive loss                                                                       —                   (233 )
   Retained earnings                                                                                      48,785                34,873

         Total stockholder’s equity                                                                       87,511                73,366

                                                                                                     $   232,388      $     192,614


                                       See accompanying notes to consolidated financial statements

                                                                  F-3
Back to Index

                                                        ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                           2003                   2002                   2001

                                                                                            (in thousands, except share and per share data)


REVENUES
Well drilling                                                                        $        52,879      $          55,736       $           43,464
Gas and oil production                                                                        38,639                 28,916                   36,681
Well services                                                                                  7,634                  7,585                    7,403
Transportation                                                                                 5,901                  5,389                    5,715
Gas marketing                                                                                     —                      —                     1,030
Other                                                                                            636                  1,670                    1,596

                                                                                             105,689                 99,296                   95,889

COSTS AND EXPENSES
Well drilling                                                                                 45,982                 48,443                   36,602
Gas and oil production and exploration                                                         8,485                  8,264                    7,846
Well Service                                                                                   3,774                  3,747                    2,961
Transportation                                                                                 2,444                  2,052                    2,001
Gas marketing                                                                                     —                      —                     1,007
Provision for possible losses                                                                     —                    (117 )                    263
General and administrative                                                                     6,532                  7,074                    9,559
Depreciation, depletion and amortization                                                      11,595                 10,836                   10,782
Interest                                                                                       1,961                  2,200                    1,714
Minority interest in Atlas Pipeline Partners, L.P.                                             4,439                  2,605                    4,099

                                                                                              85,212                 85,104                   76,834


Income from continuing operations before income taxes and cumulative effect of
  change in accounting principle                                                              20,477                 14,192                   19,055
Provision for income taxes                                                                     6,757                  4,683                    6,613

Income from continuing operations before cumulative effect of change in
  accounting principle                                                                        13,720                     9,509                12,442
Income (loss) from discontinued operations, net of taxes of $ (103), $883 and $
  463                                                                                             192                 (1,641 )                (1,030 )
Cumulative effect of change in accounting principle, net of taxes of $336                          —                    (627 )                    —

Net income                                                                           $        13,912      $              7,241    $           11,412



Net income per common share – basic and diluted
  From continuing operations                                                         $            1.28    $                .89 $                1.17
  Discontinued operations                                                                          .02                    (.15 )                (.10 )
  Cumulative effect of change in accounting principle                                               —                     (.06 )                  —

Net income per common share                                                          $            1.30    $                .68    $             1.07

Weighted average common shares outstanding                                                10,688,333            10,688,333              10,688,333


                                          See accompanying notes to consolidated financial statements
F-4
Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                                     2003                 2002                2001

                                                                                                                     (in thousands)


Net income                                                                                       $    13,912         $        7,241       $    11,412

Unrealized holding losses on natural gas futures arising during the period, net of taxes of
  $245, $118 and $181                                                                                       (520 )               (264 )              (403 )
Less: reclassification adjustment for losses realized in net income, net of taxes of $355, $17
  and $186                                                                                                  753                    42                413

                                                                                                            233                  (222 )                10

Comprehensive income                                                                             $    14,145         $        7,019       $    11,422


                                          See accompanying notes to consolidated financial statements

                                                                        F-5
Back to Index

                                                 ATLAS AMERICA, INC.
                                   (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
                                    YEARS ENDED SEPTEMBER 30, 2003, 2002, AND 2001
                                            (in thousands, except share data)

                                                                          Accumulated
                                          Common Stock                     Additional           Other                               Totals
                                                                            Paid-In         Comprehensive        Retained        Stockholder’s
                                     Shares              Amount             Capital         Income (Loss)        Earnings           Equity

Balance, October 1, 2000 (after
 giving retroactive effect to a
 106,883.33 for 1 stock split on
 February 27, 2004)                  10,688,333    $          107     $        38,619   $              (21 ) $      16,220   $          54,925
Net unrealized gain                          —                 —                   —                    10              —                   10

Net income                                    —                   —                 —                   —           11,412              11,412

Balance, September 30, 2001          10,688,333    $          107     $        38,619   $              (11 ) $      27,632   $          66,347
Net unrealized loss                          —                 —                   —                  (222 )            —                 (222 )

Net income                                   —                 —                   —                    —            7,241               7,241
Balance, September 30, 2002          10,688,333    $          107     $        38,619   $             (233 ) $      34,873   $          73,366
Net unrealized gain                          —                 —                   —                   233              —                  233

Net income                                   —                 —                   —                    —           13,912              13,912
Balance, September 30, 2003          10,688,333    $          107     $        38,619   $               —   $       48,785   $          87,511


                                    See accompanying notes to consolidated financial statements

                                                                  F-6
Back to Index

                                                         ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

            CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001

                                                                                                   2003              2002              2001

                                                                                                                (in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                    $     13,912      $        7,241     $     11,412
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation, depletion and amortization                                                          11,595             10,836            10,782
  Amortization of deferred finance costs                                                               560                310               168
  Provision for possible losses                                                                         —                (117 )             263
  (Income) loss on discontinued operations                                                            (192 )            1,641             1,030
  Cumulative effect of change in accounting principle                                                   —                 627                —
  Minority interest in Atlas Pipeline Partners, L.P.                                                 4,439              2,605             4,099
  Gain on asset dispositions                                                                           (14 )             (411 )             (64 )
  Property impairments and abandonments                                                                 24                 24               207

Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable and other assets                                          639             (1,256 )           4,102
  Increase (decrease) in accounts payable and other liabilities                                     18,211            (16,048 )           4,191


Net cash provided by operating activities of continuing operations                                  49,174               5,452           36,190

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid in asset acquisitions                                                                      —                 —             (7,875 )
Capital expenditures                                                                                (28,029 )         (21,291 )         (14,050 )
Proceeds from sale of assets                                                                            182               721               100
(Increase) decrease in other assets                                                                    (628 )             162            (2,446 )


Net cash used in investing activities of continuing operations                                      (28,475 )         (20,408 )         (24,271 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings                                                                                           68,384           159,329           125,771
Principal payments on borrowings                                                                    (86,694 )        (153,268 )        (105,992 )
Distributions paid to minority interest of Atlas Pipeline Partners, L.P.                             (4,233 )          (3,623 )          (3,783 )
Increase in other assets                                                                             (1,133 )          (1,003 )            (240 )
Net proceeds from Atlas Pipeline Partners, L.P. public offering                                      25,182                —                 —
Net advances from (payments to ) parent                                                              (5,755 )           1,546            (8,889 )


Net cash (used in) provided by financing activities                                                  (4,249 )            2,981            6,867


Net cash used by discontinued operations                                                                  —             (1,398 )         (2,529 )


Increase (decrease) in cash and cash equivalents                                                    16,450            (13,373 )          16,257
Cash and cash equivalents at beginning of year                                                       8,922             22,295             6,038

Cash and cash equivalents at end of year                                                      $     25,372      $        8,922     $     22,295


                                           See accompanying notes to consolidated financial statements
F-7
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — NATURE OF OPERATIONS

     Atlas America, Inc. (the ―Company‖ or ―AAI and its subsidiaries‖), a Delaware Corporation, is an energy company which drills for,
produces and sells natural gas and, to a significantly lesser extent, oil. The Company, through Atlas Pipeline Partners, L.P. (―Atlas Pipeline‖),
transports natural gas from wells it owns and operates and wells owned by others to interstate pipelines and, in some cases, to end users. Atlas
Pipeline is a master limited partnership in which the Company has a 39% interest. A subsidiary of the Company is the general partner of Atlas
Pipeline. The Company finances a substantial portion of its drilling activities through drilling partnerships it sponsors. The Company typically
acts as the managing general partner of these partnerships and has a material partnership interest.

    The Company was incorporated in Delaware on September 27, 2000, and is a wholly-owned subsidiary of Atlas Energy Holdings, Inc.,
which is a wholly-owned subsidiary of Resource America, Inc. (―RAI‖). RAI is a publicly traded company (trading under the symbol REXI on
the NASDAQ system) operating in the energy, real estate and financial services sectors.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

    The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for
Atlas Pipeline. The Company also owns individual interests in the assets, and is separately liable for its share of the liabilities of energy
partnerships, whose activities include only exploration and production activities. In accordance with established practice in the oil and gas
industry, the Company includes its pro-rata share of assets, liabilities, income and costs and expenses of the energy partnerships in which the
Company has an interest. All material intercompany transactions have been eliminated.

Use of Estimates

    Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and costs and
expenses during the reporting period. Actual results could differ from these estimates.

Stock-Based Compensation

     The Company accounts for its employees’ participation in RAI’s stock option plans in accordance with the provisions of Accounting
Principles Board Opinion No. 25, ―Accounting for Stock Issued to Employees (―APB 25‖), and related interpretations. Compensation expense
is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company adopted the
disclosure requirement of Statement of Financial Accounting Standards (―SFAS‖) No. 123, ―Accounting for Stock-Based Compensation
(―SFAS 123‖) as amended by the required disclosures SFAS No. 148, ―Accounting for Stock-Based Compensation—Transition and
Disclosure.‖ (See Note 7 for required pro forma disclosures.)

                                                                       F-8
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Stock-Based Compensation

    SFAS 123 requires the disclosure of pro forma net income and earnings per share as if the Company had adopted the fair value method for
stock options granted after June 30, 1996. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of
option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which significantly differ from RAI’s stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made
using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, 10 years following vesting;
stock volatility, 70%, 64% and 68% in fiscal 2003, 2002 and 2001, respectively; risk-free interest rate, 4.0%, 4.4% and 5.5% in fiscal 2003,
2002 and 2001, respectively; dividends were based on RAI’s historical rate.

     The Company accounts for its employees’ participation in RAI’s existing employee stock option plans under the recognition and
measurement principles of APB No. 25 and related interpretations. No stock-based employee compensation cost is reflected in net income of
the Company, as all options granted under those plans had an exercise price equal to RAI’s market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of
SFAS 123 to stock-based employee compensation.

                                                                                                              Years Ended September 30,

                                                                                                     2003                 2002                2001

                                                                                                                     (in thousands)

Net income, as reported                                                                         $      13,912        $        7,241       $    11,412
Stock-based employee compensation expense reported in net income, net of tax                               —                     —                 —
Less total stock-based employee compensation expense determined under the fair value
   based method for all awards, net of income taxes                                                         (488 )               (467 )              (421 )

Pro forma net income                                                                            $      13,424        $        6,774       $    10,991


Net income per share:
  Basic and diluted – as reported                                                               $           1.30     $            .68     $          1.07
  Basic and diluted – pro forma                                                                 $           1.26     $            .63     $          1.03


Impairment of Long Lived Assets

   The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset
may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an
impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value.

Earning Per Share

     There is no difference between basic and diluted net income per share since there are no potentially dilutive shares outstanding. Earnings
per share is determined by dividing net income by the weighted average number of outstanding common shares during the three years ended
September 30, 2003, after giving retroactive effect to the 106,883.33 to 1 stock split discussed in note 16.

                                                                       F-9
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Comprehensive Income

     Comprehensive income includes net income and all other changes in the equity of a business during a period from transactions and other
events and circumstances from non-owner sources. These changes, other than net income, are referred to as ―other comprehensive income‖ and
for the Company only include changes in the fair value, net of taxes, of unrealized hedging gains and losses.

Property and Equipment

    Property and equipment consists of the following:

                                                                                                                       At September 30,

                                                                                                                     2003                    2002

                                                                                                                            (in thousands)
Mineral interest in properties:
   Proved properties                                                                                            $        844         $           843
   Unproved properties                                                                                                   563                     584
Wells and related equipment                                                                                          184,227                 152,225
Support equipment                                                                                                      2,189                   1,422
Other                                                                                                                  7,298                   7,090

                                                                                                                     195,121                 162,164

Accumulated depreciation, depletion, amortization and valuation allowances:
  Oil and gas properties                                                                                             (50,170 )               (41,893 )
  Other                                                                                                               (2,691 )                (2,005 )

                                                                                                                     (52,861 )               (43,898 )

                                                                                                                $    142,260         $       118,266


Oil and Gas Properties

     The Company follows the successful efforts method of accounting. Accordingly, property acquisition costs, costs of successful exploratory
wells, all development costs, and the cost of support equipment and facilities are capitalized. Costs of unsuccessful exploratory wells are
expensed when such wells are determined to be nonproductive or, if this determination cannot be made, within twelve months of completion of
drilling. The costs associated with drilling and equipping wells not yet completed are capitalized as uncompleted wells, equipment, and
facilities. Geological and geophysical costs and the costs of carrying and retaining undeveloped properties, including delay rentals, are
expensed as incurred. Production costs, overhead and all exploration costs other than the costs of exploratory drilling are charged to expense as
incurred.

     Oil and gas properties include mineral rights with a cost at September 30, 2003 of $1.4 million before accumulated depletion. In
connection with a review of RAI’s financial statements by the staff of the Securities and Exchange Commission, the Company has been made
aware that an issue has arisen within the industry regarding the application of provisions of Statement of Financial Accounting Standards
(―SFAS‖) No. 142, ―Goodwill and Other Intangible Assets‖ and SFAS No. 141, ―Business Combinations,‖ to companies in the extractive
industries, including gas and oil companies. The issue is whether SFAS No. 142 requires companies to reclassify costs associated with mineral
rights, including both proved and unproved leasehold acquisition costs, as intangible assets in the balance sheet, apart from other capitalized
gas and oil property costs. Historically, the Company and other gas and oil companies have included the cost of these gas and oil leasehold
interests as part of gas and oil properties. Also under consideration is whether SFAS No. 142 requires companies to provide the additional
disclosures prescribed by SFAS No. 142 for intangible assets for costs associated with mineral rights.
F-10
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Oil and Gas Properties — (Continued)

    If it is ultimately determined that SFAS No. 142 requires the Company to reclassify costs associated with mineral rights from property and
equipment to intangible assets, the amounts would be immaterial to the Company’s financial position. The reclassification of these amounts
would not affect the method in which such costs are amortized or the manner in which the Company assesses impairment of capitalized costs.
As a result, net income would not be affected by the reclassification.

     The Company assesses unproved and proved properties periodically to determine whether there has been a decline in value and, if a decline
is indicated, a loss is recognized. The assessment of significant unproved properties for impairment is on a property-by-property basis. The
Company considers whether a dry hole has been drilled on a portion of, or in close proximity to, the property, the Company’s intentions of
further drilling, the remaining lease term of the property, and its experience in similar fields in close proximity. The Company assesses
unproved properties whose costs are individually insignificant in the aggregate. This assessment includes considering the Company’s
experience with similar situations, the primary lease terms, the average holding period of unproved properties and the relative proportion of
such properties on which proved reserves have been found in the past.

    The Company compares the carrying value of its proved developed gas and oil producing properties to the estimated future cash flow from
such properties in order to determine whether their carrying values should be reduced. No adjustment was necessary during any of the fiscal
years in the three year period ended September 30, 2003.

     Upon the sale or retirement of a complete or partial unit of a proved property, the cost and related accumulated depletion are eliminated
from the property accounts, and the resultant gain or loss is recognized in the statement of operations. Upon the sale of an entire interest in an
unproved property where the property had been assessed for impairment individually, a gain or loss is recognized in the statement of
operations. If a partial interest in an unproved property is sold, any funds received are accounted for as a reduction of the cost in the interest
retained.

     On an annual basis, the Company estimates the costs of future dismantlement, restoration, reclamation, and abandonment of its gas and oil
producing properties. Additionally, the Company estimates the salvage value of equipment recoverable upon abandonment. At September 30,
2002, the Company’s estimate of equipment salvage values was greater than or equal to the estimated costs of future dismantlement,
restoration, reclamation, and abandonment. On October 1, 2002, the Company adopted SFAS No. 143 ―Accounting for Asset Retirement
Obligations‖ (―SFAS 143‖) as discussed further in this footnote.

Depreciation, Depletion and Amortization

    The Company amortizes proved gas and oil properties, which include intangible drilling and development costs, tangible well equipment
and leasehold costs, on the unit-of-production method using the ratio of current production to the estimated aggregate proved developed gas
and oil reserves.

    The Company computes depreciation on property and equipment, other than gas and oil properties, using the straight-line method over the
estimated economic lives, which range from three to 39 years.

                                                                       F-11
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Asset Retirement Obligations

      Effective October 1, 2002, the Company adopted SFAS 143 which requires the Company to recognize an estimated liability for the
plugging and abandonment of its oil and gas wells and associated pipelines and equipment. Under SFAS 143, the Company must currently
recognize a liability for future asset retirement obligations if a reasonable estimate of the fair value of that liability can be made. The present
values of the expected asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 requires the
Company to consider estimated salvage value in the calculation of depletion, depreciation and amortization. Consistent with industry practice,
historically the Company had determined the cost of plugging and abandonment on its oil and gas properties would be offset by salvage values
received. The adoption of SFAS 143 resulted in (i) an increase of total liabilities because retirement obligations are required to be recognized,
(ii) an increase in the recognized cost of assets because the retirement costs are added to the carrying amount of the long-lived assets and (iii) a
decrease in depletion expense, because the estimated salvage values are now considered in the depletion calculation.

    The estimated liability is based on historical experience in plugging and abandoning wells, estimated remaining lives of those wells based
on reserves estimates, external estimates as to the cost to plug and abandon the wells in the future, and federal and state regulatory
requirements. The liability is discounted using an assumed credit-adjusted risk-free interest rate. Revisions to the liability could occur due to
changes in estimates of plugging and abandonment costs or remaining lives of the wells, or if federal or state regulators enact new plugging and
abandonment requirements.

    The adoption of SFAS 143 as of October 1, 2002 resulted in a cumulative effect adjustment to record (i) a $1.9 million increase in the
carrying values of proved properties, (ii) a $1.5 million decrease in accumulated depletion and (iii) a $3.4 million increase in non-current
plugging and abandonment liabilities. The cumulative and pro forma effects of the application of SFAS 143 were not material to the
Company’s consolidated statements of operations.

     The Company has no assets legally restricted for purposes of settling asset retirement obligations. Except for the item previously
referenced, the Company has determined that there are no other material retirement obligations associated with tangible long-lived assets.

     A reconciliation of the Company’s liability for well plugging and abandonment costs for the year ended September 30, 2003 is as follows
(in thousands):

                      Asset retirement obligations, September 30, 2002                                            $      —
                      Adoption of SFAS 143                                                                            3,380
                      Liabilities incurred                                                                               93
                      Liabilities settled                                                                               (52 )
                      Revision in estimates                                                                            (494 )
                      Accretion expense                                                                                 204

                      Asset retirement obligations, September 30, 2003                                            $   3,131


    The above accretion expense is included in depreciation, depletion and amortization in the Company’s consolidated statements of
operations and the asset retirement obligation liabilities are included in other liabilities in the Company’s consolidated balance sheet.

                                                                        F-12
Back to Index

                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Fair Value of Financial Instruments

    The Company used the following methods and assumptions in estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.

     For cash and cash equivalents, receivables and payables, the carrying amounts approximate fair value because of the short maturity of these
instruments.

    For secured revolving credit facilities and all other debt, the carrying value approximates fair value because of the short term maturity of
these instruments and the variable interest rates in the debt agreements.

Concentration of Credit Risk

    Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of periodic temporary
investments of cash. The Company places its temporary cash investments in high-quality short-term money market instruments and deposits
with high-quality financial institutions and brokerage firms. At September 30, 2003, the Company had $28.8 million in deposits at various
banks, of which $27.9 million is over the insurance limit of the Federal Deposit Insurance Corporation. No losses have been experienced on
such investments.

Environmental Matters

    The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company
has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and to comply with
regulatory policies and procedures.

    The Company accounts for environmental contingencies in accordance with SFAS No. 5 ―Accounting for Contingencies.‖ Environmental
expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused
by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or clean-ups are probable, and the costs can be reasonably estimated. The Company maintains insurance which may cover in
whole or in part certain environmental expenditures. For the three years ended September 30, 2003, the Company had no environmental
matters requiring specific disclosure or requiring recording of a liability.

Revenue Recognition

     The Company conducts certain energy activities through, and a portion of its revenues are attributable to, sponsored energy limited
partnerships. These energy partnerships raise capital from investors to drill gas and oil wells. The Company serves as general partner of the
energy partnerships and assumes customary rights and obligations for them. As the general partner, the Company is liable for partnership
liabilities and can be liable to limited partners if it breaches its responsibilities with respect to the operations of the partnerships. The income
from the Company’s general partner interest is recorded when the gas and oil are sold by a partnership.

     The Company contracts with the energy partnerships to drill partnership wells. The contracts require that the energy partnerships must pay
the Company the full contract price upon execution. The income from a drilling contract is recognized as the services are performed. The
contracts are typically completed in less than 60 days. The Company classifies the difference between the contract payments it has received and
the revenue earned as a current liability, included in liabilities associated with drilling contracts.



                                                                         F-13
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Revenue Recognition — (Continued)

    The Company recognizes transportation revenues at the time the natural gas is delivered to the purchaser.

    The Company recognizes well services revenues at the time the services are performed.

     The Company is entitled to receive management fees according to the respective partnership agreements. The Company recognizes such
fees as income when earned and includes them in well services revenues.

    The Company sells interests in gas and oil wells and retains a working interest and/or overriding royalty. The Company records the income
from the working interests and overriding royalties when the gas and oil are sold.

Supplemental Cash Flow Information

     Changes in deferred tax liabilities and advances from parent are combined in the consolidated statements of cash flows since all tax
liabilities are settled by the parent (see Income Taxes below).

    The Company considers temporary investments with maturity at the date of acquisition of 90 days or less to be cash equivalents.

    Supplemental disclosure of cash flow information:

                                                                                                           Years Ended September 30,

                                                                                                    2003              2002             2001

                                                                                                                 (in thousands)
Cash paid during the years for:
  Interest                                                                                      $      1,591     $        1,730 $         1,564
  Income taxes (refunded) paid                                                                  $        359     $         (301 ) $         160

Non-cash activities include the following:
  Atlas Pipeline units issued in exchange for gas gathering and
    transmission facilities                                                                     $         —      $            —    $      2,250
  Asset retirement obligation                                                                   $      2,979     $            —    $         —

Details of acquisitions:
  Fair value of assets acquired                                                                 $          —     $            —    $    10,555
  Atlas Pipeline units issued in exchange for gas gathering and
     transmission facilities                                                                               —                  —          (2,250 )
  Liabilities assumed                                                                                      —                  —            (430 )

        Net cash paid                                                                           $          —     $            —    $      7,875


Income Taxes

     The Company is included in the consolidated federal income tax return of RAI. Income taxes are calculated as if the Company had filed a
return on a separate company basis. Deferred taxes reflect the tax effect of temporary differences between the tax basis of the Company’s assets
and liabilities and the amounts reported in the financial statements. See Note 6 for the components of deferred taxes. Separate company state
tax returns are filed in those states in which the Company is registered to do business.

                                                                      F-14
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 3 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL

Other Assets

    The following table provides information about other assets at the dates indicated.

                                                                                                                         At September 30,

                                                                                                                      2003                    2002

                                                                                                                             (in thousands)
Deferred financing costs, net of accumulated amortization of
   $1,091 and $531                                                                                               $       1,548        $            975
Investments                                                                                                              2,974                   3,317
Other                                                                                                                    1,032                      97

                                                                                                                 $       5,554        $          4,389


    Deferred financing costs are amortized over the terms of the related loans.

Intangible Assets

     Intanglible assets consists of partnership management and operating contracts acquired through acquisitions and recorded at fair value on
their acquisition dates. The Company amortizes contracts acquired on a declining balance method, over their respective estimated lives, ranging
from five to thirteen years. Amortization expense for the years ended September 30, 2003, 2002 and 2001 was $1.1 million, $1.2 million and
$1.5 million, respectively. The aggregate estimated annual amortization expense is approximately $1.1 million for each of the succeeding five
years.

    The following table provides information about intangible assets at the dates indicated:

                                                                                                                         At September 30,

                                                                                                                      2003                    2002

                                                                                                                             (in thousands)

Partnership management and operating contracts                                                                   $      14,343 $               14,343
Accumulated amortization                                                                                                (6,104 )               (5,038 )

Intangible assets, net                                                                                           $       8,239        $          9,305


Goodwill

     On October 1, 2001, the Company early-adopted SFAS No. 142 (―SFAS 142‖) ―Goodwill and Other Intangible Assets,‖ which requires
that goodwill no longer be amortized, but instead tested for impairment at least annually. At that time, the Company had unamortized goodwill
of $31.1 million. The transitional impairment test required upon adoption of SFAS 142, which involved the use of estimates related to the fair
market value of the business operations associated with the goodwill, did not indicate an impairment loss. The Company will continue to
evaluate its goodwill at least annually and will reflect the impairment of goodwill, if any, in operating income in the statement of operations in
the period in which the impairment is indicated.

                                                                       F-15
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 3 — OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL — (Continued)

Goodwill — (Continued)

    Changes in the carrying amount of goodwill for the periods indicated are as follows:

                                                                                                           Years Ended September 30,

                                                                                                    2003              2002               2001

                                                                                                                 (in thousands)
Goodwill at beginning of period, (less accumulated amortization of $4,241, $3,508 and
  $2,094)                                                                                      $      37,470     $      31,088       $    28,115
Additions to goodwill related to asset acquisitions                                                       —                 15             4,387
Amortization expense                                                                                      —                 —             (1,414 )
Atlas Pipeline goodwill amortization, whose fiscal year began January 1, 2002, at which
  time it adopted SFAS 142                                                                                 —                 (22 )              —
Syndication network reclassified from other assets in accordance with SFAS 142 (net of
  accumulated amortization of $711)                                                                        —              6,389                 —

Goodwill at end of period (net of accumulated amortization of $4,241, $4,241 and $3,508)       $      37,470     $      37,470       $    31,088


    Adjusted net income from continuing operations for the year ended September 30, 2001 would have been $13.4 million, excluding
goodwill amortization, net of taxes, using the Company’s effective tax rate in fiscal 2001 of 35%. Adjusted basic and diluted net income per
share from continuing operations for the year ended September 30, 2001 would have been $1.25 giving effect to the retroactive stock split
discussed in Note 16.

NOTE 4 — CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS



    The Company conducts certain energy activities through, and a substantial portion of its revenues are attributable to energy limited
partnerships (―Partnerships‖). The Company serves as general partner of the Partnerships and assumes customary rights and obligations for the
Partnerships. As the general partner, the Company is liable for Partnership liabilities and can be liable to limited partners if it breaches its
responsibilities with respect to the operations of the Partnerships. The Company is entitled to receive management fees, reimbursement for
administrative costs incurred, and to share in the Partnerships’ revenue and costs and expenses according to the respective Partnership
agreements.

     The advances from Parent represent amounts owed for advances and transactions in the normal course of business. These advances, which
are non-interest bearing, have no repayment terms and are subordinated to the Company’s $75.0 million revolving credit facility (See Note 5).

   The Company reimburses RAI for all direct and indirect costs of services provided. For the years ended September 30, 2003, 2002 and
2001, such reimbursements were approximately $1.4 million, $1.2 million and $660,000, respectively.

                                                                      F-16
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — DEBT

                                                                                                                          At September 30,

                                                                                                                       2003                    2002

                                                                                                                              (in thousands)

Revolving credit facilities                                                                                        $     31,000        $        49,345
Other debt                                                                                                                  194                    160

                                                                                                                         31,194                 49,505
Less current maturities                                                                                                      56                    160

                                                                                                                   $     31,138        $        49,345


    Following is a description of borrowing arrangements in place at September 30, 2003 and 2002:

    Revolving Credit Facilities.      In July 2002, the Company entered into a $75.0 million credit facility led by Wachovia Bank. The
revolving credit facility has a current borrowing base of $54.2 million which may be increased or decreased subject to growth in the
Company’s oil and gas reserves. The facility permits draws based on the remaining proved developed non-producing and proved undeveloped
natural gas and oil reserves attributable to the Company’s wells and the projected fees and revenues from operation of the wells and the
administration of energy partnerships. Up to $10.0 million of the facility may be in the form of standby letters of credit. The facility is secured
by the Company’s assets. The revolving credit facility has a term ending in July 2005 and bears interest at one of two rates (elected at the
borrower’s option) which increase as the amount outstanding under the facility increases: (i) Wachovia prime rate plus between 25 to 75 basis
points, or (ii) LIBOR plus between 175 and 225 basis points.

     The Wachovia credit facility requires the Company to maintain specified net worth and specified ratios of current assets to current
liabilities and debt to EBITDA, and requires the Company to maintain a specified interest coverage ratio. In addition, the facility limits sales,
leases or transfers of assets and the incurrence of additional indebtedness. The facility limits the dividends payable by the Company to RAI, on
a cumulative basis, to 50% of the Company’s net income from and after April 1, 2002 plus $5.0 million. In addition, the Company is permitted
to repay intercompany debt to RAI only up to the amount of the Company’s federal income tax liability and accrued interest on RAI’s senior
notes. The facility terminates in July 2005, when all outstanding borrowings must be repaid. At September 30, 2003 and 2002, $32.3 million
and $45.0 million, respectively, were outstanding under this facility, including $1.3 million each year under letters of credit. The interest rates
ranged from 2.88% to 2.90% at September 30, 2003.

                                                                       F-17
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — DEBT — (Continued)

    In September 2003, Atlas Pipeline amended and increased its revolving credit facility with Wachovia Bank to provide for maximum
borrowings of $20.0 million. Up to $3.0 million of the facility may be used for standby letters of credit. Borrowings under the facility are
secured by a lien on and security interest in all the property of Atlas Pipeline and its subsidiaries, including pledges by Atlas Pipeline of the
issued and outstanding units of its subsidiaries. The revolving credit facility has a term ending in December 2005 and bears interest at one of
two rates, elected at Atlas Pipeline’s option: (i) the Base Rate plus the Applicable Margin or (ii) the Euro Rate plus the Applicable Margin. As
used in the facility agreement, the Base Rate is the higher of (a) Wachovia Bank’s prime rate or (b) the sum of the federal funds rate plus 50
basis points. The Euro Rate is the average of specified LIBOR rates divided by 1.00 minus the percentage prescribed by the Federal Reserve
Board for determining the reserve requirements for euro currency funding. The Applicable Margin varies with Atlas Pipeline’s leverage ratio
from between 150 to 250 basis points (for the Euro Rate option) or 0 to 75 basis points (for the Base Rate option). Draws under any letter of
credit bear interest as specified under (i), above. The credit facility contains financial covenants, including the requirement that Atlas Pipeline
maintain: (a) a leverage ratio not to exceed 3.0 to 1.0, (b) an interest coverage ratio greater than 3.5 to 1.0 and (c) a minimum tangible net worth
of $30.5 million. In addition, the facility limits, among other things, sales, leases or transfers of property by Atlas Pipeline, the incurrence by
Atlas Pipeline of other indebtedness and certain investments by Atlas Pipeline. There were no outstanding borrowings on this facility at
September 30, 2003 and $5.6 million at September 30, 2002.

    Annual debt principal payments over the next five fiscal years ending September 30 are as follows: (in thousands):

                             2004                                                                        $     56
                             2005                                                                        $ 31,056
                             2006                                                                        $     56
                             2007                                                                        $     26
                             2008                                                                        $     —

    At September 30, 2003, the Company has complied with all financial covenants in its debt agreements.

NOTE 6 — INCOME TAXES

   The following table details the components of the Company’s income tax expense from continuing operations for the fiscal years 2003,
2002 and 2001.

                                                                                                             Years Ended September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)
Provision (benefit) for income taxes:
  Current:
     Federal                                                                                     $       5,069     $        5,454 $         6,931
     State                                                                                                  60                 39              —
  Deferred                                                                                               1,628               (810 )          (318 )

                                                                                                 $       6,757     $        4,683    $      6,613


                                                                       F-18
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 6 — INCOME TAXES — (Continued)

    A reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate is as follows:

                                                                                                          Years Ended September 30,

                                                                                                   2003              2002                    2001

Statutory tax rate                                                                                        35 %                35 %                   35 %
Statutory depletion                                                                                       (2 )                (3 )                   (2 )
Non-conventional fuel credit                                                                              (1 )                (1 )                   (1 )
Goodwill                                                                                                  —                   —                       3
State income taxes, net of federal tax benefit                                                             1                   2                     —

                                                                                                          33 %                33 %                   35 %


    The components of the net deferred tax liability are as follows:

                                                                                                                            September 30,

                                                                                                                     2003                    2002

                                                                                                                            (in thousands)
Deferred tax assets related to:
  Accrued liabilities                                                                                            $          434      $              105

                                                                                                                 $          434      $              105


Deferred tax liabilities related to:
  Property and equipment bases differences                                                                            (15,601 )              (13,267 )
  Other, net                                                                                                           (5,864 )               (5,798 )

                                                                                                                      (21,465 )              (19,065 )

Net deferred tax liability                                                                                       $    (21,031 ) $            (18,960)


    The Company’s liability for its share of current payable federal income taxes are included in Advances from Parent in the Company’s
consolidated balance sheets.

    SFAS No. 109, ―Accounting for Income Taxes‖, requires that deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax assets will not be realized. No valuation allowance was needed at September 30, 2003 or
2002.

NOTE 7 — EMPLOYEE BENEFIT PLANS

     Employee Stock Ownership Plan.        RAI sponsors an Employee Stock Ownership Plan (―ESOP‖), which is a qualified non-contributory
retirement plan established to acquire shares of RAI’s common stock. Employees of the Company who are 21 years of age or older and have
completed 1,000 hours of service are eligible to participate in RAI’s ESOP. Contributions to the ESOP are made at the discretion of RAI’s
Board of Directors and are included in the general and administrative expense of RAI.

    Employee Savings Plan.       RAI sponsors an Employee Retirement Savings Plan and Trust under Section 401(k) of the Internal Revenue
Code which allows employees to defer up to 15% of their income, subject to certain limitations, on a pretax basis through contributions to the
savings plan. Prior to March 1, 2002, RAI matched up to 100% of each employee’s contribution, subject to certain limitations; thereafter, up to
50%. Included in general and administrative expenses are $164,000, $202,000 and $236,000 for the Company’s contributions for the years
ended September 30, 2003, 2002 and 2001, respectively.

                                                                   F-19
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — EMPLOYEE BENEFIT PLANS — (Continued)

   Stock Options.    The following table summarizes certain information about RAI’s equity compensation plans as they pertain to the
Company, in the aggregate, as of September 30, 2003.



                                                                                              (a) (1)              (b) (1)               (c) (2)

                                                                                                                                        Number of
                                                                                                                                         securities
                                                                                                                                        remaining
                                                                                             Number of                                 available for
                                                                                          securities to be                           future issuance
                                                                                            issued upon                               under equity
                                                                                             exercise of                              compensation
                                                                                            outstanding       Weighted-average       plans excluding
                                                                                              options,         exercise price of         securities
                                                                                           warrants and      outstanding options,       reflected in
Plan category                                                                                  rights        warrants and rights        column (a)


Equity compensation plans
  approved by security
  holders                                                                                       226,447      $               10.73         227,688

Equity compensation plans
  not approved by security
  holders                                                                                        36,554      $                 .11                 —

Total                                                                                           263,001      $                9.25         227,688



(1) Represents amounts allocable to the Company.

(2) Represents shares available to eligible employees of RAI and its subsidiaries including the Company.

    RAI has three existing employee stock option plans, those of 1997, 1999 and 2002, in which the Company’s employees are participants.
Options under all plans become exercisable as to 25% of the optioned shares each year after the date of grant, and expire not later than ten
years after the date of grant.

    The 1997 Key Employee Stock Option Plan authorized the granting of up to 825,000 shares of RAI’s common stock in the form of ISO’s,
non-qualified stock options and SAR’s. No options were issued under this plan during fiscal 2003 or fiscal 2002. In fiscal 2001, options for
47,500 shares were issued under this plan to the Company’s employees.

    The 1999 Key Employee Stock Option Plan authorized the granting of up to 1,000,000 shares of RAI’s common stock in the form of
ISO’s, non-qualified stock options and SAR’s. No options were issued under this plan during fiscal 2003. In fiscal 2002 and 2001, options for
10,000 and 72,000 shares, respectively, were issued under this plan to the Company’s employees.

    In April 2002, RAI’s stockholders approved the 2002 Key Employee Stock Option Plan. This plan, for which 750,000 shares were
reserved, provides for the issuance of ISO’s, non-qualified stock options and SAR’s. In fiscal 2003 and 2002, option for 0 and 65,500 shares,
respectively, were issued under this plan to the Company’s employees.

                                                                     F-20
Back to Index

                                                     ATLAS AMERICA, INC.
                                        (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — EMPLOYEE BENEFIT PLANS — (Continued)

     Transactions for RAI’s three employee stock option plans in which the Company’s employees participate are summarized as follows:

                                                                               Years Ended September 30,

                                                       2003                                    2002                                    2001

                                                                Weighted                                Weighted                                Weighted
                                                                Average                                 Average                                 Average
                                              Shares          Exercise Price    Shares                Exercise Price       Shares             Exercise Price


Outstanding – beginning of year                281,666        $       11.55       209,927             $         12.86       101,500           $       15.21
 Granted                                            —         $          —         75,500             $          7.91       119,500           $       11.05
 Exercised                                          —         $          —             —              $            —             —            $          —
 Forfeited                                     (55,219 )      $       14.94        (3,761 )           $         11.06       (11,073 )         $       11.06

 Outstanding – end of year                     226,447        $       10.73       281,666             $         11.55       209,927           $       12.86


Exercisable, at end of year                    116,224        $       11.91        97,542             $         13.97        46,000           $       15.18

Available for grant                            227,688 (1)                         86,719 (1)                                42,458 (1)

Weighted average fair value per
 share of options granted
  during the year                                             $            —                          $           5.93                        $        8.54




(1) Shares represent amounts available under RAI’s plans which are available to eligible employees of RAI and its subsidiaries, including the
    Company.

   The following information applies to employee stock options outstanding attributable to the Company’s employees as of September 30,
2003:

                                                                               Outstanding                                           Exercisable

                                                                                 Weighted
                                                                                 Average                    Weighted                            Weighted
Range of                                                                        Contractual                 Average                             Average
Exercise Prices                                                   Shares        Life (Years)              Exercise Price    Shares            Exercise Price

$ 7.71 — $ 8.08                                                     68,500                8.31        $            7.73        20,125         $        7.78
         $ 9.19                                                      7,500                 .88        $            9.19         1,875         $        9.19
$11.03 — $11.06                                                    112,447                7.33        $           11.05        56,224         $       11.05
         $15.50                                                     38,000                6.64        $           15.50        38,000         $       15.50

                                                                   226,447                                                   116,224


    In connection with the acquisition of the Company, RAI issued options for 120,213 shares at an exercise price of $.11 per share to certain
employees of the Company who had held options of Atlas America before its acquisition by RAI. Options for 36,554 shares remain outstanding
and are exercisable as of September 30, 2003.

                                                                        F-21
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 8 — COMMITMENTS AND CONTINGENCIES

    The Company leases office space and equipment under leases with varying expiration dates through 2008. Rental expense was $1.6
million, $1.4 million and $772,000 for the years ended September 30, 2003, 2002 and 2001, respectively. At September 30, 2003, future
minimum rental commitments for the next five fiscal years were as follows (in thousands):

                             2004                                                                          $    572
                             2005                                                                               462
                             2006                                                                               145
                             2007                                                                                16
                             2008                                                                                16

     The Company is the managing general partner of various energy partnerships, and has agreed to indemnify each investor partner from any
liability that exceeds such partner’s share of partnership assets. The Company has never had to reimburse a limited partner for this purpose.
Subject to certain conditions, investor partners in certain energy partnerships have the right to present their interests for purchase by the
Company, as managing general partner. The Company is not obligated to purchase more than 5% or 10% of the units in any calendar year.
Based on past experience, the Company believes that any liability incurred would not be material.

     The Company may be required to subordinate a part of its net partnership revenues to the receipt by investor partners of cash distributions
from the energy partnerships equal to at least 10% of their agreed subscriptions determined on a cumulative basis, in accordance with the terms
of the partnership agreements.

    The Company is a defendant in a proposed class action originally filed in February 2000 in the New York Supreme Court, Chautauqua
County, by individuals, putatively on their own behalf and on behalf of similarly situated individuals, who leased property to the Company.
The complaint alleges that the Company is not paying lessors the proper amount of royalty revenues derived from the natural gas produced
from the wells on the leased property. The complaint seeks damages in an unspecified amount for the alleged difference between the amount of
royalties actually paid and the amount of royalties that allegedly should have been paid. No estimate of possible loss can be made at this time,
however, the Company believes the complaint is without merit and is defending itself vigorously.

     The Company is also a party to various routine legal proceedings arising out of the ordinary course of its business. Management believes
that none of these actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial position or results of
operations.

NOTE 9 — HEDGING ACTIVITIES

     The Company, through its subsidiaries, from time to time enters into natural gas futures and option contracts to hedge its exposure to
changes in natural gas prices. At any point in time, such contracts may include regulated New York Mercantile Exchange (―NYMEX‖) futures
and options contracts and non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally
settled with offsetting positions, but may be settled by the delivery of natural gas.

                                                                       F-22
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 — HEDGING ACTIVITIES — (Continued)

     The Company formally documents all relationships between hedging instruments and the items being hedged, including the Company’s
risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options
contracts to the forecasted transactions. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the
derivatives are highly effective in offsetting changes in the fair value of hedged items. Historically these contracts have qualified and been
designated as cash flow hedges and recorded at their fair values. Gains or losses on future contracts are determined as the difference between
the contract price and a reference price, generally prices on NYMEX. Such gains and losses are charged or credited to accumulated other
comprehensive income (loss) and recognized as a component of sales revenue in the month the hedged gas is sold. If it is determined that a
derivative is not highly effective as a hedge or it has ceased to be a highly effective hedge, due to the loss of correlation between changes in gas
reference prices under a hedging instrument and actual gas prices, the Company will discontinue hedge accounting for the derivative and
subsequent changes in fair value for the derivative will be recognized immediately into earnings.

    At September 30, 2003, the Company had no open natural gas futures contracts related to natural gas sales and accordingly, had no
unrealized loss or gain related to open NYMEX contracts at that date. Its net unrealized gain was approximately $316,600 at September 30,
2002. The Company recognized losses of $1.1 million, $59,000 and $599,000 on settled contracts covering natural gas production for the years
ended September 30, 2003, 2002 and 2001, respectively. The Company recognized no gains or losses during the three year period ended
September 30, 2003 for hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

    Although hedging provides the Company some protection against falling prices, these activities could also reduce the potential benefits of
price increases, depending upon the instrument.

NOTE 10 — DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
          ACCOUNTING PRINCIPLE

Discontinued Operations

     In June 2002, the Company adopted a plan to dispose of Optiron Corporation, an energy technology subsidiary. The Company had owned
50% of Optiron, and reduced its interest to 10% through a sale to management that was completed in September 2002. In connection with the
sale, the Company forgave $4.3 million of the $5.9 million of indebtedness owed to it by Optiron. The remaining $1.6 million of indebtedness
was retained by the Company in the form of a promissory note secured by all of Optiron’s assets and by the common stock of Optiron’s 90%
shareholder. The note bears interest at the prime rate plus 1% payable monthly; an additional 1% will accrue until the maturity date of the note
in 2022.

    Under the terms of the plan of disposal, Optiron was obligated to pay to the Company 10% of Optiron’s revenues if such revenues
exceeded $2.0 million in the twelve month period following the closing of the transaction. As a result, in September 2003, Optiron became
obligated to pay the Company $295,000. This payment is due in March 2004.

    In accordance with SFAS No. 144, the results of operations have been prepared under the financial reporting requirements for discontinued
operations, pursuant to which, all historical results of Optiron are included in the results of discontinued operations rather than the results of
continuing operations for all periods presented.

                                                                       F-23
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 10 — DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
          ACCOUNTING PRINCIPLE — (Continued)

Discontinued Operations — (Continued)

    Summarized operating results of the discontinued Optiron operations are as follows:

                                                                                                            Years Ended September 30,

                                                                                                    2003               2002              2001

                                                                                                                  (in thousands)

Loss from discontinued operations before income taxes                                           $           —     $           (553 ) $     (1,493 )
Income tax benefit                                                                                          —                  193            463

Loss from discontinued operations                                                               $           —     $           (360 ) $     (1,030 )


Income (loss) on disposal of discontinued operations before income taxes                        $           295 $         (1,971 ) $            —
Income tax (provision) benefit                                                                             (103 )            690                —

Income (loss) on disposal of discontinued operations                                            $          192    $       (1,281 ) $            —


Total gain (loss) on discontinued operations                                                    $          192    $       (1,641 ) $       (1,030 )


Cumulative Effect of Change in Accounting Principle

   Optiron adopted SFAS 142 on January 1, 2002, the first day of its fiscal year. Optiron performed the evaluation of its goodwill required by
SFAS 142 and determined that it was impaired due to uncertainty associated with the on-going viability of the product line with which the
goodwill was associated. This impairment resulted in a cumulative effect adjustment on Optiron’s books of $1.9 million before tax. The
Company recorded its 50% share of this cumulative effect adjustment in fiscal 2002.

NOTE 11 — ACQUISITIONS

     In January 2001, the Company and its consolidated subsidiary, Atlas Pipeline, acquired certain energy assets of Kingston Oil Corporation
for $4.5 million of cash and 88,235 common units of Atlas Pipeline. In March 2001, the Company and Atlas Pipeline acquired certain energy
assets of American Refining and Exploration Company for $2.0 million of cash and 32,924 common units of Atlas Pipeline. Atlas Pipeline
borrowed $1.4 million under its $10.0 million revolving credit facility to fund its share of the cash payments for these acqusitions. In August
2001, the Company acquired certain energy assets of Castle Gas company for $1.4 million. These acquisitions were accounted for under the
purchase method of accounting and, accordingly, the purchase prices were allocated to the assets acquired based on their fair values at the dates
of acquisition and the results of the operations of the businesses acquired are included in the consolidated statements of income from such
dates. The pro forma effect of these acquisitions on operations prior to the acquisition dates is not material.

                                                                      F-24
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 12 — OPERATIONS OF ATLAS PIPELINE

     In February 2000, the Company’s natural gas gathering operations were sold to Atlas Pipeline in connection with a public offering by Atlas
Pipeline of 1,500,000 common units. The Company received net proceeds of $15.3 million for the gathering systems, and Atlas Pipeline issued
to the Company 1,641,026 subordinated units constituting a 51% combined general and limited partner interest in Atlas Pipeline. A subsidiary
of the Company is the general partner of Atlas Pipeline and has a 2% partnership interest on a consolidated basis.

     The Company’s subordinated units are a special class of limited partnership interest in Atlas Pipeline under which its rights to distributions
are subordinated to those of the publicly held common units. The subordination period extends until December 31, 2004 and will continue
beyond that date if financial tests specified in the partnership agreement are not met. The Company’s general partner interest also includes a
right to receive incentive distributions if the partnership meets or exceeds specified levels of distributions.

    In May 2003, Atlas Pipeline completed a public offering of 1,092,500 common units of limited partner interest. The net proceeds after
underwriting discounts and commissions were approximately $25.2 million. These proceeds were used in part to repay existing indebtedness of
$8.5 million. Atlas Pipeline intends to use the balance of these proceeds to fund future capital projects and for working capital. Upon the
completion of this offering the Company’s combined general and limited partner interest in Atlas Pipeline was reduced to 39%. Because the
Company, through its general partner interest, controls the decisions and operations of Atlas Pipeline it is consolidated in the Company’s
financial statements.

    In connection with the Company’s sale of the gathering systems to Atlas Pipeline, the Company entered into agreements that:

    •    Require it to provide stand-by construction financing to Atlas Pipeline for gathering system extensions and additions to a maximum of
         $1.5 million per year for five years.

    •    Require it to pay gathering fees to Atlas Pipeline for natural gas gathered by the gathering systems equal to the greater of $.35 per Mcf
         ($.40 per Mcf in certain instances) or 16% of the gross sales price of the natural gas transported.

   During fiscal 2003, 2002 and 2001, the fee paid to Atlas Pipeline was calculated based on the 16% rate. Through September 30, 2003, the
Company has not been required to provide any construction financing.

                                                                       F-25
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 12 — OPERATIONS OF ATLAS PIPELINE — (Continued)

    In September 2003, Atlas Pipeline entered into a purchase and sale agreement with SEMCO Energy, Inc. (―SEMCO‖) pursuant to which
Atlas Pipeline or its designee will purchase all of the outstanding equity of SEMCO’s wholly-owned subsidiary, Alaska Pipeline Company
(―Alaska Pipeline‖), which owns an intrastate natural gas transmission pipeline that delivers gas to metropolitan Anchorage (the
―Acquisition‖). The total consideration, payable in cash at closing, will be approximately $95.0 million, subject to an adjustment based on the
amount of working capital that Alaska Pipeline has at closing.

    Consummation of the Acquisition is subject to a number of conditions, including receipt of governmental and non-governmental consents
and approvals and the absence of a material adverse change in Alaska Pipeline’s business. Among the required governmental authorizations are
approval of the Regulatory Commission of Alaska and expiration, without adverse action, of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act. The purchase and sale agreement may be terminated by either Atlas Pipeline or SEMCO if the transaction is not
consummated by June 16, 2004. The purchase and sale agreement contains customary representations, warranties and indemnifications.

     As part of the Acquisition, at closing, Alaska Pipeline and ENSTAR Natural Gas Company (―ENSTAR‖), a division of SEMCO which
conducts its gas distribution business in Alaska, will enter into a Special Contract for Gas Transportation pursuant to which ENSTAR will pay
a reservation fee for use of all of the pipeline’s transportation capacity of $943,000 per month, plus $.075 per thousand cubic feet, or mcf, of
gas transported, for 10 years. During 2002, total gas volumes transported on the Alaska Pipeline system averaged 130,000 mcf per day.
SEMCO will execute a gas transmission agreement with Alaska Pipeline pursuant to which SEMCO will be obligated to make up any
difference if the Regulatory Commission of Alaska reduces the transportation rates payable by ENSTAR pursuant to the Special Contract.

    Further, Alaska Pipeline will enter into an Operation and Maintenance and Administrative Services Agreement with ENSTAR under which
ENSTAR will continue to operate and maintain the pipeline for at least 5 years for a fee of $334,000 per month for the first three years.
Thereafter, ENSTAR’s fee will be adjusted for inflation.

     Atlas Pipeline has received a commitment from Friedman, Billings, Ramsey Group, Inc. (―FBR‖) to make a $25.0 million preferred equity
investment in a special purpose vehicle (the ―SPV‖), to be jointly owned and controlled by FBR and Atlas Pipeline; such entity will be the
acquirer of Alaska Pipeline. Under the terms of the FBR commitment, Atlas Pipeline will have the right, during the 18 months following the
closing of the Acquisition, to purchase FBR’s preferred equity interest in the SPV at FBR’s original cost plus accrued and unpaid preferred
distributions and a premium. If Atlas Pipeline does not purchase FBR’s interest, FBR has the right to require RAI to purchase this interest. RAI
will then have the right to require Atlas Pipeline to purchase the equity interest from it. Atlas Pipeline intends to make a $24.0 million common
equity investment in the SPV which Atlas Pipeline will fund in part through its existing $20.0 million credit facility. The SPV has received a
commitment from Wachovia Bank, National Association and Wachovia Capital Markets, LLC for a $50.0 million credit facility to partially
finance the Acquisition. Up to $25.0 million of borrowings under the facility will be secured by a lien on and security interest in all of the
SPV’s property. In addition, upon the earlier to occur of the termination of Atlas Pipeline’s subordination period or the amendment of the
restrictions in the partnership agreement on Atlas Pipeline’s incurrence of debt, Atlas Pipeline will guarantee all borrowings under the facility,
securing the guarantee with a pledge of its interest in the SPV. SPV will be a consolidated subsidiary of Atlas Pipeline at the consummation of
the acquisition.

                                                                      F-26
Back to Index

                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 — OPERATING SEGMENT INFORMATION AND MAJOR CUSTOMERS

     The Company’s operations include two reportable operating segments. In addition to the reportable operating segments, certain other
activities are reported in the ―Other energy‖ category. These operating segments reflect the way the Company manages its operations and
makes business decisions. The Company does not allocate income taxes to its operating segments. Operating segment data for the periods
indicated are as follows:

Year Ended September 30, 2003 (in thousands):
                                                                                               Production and         Other
                                                                               Well Drilling    Exploration         Energy (a)     Total

Revenues from external customers                                              $      52,879    $     38,639     $       14,171 $   105,689
Interest income                                                                          —               —                 220         220
Interest expense                                                                         —               —               1,961       1,961
Depreciation, depletion and amortization                                                 —            8,042              3,553      11,595
Segment profit (loss)                                                                 5,320          21,465             (6,308 )    20,477
Other significant items:
  Segment assets                                                                      7,844         145,614             78,930     232,388

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

Year Ended September 30, 2002 (in thousands):
                                                                                               Production and         Other
                                                                               Well Drilling    Exploration         Energy (a)     Total

Revenues from external customers                                              $      55,736    $     28,916     $       14,644 $     99,296
Interest income                                                                          —               —                 686          686
Interest expense                                                                         —               —               2,200        2,200
Depreciation, depletion and amortization                                                 —            7,550              3,286       10,836
Segment profit (loss)                                                                 6,057          12,708             (4,573 )     14,192
Other significant items:
  Segment assets                                                                      7,555         119,125             65,934     192,614

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

                                                                     F-27
Back to Index

                                                        ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 — OPERATING SEGMENT INFORMATION AND MAJOR CUSTOMERS — (Continued)

Year Ended September 30, 2001 (in thousands):
                                                                                                  Production and         Other
                                                                                  Well Drilling    Exploration         Energy (a)        Total

Revenues from external customers                                                 $      43,464    $     36,681     $       15,744 $        95,889
Interest income                                                                             —               —                 791             791
Interest expense                                                                            —               —               1,714           1,714
Depreciation, depletion and amortization                                                   236           6,148              4,398          10,782
Segment profit (loss)                                                                    6,626          22,687            (10,258 )        19,055
Other significant items:
  Segment assets                                                                         5,646         102,756             86,127        194,529

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

    Operating profit (loss) per segment represents total revenues less costs and expenses attributable thereto, including interest, provision for
possible losses and depreciation, depletion and amortization.

     The Company’s natural gas is sold under contract to various purchasers. For the years ended September 30, 2003, 2002 and 2001, gas sales
to First Energy Solutions Corporation accounted for 18%, 16% and 17%, respectively, of total revenues.

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION

    Results of operations from oil and gas producing activities:

                                                                                                             Years Ended September 30,


                                                                                                      2003               2002            2001

                                                                                                                   (in thousands)

Revenues                                                                                          $     38,639 $           28,916 $        36,681
Production costs                                                                                        (6,770 )           (6,691 )        (6,184 )
Exploration expenses                                                                                    (1,715 )           (1,573 )        (1,662 )
Depreciation, depletion and amortization                                                                (8,042 )           (7,550 )        (6,148 )
Income taxes                                                                                            (7,519 )           (4,005 )        (7,223 )

Results of operations from oil and gas producing activities                                       $     14,593     $        9,097    $     15,464


                                                                       F-28
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    Capitalized Costs Related to Oil and Gas Producing Activities.      The components of capitalized costs related to the Company’s oil and gas
producing activities are as follows:

                                                                                                                  At September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)

Proved properties                                                                                $        844      $         843     $     1,861
Unproved properties                                                                                       563                584             481
Wells and related equipment and facilities                                                            184,176            152,174         126,971
Support equipment and facilities                                                                        2,189              1,422           1,052
Uncompleted wells equipment and facilities                                                                 51                 51              38

                                                                                                      187,823            155,074         130,403
Accumulated depreciation, depletion, amortization and valuation allowances                            (50,170 )          (41,893 )       (33,129 )

        Net capitalized costs                                                                    $    137,653      $     113,181     $    97,274


   Costs Incurred in Oil and Gas Producing Activities.      The costs incurred by the Company in its oil and gas activities during fiscal years
2003, 2002 and 2001 are as follows:

                                                                                                             Years Ended September 30,

                                                                                                      2003              2002             2001

                                                                                                                   (in thousands)
Property acquisition costs:
  Unproved properties                                                                            $         —       $           9     $        90
  Proved properties                                                                              $        412      $         154     $     7,031
Exploration costs                                                                                $      1,715      $       1,573     $     1,662
Development costs                                                                                $     28,007      $      20,934     $    13,579


    The development costs above for the years ended September 30, 2003, 2002 and 2001 were substantially all incurred for the development
of proved undeveloped properties.

    Oil and Gas Reserve Information (Unaudited). The estimates of the Company’s proved and unproved gas reserves are based upon
evaluations made by management and verified by Wright & Company, Inc., an independent petroleum engineering firm, as of September 30,
2003, 2002 and 2001. All reserves are located within the United States. Reserves are estimated in accordance with guidelines established by the
Securities and Exchange Commission and the Financial Accounting Standards Board which require that reserve estimates be prepared under
existing economic and operating conditions with no provisions for price and cost escalation except by contractual arrangements.

    Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating
conditions, i.e. prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions.

    •    Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation tests. The
         area of a reservoir considered proved includes (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts,
         if any; and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on
         the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural
         occurrence of hydrocarbons controls the lower proved limit of the reservoir.
F-29
Back to Index

                                                       ATLAS AMERICA, INC.
                                          (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    •    Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are
         included in the ―proved‖ classification when successful testing by a pilot project, or the operation of an installed program in the
         reservoir, provides support for the engineering analysis on which the project or program was based.

    •    Estimates of proved reserves do not include the following: (a) oil that may become available from known reservoirs but is classified
         separately as ―indicated additional reservoirs‖; (b) crude oil, natural gas, and natural gas liquids, the recovery of which is subject to
         reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors; (c) crude oil, natural gas and
         natural gas liquids, that may occur in undrilled prospects; and (d) crude oil and natural gas, and natural gas liquids, that may be
         recovered from oil shales, coal, gilsonite and other such sources.

     Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and
operation methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery
techniques for supplementing the natural forces and mechanisms of primary recovery should be included as ―proved developed reserves‖ only
after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery
will be achieved.

    There are numerous uncertainties inherent in estimating quantities of proven reserves and in projecting future net revenues and the timing
of development expenditures. The reserve data presented represents estimates only and should not be construed as being exact. In addition, the
standardized measures of discounted future net cash flows may not represent the fair market value of the Company’s oil and gas reserves or the
present value of future cash flows of equivalent reserves, due to anticipated future changes in oil and gas prices and in production and
development costs and other factors for effects have not been proved.

                                                                       F-30
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

    The Company’s reconciliation of changes in proved reserve quantities is as follows (unaudited):

                                                                                                                 Gas                Oil
                                                                                                                (Mcf)              (Bbls)



Balance September 30, 2000                                                                                    113,142,544          1,766,654
  Current additions                                                                                            19,891,663             68,895
  Sales of reserves in-place                                                                                      (88,068 )              (61 )
  Purchase of reserves in(place                                                                                 7,159,387             40,881
  Transfers to limited partnerships                                                                           (11,871,230 )               —
  Revisions                                                                                                    (3,774,259 )          102,136
  Production                                                                                                   (6,342,667 )         (177,437 )

Balance September 30, 2001                                                                                    118,117,370          1,801,068
  Current additions                                                                                            19,303,971             55,416
  Sales of reserves in-place                                                                                     (510,812 )          (23,676 )
  Purchase of reserves in(place                                                                                   280,594              2,180
  Transfers to limited partnerships                                                                            (6,829,047 )          (45,001 )
  Revisions                                                                                                       (23,057 )          260,430
  Production                                                                                                   (7,117,276 )         (172,750 )

Balance September 30, 2002                                                                                    123,221,743          1,877,667
  Current additions                                                                                            27,440,261             44,868
  Sales of reserves in-place                                                                                      (56,480 )          (14,463 )
  Purchase of reserves in(place                                                                                   986,463             18,998
  Transfers to limited partnerships                                                                            (8,669,521 )          (31,386 )
  Revisions                                                                                                    (2,662,812 )          119,038
  Production                                                                                                   (6,966,899 )         (160,048 )

Balance September 30, 2003                                                                                    133,292,755          1,854,674


Proved developed reserves at:
   September 30, 2001                                                                                           80,249,011         1,735,376
   September 30, 2002                                                                                           83,995,712         1,846,281
   September 30, 2003                                                                                           87,760,113         1,825,280

    The following schedule presents the standardized measure of estimated discounted future net cash flows relating to proved oil and gas
reserves. The estimated future production is priced at fiscal year-end prices, adjusted only for fixed and determinable increases in natural gas
and oil prices provided by contractual agreements. The resulting estimated future cash inflows are reduced by estimated future costs to develop
and produce the proved reserves based on fiscal year-end cost levels. The future net cash flows are reduced to present value amounts by
applying a 10% discount factor. The standardized measure of future cash flows was prepared using the prevailing economic conditions existing
at September 30, 2003, 2002 and 2001 and such conditions continually change. Accordingly such information should not serve as a basis in
making any judgment on the potential value of recoverable reserves or in estimating future results of operations (unaudited).

                                                                     F-31
Back to Index

                                                      ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 14 — SUPPLEMENTAL OIL AND GAS INFORMATION — (Continued)

                                                                                                       Years Ended September 30,

                                                                                                2003              2002             2001

                                                                                                             (in thousands)
Future cash inflows                                                                         $    715,539 $         518,118 $        485,781
Future production costs                                                                         (185,442 )        (147,279 )       (126,979 )
Future development costs                                                                         (72,476 )         (55,644 )        (50,953 )
Future income tax expense                                                                       (125,556 )         (79,557 )        (76,584 )


Future net cash flows                                                                            332,065           235,638          231,265
  Less 10% annual discount for estimated timing of cash flows                                   (187,714 )        (131,512 )       (132,553 )

  Standardized measure of discounted future net cash flows                                  $    144,351     $     104,126     $     98,712


   The future cash flows estimated to be spent to develop proved undeveloped properties in the years ended September 30, 2004, 2005 and
2006 are $27.6 million, $29.3 million and $15.6 million, respectively.

    The following table summarizes the changes in the standardized measure of discounted future net cash flows from estimated production of
proved oil and gas reserves after income taxes (unaudited):

                                                                                                       Years Ended September 30,

                                                                                                2003              2002             2001

                                                                                                             (in thousands)
Balance, beginning of year                                                                  $    104,126     $      98,712     $     98,599
Increase (decrease) in discounted future net cash flows:
   Sales and transfers of oil and gas, net of related costs                                      (31,869 )         (22,223 )        (30,496 )
   Net changes in prices and production costs                                                     44,232               249          (21,530 )
   Revisions of previous quantity estimates                                                         (229 )           3,787           (4,184 )
   Development costs incurred                                                                      3,689             4,107            4,011
   Changes in future development costs                                                              (166 )            (149 )           (853 )
   Transfers to limited partnerships                                                              (3,313 )          (3,970 )         (4,177 )
   Extensions, discoveries, and improved recovery less related costs                              24,272            12,057           20,716
   Purchases of reserves in-place                                                                  1,730               340            7,984
   Sales of reserves in-place, net of tax effect                                                    (200 )            (799 )           (204 )
   Accretion of discount                                                                          13,247            12,726           14,078
   Net changes in future income taxes                                                            (18,749 )             203           13,636
   Estimated settlement of asset retirement obligations                                           (3,131 )               –                –
   Estimated proceeds on disposal of well equipment                                                3,381                 –                –
   Other                                                                                           7,331              (914 )          1,132

Balance, end of year                                                                        $    144,351     $     104,126     $     98,712


                                                                       F-32
Back to Index

                                                     ATLAS AMERICA, INC.
                                        (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 15 — QUARTERLY RESULTS (Unaudited)

                                                                      Dec 31                  March 31                June 30               September 30

                                                                                      (in thousands, except share and per share data)
Year ended September 30, 2003
Revenues                                                        $          18,135        $          36,474       $          21,867      $          29,213
Costs and expenses                                                         15,132                   30,126                  17,995                 21,959

Income from continuing operations before taxes and cumulative
  effect of change in accounting principle                      $           3,003        $            6,348      $           3,872      $           7,254

Discontinued operations                                         $               —        $               —       $               —      $             192

Net income                                                      $           2,012        $            4,254      $           2,557      $           5,089


Net income per common share – basic and diluted:
 From continuing operations                                     $               .19      $               .40     $               .24    $              .45
 Discontinued operations                                                         —                        —                       —                    .02

Net income per common share                                     $               .19      $               .40     $               .24    $              .47

Weighted average common shares outstanding                            10,688,333               10,688,333             10,688,333              10,688,333


Year ended September 30, 2002
Revenues                                                        $          28,986        $          27,485       $          19,260      $          23,565
Costs and expenses                                                         24,598                   23,769                  17,276                 19,461

Income from continuing operations before taxes and cumulative
  effect of change in accounting principle                      $           4,388        $            3,716      $           1,984      $           4,104

Discontinued operations                                         $               —        $               —       $          (1,583 ) $                 (58 )

Cumulative effect of change in accounting principle             $              (655 ) $                  —       $               —      $                  28

Net income (loss)                                               $           2,197        $            2,578      $              (254 ) $            2,720


Net income (loss) per common share – basic and diluted:
 From continuing operations                                     $               .27 $                    .24     $               .12 $                 .26
 Discontinued operations                                                         —                        —                     (.15 )                  —
 Cumulative effect of change in accounting principle                           (.06 )                     —                       —                     —

Net income (loss) per common share                              $               .21      $               .24     $              (.03 ) $               .26

Weighted average common shares outstanding                            10,688,333               10,688,333             10,688,333              10,688,333


                                                                    F-33
Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – SUBSEQUENT EVENT

    On December 16, 2003, the Board of Directors of Resource America, Inc. approved the filing of a registration statement on Form S-1 with
respect to a proposed public offering of up to 19.9% of the Company’s common stock. The consolidated financial statements have been
adjusted to give effect to a 106,883.33 for 1 stock split on February 27, 2004 to allow the Company to have available shares in a number
appropriate for a public offering and for the proposed subsequent distribution by Resource America, Inc. of its shares in the Company to its
common stockholders. Income (loss) per share reflecting the retroactive effect of the stock split is presented on the face of the consolidated
statements of income and in the quarterly results disclosed in Note 15.

                                                                     F-34


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

    These unaudited consolidated financial statements as of December 31, 2003 and for the three month periods ended December 31, 2003 and
2002 were prepared by the Company and should be read in conjunction with the audited consolidated financial statements contained in this
registration statement, which include the Company’s audited consolidated balance sheets as of September 30, 2003 and 2002 and the
consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated
statements of changes in shareholder’s equity for the years ended September 30, 2003, 2002 and 2001.

                                                                     F-35


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                                   CONSOLIDATED BALANCE SHEET
                                                     (in thousands, except share data)

                                                                                                                December 31,
                                                                                                                    2003
                                                                                                                (Unaudited)
                 ASSETS
                Current assets:
                   Cash and cash equivalents                                                              $               16,379
                   Accounts receivable                                                                                    11,643
                   Prepaid expenses                                                                                        1,079
                     Total current assets                                                                                 29,101
                Property and equipment, net                                                                              150,102
                Goodwill                                                                                                  37,470
                Intangible assets                                                                                          7,974
                Other assets                                                                                               6,126
                                                                                                          $              230,773
                LIABILITIES AND STOCKHOLDER’S EQUITY
                Current liabilities:
                  Current portion of long-term debt                                                       $                    56
                  Accounts payable                                                                                         18,837
                  Liabilities associated with drilling contracts                                                           40,552
                  Accrued liabilities                                                                                       3,416
                      Total current liabilities                                                                                   62,861
                Long-term debt                                                                                                    19,124
                Advances from Parent                                                                                                 790
                Deferred tax liability                                                                                            21,690
                Other liabilities                                                                                                  3,186

                Minority interest                                                                                                 43,550
                Commitments and contingencies                                                                                          -
                Stockholder’s equity:
                   Preferred stock $.01 par value: 1,000,000 authorized shares                                                     -
                   Common stock, $0.01 par value: 49,000,000 authorized shares                                                   107
                   Additional paid-in capital                                                                                 38,619
                   Retained earnings                                                                                          40,846
                        Total stockholder’s equity                                                                            79,572
                                                                                                              $              230,773
                                            See accompanying notes to consolidated financial statements

                                                                       F-36


Back to Index

                                                         ATLAS AMERICA, INC.
                                           (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                               CONSOLIDATED STATEMENTS OF INCOME
                                          THREE MONTHS ENDED DECEMBER 31, 2003 and 2002
                                               (in thousands, except share and per share data)


                                                                                                                  2003                     2002
                                                                                                                           (unaudited)
REVENUES
Well drilling                                                                                             $              21,959     $              6,583
Gas and oil production                                                                                                   10,195                    8,069
Well services                                                                                                             1,979                    1,899
Transportation                                                                                                            1,599                    1,407
Other                                                                                                                       127                      177
                                                                                                                         35,859                   18,135
COSTS AND EXPENSES
Well drilling                                                                                                            19,095                    5,725
Gas and oil production and exploration                                                                                    1,685                    1,586
Well services                                                                                                             1,004                      839
Transportation                                                                                                              596                      590
General and administrative                                                                                                  948                    2,246
Depreciation, depletion and amortization                                                                                  3,245                    2,872
Interest                                                                                                                    487                      629
Minority interest in Atlas Pipeline Partners, L.P.                                                                        1,271                      645
                                                                                                                         28,331                   15,132
Income from operations before income taxes                                                                                7,528                    3,003
Provision for income taxes                                                                                                2,635                      991
Net Income                                                                                         $                      4,893     $              2,012
Net Income Per Common Share — Basic and Diluted
   Net income per common share                                                                     $                      .46       $              .19
   Weighted average common shares outstanding                                                                     10,688,333               10,688,333
                                       See accompanying notes to consolidated financial statements

                                                                       F-37


Back to Index
                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                     THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
                                                      (in thousands)

                                                                                                   2003                        2002


                                                                                                              (unaudited)


Net income                                                                                $               4,893          $              2,012
Unrealized loss on natural gas futures and options contracts,
  net of taxes of $142                                                                                        —                          (275 )
Less reclassification adjustment for losses realized in net income,
  net of taxes of $33                                                                                        —                             63
                                                                                                             —                           (212 )
Comprehensive income                                                                      $               4,893          $              1,800
                                          See accompanying notes to consolidated financial statements

                                                                      F-38


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
                                      THREE MONTHS ENDED DECEMBER 31, 2003
                                                       (Unaudited)
                                             (in thousands, except share data)

                                                                                      Additional                                       Total
                                                         Common Stock                  Paid-In                Retained             Stockholder’s
                                                  Shares            Amount             Capital                Earnings                Equity
Balance, October 1, 2003                        10,688,333   $            107     $         38,619    $             48,785     $           87,511
Cash dividend to parent                                  -                   -                    -                (12,832 )              (12,832 )
Net income                                               -                   -                    -                  4,893                  4,893
Balance, December 31, 2003                      10,688,333   $            107     $         38,619    $             40,846     $           79,572
                                          See accompanying notes to consolidated financial statements

                                                                      F-39


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        THREE MONTHS ENDED DECEMBER 31, 2003 and 2002
                                                         (Unaudited)
                                                       (in thousands )

                                                                                                               2003                    2002


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                                $           4,893    $              2,012
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Depreciation, depletion and amortization                                                                            3,245                   2,872
  Amortization of deferred finance costs                                                                                127                     153
  Minority interest Atlas Pipeline Partners L.P                                                                    1,271                 645
  Gain on asset dispositions                                                                                         (19 )                (5 )
  Property impairments and abandonments                                                                                6                   6
  Deferred income taxes                                                                                            2,635                 991
Changes in operating assets and liabilities                                                                       22,547               8,555
Net cash provided by operating activities                                                                         34,705              15,229

 CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                                                                              (10,807 )           (4,100 )
Proceeds from sale of assets                                                                                           43                  5
(Increase) decrease in other assets                                                                                  (697 )               15
Decrease in other liabilities                                                                                                            (38 )
Net cash used in investing activities                                                                             (11,461 )           (4,118 )

 CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings                                                                                                         23,000             35,155
Principal payments on borrowings                                                                                  (35,014 )          (26,405 )
Distributions paid to minority interests of Atlas Pipeline Partners, L.P                                           (1,682 )             (875 )
(Payments to) advances from Parent                                                                                (18,516 )              526
Increase in other assets                                                                                              (25 )             (325 )
Net cash (used in) provided by financing activities                                                               (32,237 )            8,076
Increase (decrease) in cash and cash equivalents                                                                   (8,993 )           19,187
Cash and cash equivalents at beginning of year                                                                     25,372              8,922
Cash and cash equivalents at end of period                                                             $           16,379     $       28,109
                                           See accompanying notes to consolidated financial statements

                                                                     F-40


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 1 – MANAGEMENT’S OPINION REGARDING INTERIM FINANCIAL STATEMENTS

    The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for
Atlas Pipeline Partners, L.P. (―Atlas Pipeline‖).

     The consolidated financial statements and the information and tables contained in the notes to the consolidated financial statements as of
December 31, 2003 and for the three months ended December 31, 2003 and 2002 are unaudited. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America
have been condensed or omitted in these statements pursuant to the rules and regulations of the Securities and Exchange Commission.
However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of
the interim periods presented. The results of operations for the three months ended December 31, 2003 may not necessarily be indicative of the
results of operations for the full fiscal year ending September 30, 2004.

    Certain reclassifications have been made to the consolidated financial statements for the three months ended December 31, 2002 to
conform to the presentation as of and for the three months ended December 31, 2003.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment consists of the following (in thousands):

                Mineral interests in properties:
                    Proved properties                                                                         $            844
                    Unproved properties                                                                                    943
                Wells and related equipment                                                                            194,540
                Support equipment                                                                                        2,240
                Other                                                                                                    7,353
                                                                                                                       205,920
                Accumulated depreciation, depletion, amortization and
                  valuation allowances:
                    Oil and gas properties and other                                                                      (55,818 )
                                                                                                                $         150,102
                                                                        F-41


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (Continued)

Fair Value of Financial Instruments

    The Company uses the following methods and assumptions in estimating the fair value of each class of financial instruments for which it is
practicable to estimate fair value.

     For cash and cash equivalents, receivables and payables the carrying amounts approximate fair value because of the short maturity of these
instruments.

    For secured revolving credit facilities and all other debt, the carrying value approximates fair value because of the short term maturity of
these instruments and the variable interest rates in the debt agreement.

Earnings Per Share

     There is no difference between basic and diluted net income per share since there are no potentially dilutive shares outstanding. Earnings
per share is determined by dividing net income by the weighted average number of outstanding common shares during the three months ended
December 31, 2003 and 2002.

Asset Retirement Obligations

   The Company accounts for its estimated plugging and abandonment of its oil and gas properties in accordance with SFAS 143,
―Accounting for Asset Retirement Obligations.‖

    A reconciliation of the Company’s liability for well plugging and abandonment costs for the periods indicated follows:

                                                                                                                        Three Months Ended
                                                                                                                           December 31,
                                                                                                                 2003                        2002
                                                                                                                          (in thousands)
Asset retirement obligations, beginning of period                                                         $              3,131      $                   –
Liabilities incurred                                                                                                        30                          –
Adoption of SFAS 143                                                                                                         –                      3,380
Liabilities settled                                                                                                        (28 )                        –
Accretion expense                                                                                                           47                          –
Asset retirement obligations, end of period                                                               $              3,180      $               3,380
                                                                        F-42


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Asset Retirement Obligations — (Continued)

    The above accretion expense is included in depreciation, depletion and amortization in the Company’s consolidated statements of income
and the asset retirement obligation liabilities are included in other liabilities in the Company’s consolidated balance sheets.

Supplemental Cash Flow Information
    The Company considers temporary investments with a maturity at the date of acquisition of 90 days or less to be cash equivalents.

    Supplemental disclosure of cash flow information:

                                                                                                                       Three Months Ended
                                                                                                                          December 31,
                                                                                                                2003                        2002

                                                                                                                         (in thousands)
Cash paid during the period for:
  Interest                                                                                               $               406        $              542

  Income taxes                                                                                           $                 –        $               –

Derivative Instruments and Hedging Activities

    The Company from time to time enters into natural gas futures and option contracts to hedge its exposure to changes in natural gas prices.
At any point in time, such contracts may include regulated New York Mercantile Exchange (―NYMEX‖) futures and options contracts and
non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally settled with offsetting
positions, but may be settled by the delivery of natural gas.

     The Company formally documents all relationships between hedging instruments and the items being hedged, including the Company’s
risk management objectives and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options
contracts to the hedged asset. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are
highly effective in offsetting changes in fair value of hedged items. When it is determined that a derivative is not highly effective as a hedge or
it has ceased to be a highly effective hedge due to the loss of correlation between changes in gas reference prices under a hedging instrument
and actual gas prices, the Company will discontinue hedge accounting for the derivative and further changes in fair value for the derivative will
be recognized immediately into earnings. Gains or losses on these instruments are accumulated in other comprehensive income (loss) to the
extent that these hedges are deemed to be highly effective as hedges, and are recognized in earnings in the period in which the hedged item is
recognized in earnings.

                                                                       F-43


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Derivative Instruments and Hedging Activities — (Continued)

     At December 31, 2003, the Company had no open natural gas futures contracts related to natural gas sales. Gains or losses on futures
contracts are determined as the difference between the contract price and a reference price, generally prices on NYMEX. The Company did not
settle any contracts during the three months ended December 31, 2003. The Company recognized losses of $96,000 on settled contracts during
the three months ended December 31, 2002. The Company recognized no gains or losses during the three months ended December 31, 2003 for
hedge ineffectiveness or as a result of the discontinuance of cash flow hedges.

    Although hedging provides the Company some protection against falling prices, these activities could also reduce the potential benefits of
price increases, depending upon the instrument.

Recently Issued Financial Accounting Standards

    In December 2003, the Financial Accounting Standards Board (―FASB‖) revised SFAS No. 132, ―Employers’ Disclosures about Pensions
and other Postretirement Benefits,‖ (―SFAS No. 132‖) establishing additional annual disclosures about plan assets, investment strategy,
measurement date, plan obligations and cash flows. In addition, the revised standard established interim disclosure requirements related to the
net periodic benefit cost recognized and contributions paid or expected to be paid during the current fiscal year. The new annual disclosures are
effective for financial statements with fiscal years ending after December 15, 2003 and the interim-period disclosures are effective for interim
periods beginning after December 15, 2003. The adoption of the revised SFAS No. 132 will have no impact on the Company’s results of
operations or financial position.

    In April 2003, the FASB issued SFAS No. 149 (―SFAS 149‖) ―Amendment of Statement 133 on Derivative Instruments and Hedging
Activates.‖ SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and amends and clarifies financial accounting and
reporting for derivative instruments. The adoption of SFAS 149 did not have a material effect on the Company’s financial position or results of
operations.

                                                                        F-44


Back to Index

                                                            ATLAS AMERICA, INC.
                                              (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 3 – OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL

Other Assets

The following table provides information about other assets (in thousands):

                Deferred financing costs, net of accumulated amortization of
                   $1,281 and $1,091                                                                           $         1,445
                Investments                                                                                              2,937
                Other                                                                                                    1,744

                Total other assets                                                                             $         6,126


Intangible Assets

     Intangible assets consists of partnership management and operations contracts acquired through acquisitions and recorded at fair value on
their acquisition dates. The Company amortizes contracts acquired on a declining balance method over their respective estimated lives, ranging
from five to thirteen years. Amortization expense for the three months ended December 31, 2003 and 2002 was $265,000 and $318,000,
respectively. The aggregate estimated annual amortization expense is approximately $1.1 million for each of the succeeding five years.

The following table provides information about intangible assets (in thousands):

                Partnership management and operating contracts                                                 $        14,343
                 Accumulated amortization                                                                               (6,369 )
                Intangible assets, net                                                                         $         7,974
                                                                        F-45


Back to Index

                                                            ATLAS AMERICA, INC.
                                              (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 3 – OTHER ASSETS, INTANGIBLE ASSETS AND GOODWILL — (Continued)

Goodwill

     The Company accounts for its goodwill in accordance with SFAS 142 ―Goodwill and Other Intangible Assets.‖ The Company evaluates its
goodwill at least annually as of the last day of the fiscal year and will reflect the impairment of goodwill, if any, in operating income in the
statement of income in the period in which the impairment is indicated. At December 31, 2003 the Company had goodwill of $37.5 million, net
of accumulated amortization of $4.2 million .

NOTE 4 — DEBT

Total debt consists of the following (in thousands) :

                Revolving credit facilities                                                                    $        19,000
                Other debt                                                                                                 180
                                                                                                                        19,180
                Less current maturities                                                                                    (56 )
                                                                                                               $        19,124
NOTE 5 — OPERATING SEGMENT AND MAJOR CUSTOMER INFORMATION

     The Company’s operations include two reportable operating segments. In addition to the reportable operating segments, certain other
activities are reported in the ―Other energy‖ category. These operating segments reflect the way the Company manages its operations and
makes business decisions. The Company does not allocate income taxes to its operating segments. Operating segment data for the periods
indicated are as follows:

Three Months Ended December 31, 2003 (in thousands):

                                                                                          Production
                                                                   Well                      and                Other
                                                                  Drilling                Exploration          Energy (a)                Total

Revenues from
   external customers                                        $          21,959        $          10,196    $            3,704        $       35,859
Interest income                                                              –                        –                    39                    39
Interest expense                                                             –                        –                   487                   487
Depreciation, depletion and
   amortization                                                              –                     2,210                1,035                    3,245
Operating profit (loss)                                                  2,498                     6,184               (1,154 )                  7,528
Other significant items:
   Segment assets                                                        7,715                  149,924               73,134                230,773

                                                                      F-46


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 5 - OPERATING SEGMENT AND MAJOR CUSTOMER INFORMATION — (Continued)

Three months ended December 31, 2002 (in thousands):

                                                                                          Production
                                                                   Well                      and                Other
                                                                  Drilling                Exploration          Energy (a)                Total

Revenues from
   external customers                                        $           6,583        $            8,069   $            3,483        $       18,135
Interest income                                                              -                         -                   91                    91
Interest expense                                                             -                         -                  629                   629
Depreciation, depletion and
     amortization                                                               -                  1,932                     940                 2,872
Operating profit (loss)                                                      (127 )                3,620                    (568 )               3,003
Other significant items:
     Segment assets                                                      6,884                  137,117               84,485                228,486

(a) Revenues and expenses from segments below the quantitative thresholds are attributable to two operating segments of the Company.
    Those segments include well services and natural gas transportation. These segments have never met any of the quantitative thresholds for
    determining reportable segments.

   Operating profit (loss) per segment represents total revenues less costs and expenses attributable thereto. Costs and expenses allocated to
segments include interest, provision for possible losses and depreciation, depletion and amortization.

     The Company markets its gas and oil production on a competitive basis. Gas is sold under various types of contracts ranging from
life-of-the-well to short-term contracts. The Company is party to a ten-year agreement which expires in March 2009 to sell the majority of its
existing and future production to an affiliate of First Energy Corporation, (―FEC‖) a publicly-traded company (NYSE:FE). Pricing under the
contract is tied to index-based formulas which the Company negotiates annually. Approximately 57% of the Company’s current production
was dedicated to the performance of this agreement for the three months ended December 31, 2003. Payments to the Company under the
agreement are guaranteed by FEC.

    The Company anticipates that it will negotiate mutually agreeable pricing terms for subsequent 12-month periods pursuant to the
aforementioned agreement. Management believes that the loss of any one customer would not have a material adverse effect as it believes that,
under current market conditions, the Company’s production could readily be absorbed by other purchasers.

                                                                       F-47


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 6 - PENDING ACQUISITION

   In September 2003, Atlas Pipeline entered into a purchase and sale agreement with SEMCO Energy, Inc. (―SEMCO‖) pursuant to which
Atlas Pipeline or its designee will purchase all of the outstanding equity of SEMCO’s wholly-owned subsidiary, Alaska Pipeline Company,
which owns an intrastate natural gas transmission pipeline that delivers gas to metropolitan Anchorage (the ―Acquisition‖). The total
consideration, payable in cash at closing, will be approximately $95.0 million, subject to an adjustment based on the amount of working capital
that Alaska Pipeline has at closing.

    Consummation of the Acquisition is subject to a number of conditions, including receipt of governmental and non-governmental consents
and approvals and the absence of a material adverse change in Alaska Pipeline’s business. Among the required governmental authorizations are
approval of the Regulatory Commission of Alaska and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act (which has passed). The purchase and sale agreement may be terminated by either Atlas Pipeline or SEMCO if the transaction is not
consummated by June 16, 2004. The purchase and sale agreement contains customary representations, warranties and indemnifications.

     As part of the Acquisition, at closing, Alaska Pipeline and ENSTAR Natural Gas Company (―ENSTAR‖), a division of SEMCO which
conducts its gas distribution business in Alaska, will enter into a Special Contract for Gas Transportation pursuant to which ENSTAR will pay
a reservation fee of $943,000 per month for the use of all of the pipeline’s transportation capacity plus $.075 per thousand cubic feet, or mcf, of
gas transported, for 10 years. During 2002, total gas volumes transported on the Alaska Pipeline system averaged 130,000 mcf per day.
SEMCO will execute a gas transmission agreement with Alaska Pipeline pursuant to which SEMCO will be obligated to make up any
difference if the Regulatory Commission of Alaska reduces the transportation rates payable by ENSTAR pursuant to the Special Contract.

   Additionally, Alaska Pipeline will enter into an Operation and Maintenance and Administrative Services Agreement with ENSTAR under
which ENSTAR will continue to operate and maintain the pipeline for at least 5 years for a fee of $334,000 per month for the first three years.
Thereafter, ENSTAR’s fee will be adjusted for inflation.

   Atlas Pipeline has received a commitment from Friedman, Billings, Ramsey Group, Inc. (―FBR‖) to make a $25.0 million preferred equity
investment in a special purpose vehicle (the ―SPV‖), to be jointly owned and controlled by FBR and Atlas Pipeline, the SPV will be the
acquirer of Alaska Pipeline. Under the terms of the FBR commitment, Atlas Pipeline will have the right, during the 18 months following the
closing of the Acquisition, to purchase FBR’s preferred equity interest in the SPV at FBR’s original cost plus accrued and unpaid preferred
distributions and a specified premium. If Atlas Pipeline does not purchase FBR’s interest, FBR has the right to require the Company to
purchase this interest. The Company will then have the right to require Atlas Pipeline to purchase the equity interest from it. The Company,
through Atlas Pipeline intends to make a $24.0 million common equity investment in the SPV which Atlas Pipeline will fund in part through its
existing $20.0 million credit facility. The SPV has received a commitment from Wachovia Bank, National Association and Wachovia Capital
Markets, LLC for a $50 million credit facility to partially finance the Acquisition. Up to $25 million of borrowings under the facility will be
secured by a lien on and security interest in all of the SPV’s property. In addition, upon the earlier to occur of the termination of Atlas
Pipeline’s subordination period or the amendment of the restrictions in the partnership agreement on Atlas Pipeline’s incurrence of debt, Atlas
Pipeline will guarantee all borrowings under the facility, securing the guarantee with a pledge of its interest in the SPV.

                                                                       F-48


Back to Index

                                                       ATLAS AMERICA, INC.
                                         (A Wholly-Owned Subsidiary of Atlas Energy Holdings, Inc.)

NOTE 7 - SUBSEQUENT EVENTS

     On February 10, 2004, the Company filed a registration statement on Form S-1 with respect to a proposed public offering of up to 19.8% of
its common stock. On February 27, 2004 the Company effectuated a 106,833 for 1 stock split. Income per share reflecting the retroactive effect
of the stock split is presented on the face of the consolidated statements of income for the three months ended December 31, 2003 and 2002.
                                                                       F-49




Back to Index

                                                           TABLE OF CONTENTS

                SUMMARY                                                                                                            2
                RISK FACTORS                                                                                                       7
                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS                                                                 16
                USE OF PROCEEDS                                                                                                   17
                CAPITALIZATION                                                                                                    18
                SELECTED CONSOLIDATED FINANCIAL DATA                                                                              19
                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS                                                                                           22
                BUSINESS                                                                                                          35
                MANAGEMENT                                                                                                        51
                RELATIONSHIP WITH RESOURCE AMERICA                                                                                57
                PRINCIPAL STOCKHOLDER                                                                                             64
                DESCRIPTION OF CAPITAL STOCK                                                                                      65
                SHARES ELIGIBLE FOR FUTURE SALE                                                                                   68
                UNDERWRITING                                                                                                      70
                LEGAL MATTERS                                                                                                     73
                ENGINEERS                                                                                                         73
                EXPERTS                                                                                                           73
                WHERE YOU CAN FIND MORE INFORMATION                                                                               73
                GLOSSARY                                                                                                          74
                INDEX TO FINANCIAL STATEMENTS                                                                                    F-1


Back to Index

                                                     Dealer Prospectus Delivery Obligation

   Until ______________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
Back to Contents

                                  2,300,000 Common Shares


                                  ATLAS AMERICA, INC.

                    _____________________________________________________

                                      PROSPECTUS
                   _____________________________________________________

                             FRIEDMAN BILLINGS RAMSEY



                             MCDONALD INVESTMENTS INC.
Back to Contents

                                                                     PART II

                                           INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

   The following is a list of estimated expenses in connection with the issuance and distribution of the securities being registered, with the
exception of underwriting discounts and commissions:

              SEC registration fee                                                                           $              5,362
              NASD filing fee                                                                                               4,732
              Nasdaq listing fee                                                                                          100,000
              Printing costs                                                                                               45,000
              Legal fees and expenses                                                                                     150,000
              Accounting fees and expenses                                                                                200,000
              Transfer agent fees                                                                                           5,000
              Blue sky fees and expenses                                                                                       —
              Miscellaneous                                                                                                44,638

                   Total                                                                                     $            555,362

All of the above expenses except the SEC registration fee, NASD filing fee and the Nasdaq listing fee are estimates.

Item 14. Indemnification of Directors and Officers.

    Under the provisions of Section 145 of the Delaware General Corporation Law, the registrant is required to indemnify any present or former
officer or director against expenses arising out of legal proceedings in which the director or officer becomes involved by reason of being a
director or officer if the director or officer is successful in the defense of such proceedings. Section 145 also provides that the registrant may
indemnify a director or officer in connection with a proceeding in which he is not successful in defending if it is determined that he acted in
good faith and in a manner reasonably believed to be in or not opposed to the best interests of the registrant or, in the case of a criminal action,
if it is determined that he had no reasonable cause to believe his conduct was unlawful. Liabilities for which a director or officer may be
indemnified include amounts paid in satisfaction of settlements, judgments, fines and other expenses (including attorneys’ fees incurred in
connection with such proceedings). In a stockholder derivative action, no indemnification may be paid in respect of any claim, issue or matter
as to which the director or officer has been adjudged to be liable to the registrant (except for expenses allowed by a court).

                                                                        II-1
Back to Contents

   The registrant’s Amended and Restated Certificate of Incorporation provides for indemnification of directors and officers of the registrant to
the full extent permitted by applicable law. Under the provisions of the registrant’s Amended and Restated Bylaws, the registrant is required to
indemnify officers or directors to a greater extent than under the current provisions of Section 145 of the Delaware General Corporation Law.
Except with respect to stockholder derivative actions, the Bylaw provisions generally state that the director or officer will be indemnified
against expenses, amounts paid in settlement and judgments, fines, penalties and/or other amounts incurred with respect to any threatened,
pending or completed proceeding, provided that (i) such person acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the registrant, and (ii) with respect to any criminal action or proceeding, such person had no reasonable
cause to believe his or her conduct was unlawful.

   The foregoing standards also apply with respect to the indemnification of expenses incurred in a stockholder derivative suit. However, a
director or officer may only be indemnified for settlement amounts or judgments incurred in a derivative suit to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

    In accordance with the Delaware General Corporation Law, the registrant’s Amended and Restated Certificate of Incorporation contains a
provision to limit the personal liability of the directors of the registrant for violations of their fiduciary duty. This provision eliminates each
director’s liability to the registrant or its stockholders, for monetary damages except (i) for breach of the director’s duty of loyalty to the
registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions or (iv) for any transaction from which a director derived an improper personal benefit. The effect of
this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of
are, including any such actions involving gross negligence.

   Resource America, the corporate parent of the registrant, maintains directors’ and officers’ liability insurance against any actual or alleged
error, misstatement, misleading statement, act, omission, neglect or breach of duty by any director or officer of itself or any direct or indirect
subsidiary, excluding certain matters including fraudulent, dishonest or criminal acts or self-dealing.

Item 15. Recent Sales of Unregistered Securities.

      None.

Item 16. Exhibits and Financial Statement Schedules.

(a)       Exhibits.

         Exhibit No.                                                             Description

                   1.1     Form of Underwriting Agreement.
                   3.1     Form of Amended and Restated Certificate of Incorporation. (2)
                   3.2     Form of Amended and Restated Bylaws. (2)
                   4.1     Specimen stock certificate. (1)
                   5.1     Opinion re: legality.
                  10.1     Gas Purchase Agreement, dated March 31, 1999, among FirstEnergy Solutions Corp.
                           (f/k/a Northeast Ohio Gas Marketing, Inc.), Atlas Energy Group, Inc., Atlas
                           Resources, Inc. and Resource Energy, Inc., as amended by Amendment to Gas
                           Purchase Agreement dated February 1, 2001 and Second Amendment to Base Gas
                           Purchase Agreement dated July 15, 2003.
                  10.2     Master Natural Gas Gathering Agreement, dated February 2, 2000, among Atlas
                           Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, L.P., Atlas America,
                           Inc., Resource Energy, Inc. and Viking Resources Corporation.


                                                                        II-2



                10.3     Omnibus Agreement, dated February 2, 2000, among Atlas Pipeline Partners, L.P.,
                         Atlas Pipeline Operating Partnership, L.P., Atlas America, Inc., Resource Energy,
                         Inc. and Viking Resources Corporation.
              10.4       Credit Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
                         Bank, National Association, and other banks party thereto, dated March 12, 2004.
              10.5       Credit Agreement among Atlas Pipeline Partners, L.P., Wachovia Bank, National
                         Association, and the other parties thereto, dated December 27, 2002. (2)
              10.5 (a)   Second Amendment to Credit Agreement dated March 28, 2003. (2)
              10.5 (b)   Third Amendment to Credit Agreement dated September 15, 2003. (2)
              10.6       Purchase and Sale Agreement between Atlas Pipeline Partners, L.P. and SEMCO
                         Energy, Inc. dated September 16, 2003. (2)
              10.7       Form of Master Separation and Distribution Agreement between Atlas America, Inc.
                         and Resource America, Inc.
              10.8       Form of Registration Rights Agreement between Atlas America, Inc. and Resource
                         America, Inc.
              10.9       Form of Tax Matters Agreement between Atlas America, Inc. and Resource
                         America, Inc.
             10.10       Form of Transition Services Agreement between Atlas America, Inc. and Resource
                         America, Inc.
             10.11       Natural Gas Gathering Agreement among Atlas Pipeline Partners, L.P., Atlas
                         Pipeline Operating Partnership, L.P., Atlas Resources, Inc., Atlas Energy Group,
                         Inc., Atlas Noble Corp., Resource Energy, Inc. and Viking Resources Corporation
                         dated January 1, 2002.
             10.12       Form of Employment Agreement for Edward E. Cohen.
              21.1       Subsidiaries of Atlas America. (2)
              23.1       Consent of Grant Thornton LLP.
              23.2       Consent of Wright & Company. (2)
              23.3       Consent of Ledgewood Law Firm, P.C. (included in Exhibit 5.1)
              24.1       Power of Attorney (included on signature pages). (2)


(1) To be filed by amendment.
(2) Previously filed as an exhibit to this registration statement on February 10, 2004.
(b) Financial Statement Schedules.

    All schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated financial statements and notes thereto.

Item 17. Undertakings.

     (a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

     (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director,

                                                                        II-3




officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

                          (c)                        The undersigned registrant hereby undertakes that:

    (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared
effective.
    (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

                                                                        II-4




                                                                  SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Philadelphia, Pennsylvania, on March 16, 2004.

                                                                      ATLAS AMERICA, INC.
                                                                  By: /s/ Edward E. Cohen

                                                                       Edward E. Cohen
                                                                       Chairman, Chief Executive Officer and President

   Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 16, 2004.

                                                                       /s/ Edward E. Cohen

                                                                       Edward E. Cohen, for himself as Chairman and Chief Executive
                                                                       Officer and President and as attorney-in-fact for:
                                                                         Freddie M. Kotek, Executive Vice President and Chief Financial
                                                                            Officer
                                                                         Nancy J. McGurk, Senior Vice President and Chief Accounting
                                                                            Officer
                                                                         Jonathan Z. Cohen, Vice Chairman
                                                                         Carlton M. Arrendell, Director
                                                                         William R. Bagnell, Director
                                                                         Donald W. Delson, Director
                                                                         Nicholas DiNubile, Director
                                                                         Dennis A. Holtz, Director

                                                                        II-5
                                                          ATLAS AMERICA, INC.

                                                     2,645,000 Shares of Common Stock

                                                     UNDERWRITING AGREEMENT

                                                           ________________, 2004

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
McDONALD INVESTMENTS, INC.
 as Representatives of the several Underwriters c/o Friedman, Billings, Ramsey & Co., Inc. 1001 19th Street North
Arlington, Virginia 22209

Dear Sirs:

Atlas America, Inc., a Delaware corporation (the "Company"), confirms its agreement with each of the Underwriters listed on Schedule II
hereto (collectively, the "Underwriters"), for whom Friedman, Billings, Ramsey & Co., Inc. and McDonald Investments are acting as
representatives (in such capacity, the "Representatives"), with respect to (i) the sale by the Company of 2,300,000 shares (the "Initial Shares")
of Common Stock, par value $0.01 per share, of the Company ("Common Stock") in the respective numbers of shares set forth opposite the
name of the Company in Schedule I hereto, and the purchase by the Underwriters, acting severally and not jointly, of the respective number of
shares of Common Stock set forth opposite the names of the Underwriters in Schedule II hereto, and (ii) the grant of the option described in
Section 1(b) hereof to purchase all or any part of 345,000 additional shares of Common Stock to cover over-allotments (the "Option Shares"), if
any, from the Company in the number of shares of Common Stock set forth opposite the name of the Company in Schedule I hereto, to the
Underwriters, acting severally and not jointly, in the respective numbers of shares of Common Stock set forth opposite the names of the
Underwriters in Schedule II hereto. The 2,300,000 shares of Common Stock to be purchased by the Underwriters and all or any part of the
345,000 shares of Common Stock subject to the option described in Section l(b) hereof are hereinafter called, collectively, the "Shares."

The Company understands that the Underwriters propose to make a public offering of the Shares as soon as the Underwriters deem advisable
after this agreement ("Agreement") has been executed and delivered.

The Company has filed with the Securities and Exchange Commission (the Commission"), a registration statement on Form S-1 (No.
333-112653) and a related preliminary prospectus for the registration of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder (the "Securities Act Regulations"). The Company has prepared and filed such
amendments thereto, if any, and such amended preliminary prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may hereafter be required. The registration statement has been
declared effective under the Securities Act by the Commission. The registration statement as amended at the time it became effective
(including all information deemed (whether by incorporation by reference or otherwise) to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) of the Securities Act Regulations) is hereinafter called the "Registration Statement," except that, if
the Company files a post-effective amendment to such registration statement which becomes effective prior to the Closing Time (as defined
below), "Registration Statement" shall refer to such registration statement as so amended. Any registration statement filed pursuant to Rule
462(b) of the Securities Act Regulations is hereinafter called the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the 462(b) Registration Statement. Each prospectus included in the Registration Statement, or
amendments thereof or supplements thereto, before it became effective under the Securities Act and any prospectus filed with the Commission
by the Company with the consent of the Underwriters pursuant to Rule 424(a) of the Securities Act Regulations is hereinafter called the
"Preliminary Prospectus." The term "`Prospectus" means the final prospectus, as first filed with the Commission pursuant to paragraph (1) or
(4) of Rule 424(b) of the Securities Act Regulations, and any amendments thereof or supplements thereto. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus.

The Company and the Underwriters agree as follows:

1. Sale and Purchase:

(a) Initial Shares. Upon the basis of the warranties and representations and other terms and conditions herein set forth, at the purchase price per
share of $ , the Company agrees to sell to the Underwriters the number of Initial Shares set forth in Schedule I opposite its name, and each
Underwriter agrees, severally and not jointly, to purchase from the Company the number of Initial Shares set forth in Schedule II opposite such
Underwriter's name, plus any additional number of Initial Shares which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 8 hereof, subject in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion
shall make to eliminate any sales or purchases of fractional shares.

(b) Option Shares. In addition, upon the basis of the warranties and representations and other terms and conditions herein set forth, at the
purchase price per share set forth in paragraph (a), the Company hereby grants an option to the Underwriters, acting severally and not jointly, to
purchase from the Company in Schedule I hereto, all or any part of the Option Shares, plus any additional number of Option Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of Section 8 hereof. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be
made in connection with the offering and distribution of the Initial Shares upon notice by the Representatives to the Company setting forth the
number of Option Shares as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such Option Shares. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later than three full business days (or earlier, without the consent of the
Company, than two full business days) after the exercise of such option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Shares, the Company will sell that proportion of the total number of Option Shares
then being purchased which the number of Initial Shares set forth in Schedule I opposite the name of the Company bears to the total number of
Initial Shares, and each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Shares
then being purchased which the number of Initial Shares set forth in Schedule II opposite the name of such Underwriter bears to the total
number of Initial Shares, subject in each case to such adjustments among the Underwriters as the Representatives in their sole discretion shall
make to eliminate any sales or purchases of fractional shares.

2. Payment and Delivery:

(a) Initial Shares. The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and
registered in such names as the Representatives may request upon at least forty-eight hours' prior notice to the Company shall be delivered by
or on behalf of the Company to the Representatives, including, at the option of the Representatives, through the facilities of The Depository
Trust Company ("DTC") for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the account specified to the Representatives by the Company upon at least forty-eight
hours' prior notice. The Company will cause the certificates representing the Initial Shares to be made available for checking and packaging at
least twenty-four hours prior to the Closing Time (as defined below) with respect thereto at the office of the Representatives, 1001 19th Street
North, Arlington, Virginia 22209, or at the office of DTC or its designated custodian, as the case may be (the "Designated Office"). The time
and date of such delivery and payment shall be 9:30 a.m., New York City time, on the third (fourth, if pricing occurs after 4:30 p.m., New York
City time) business day after the date hereof (unless another time and date shall be agreed to by the Representatives and the Company). The
time at which such payment and delivery are actually made is hereinafter sometimes called the "Closing Time" and the date of delivery of both
Initial Shares and Option Shares is hereinafter sometimes called the "Date of Delivery."

(b) Option Shares. Any Option Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized
denominations and registered in such names as the Representatives may request upon at least forty-eight hours' prior notice to the Company
shall be delivered by or on behalf of the Company to the Representatives, including, at the option of the Representatives, through the facilities
of DTC for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire
transfer of Federal (same-day) funds to the account specified to the Representatives by the Company upon at least forty-eight hours'
prior notice. The Company will cause the certificates representing the Option Shares to be made available for checking and packaging at least
twenty-four hours prior to the Date of Delivery with respect thereto at the Designated Office. The time and date of such delivery and payment
shall be 9:30 a.m., New York City time, on the date specified by the Representatives in the notice given by the Representatives to the Company
of the Underwriters' election to purchase such Option Shares or on such other time and date as the Company and the Representatives may agree
upon in writing.

(c) Directed Shares. It is understood that approximately shares of the Initial Shares ("Directed Shares") initially will be reserved by the
Underwriters for offer and sale to employees and persons having business relationships with the Company ("Directed Share Participants") upon
the terms and conditions set forth in the Prospectus and in accordance with the rules and regulations of the National Association of Securities
Dealers, Inc. (the "Directed Share Program"). Under no circumstances will the Representatives or any Underwriter be liable to the Company or
to any Directed Share Participant for any action taken or omitted to be taken in good faith in connection with such Directed Share Program. To
the extent that any Directed Shares are not affirmatively reconfirmed for purchase by any Directed Share Participant on or immediately after
the date of this Agreement, such Directed Shares may be offered to the public as part of the public offering contemplated herein.

3. Representations and Warranties of the Company:

The Company represents and warrants to the Underwriters that:

(a) the Company has an authorized capitalization as set forth in the Prospectus; the outstanding shares of capital stock, partnership interests and
membership interests as applicable (collectively, "equity interests") of the Company and each subsidiary (within the meaning of Rule 405 of
the Securities Act Regulations) of the Company (each, a "Subsidiary") have been duly and validly authorized and issued and are fully paid and
non-assessable (or all capital contributions required to be made in connection therewith as of the date hereof have been so made), and except as
disclosed in the Prospectus with respect to Atlas Pipeline Partners, L.P. ("APL") all of the outstanding equity interests of the Subsidiaries are
directly or indirectly owned of record and beneficially by the Company; except as disclosed in the Prospectus under the caption "Relationship
with Resource America", there are no outstanding (i) securities or obligations of the Company or any of the Subsidiaries convertible into or
exchangeable for any equity interest of the Company or any such Subsidiary, (ii) warrants, rights or options to subscribe for or purchase from
the Company or any such Subsidiary any such equity interest or any such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any equity interest, any such convertible or exchangeable securities or obligation,
or any such warrants, rights or options;

(b) each of the Company and the Subsidiaries (all of which are named in Exhibit 21 to the Registration Statement) has been duly organized or
formed and is validly existing as a corporation, limited partnership or limited liability
company in good standing under the laws of its respective jurisdiction of organization or formation with full corporate, partnership or limited
liability company, as applicable, power and authority to own its respective properties and to conduct its respective businesses as described in
the Registration Statement and Prospectus and, in the case of the Company, to execute and deliver this Agreement and to consummate the
transactions contemplated herein;

(c) the Company and all of the Subsidiaries are duly qualified or licensed and are in good standing in each jurisdiction in which they conduct
their respective businesses or in which they own or lease real property or otherwise maintain an office and in which the failure, individually or
in the aggregate, to be so qualified or licensed could have a material adverse effect on the assets, business, operations, earnings, prospects,
properties or condition (financial or otherwise), present or prospective, of the Company and the Subsidiaries taken as a whole, (any such effect
or change, where the context so requires, is hereinafter called a "Material Adverse Effect" or "Material Adverse Change"); except as disclosed
in the Prospectus under "Business - Credit Facility" with respect to limitations under the Company's credit facility, no Subsidiary is prohibited
or restricted, directly or indirectly, from paying dividends to the Company, or from making any other distribution with respect to such
Subsidiary's capital stock or from repaying to the Company or any other Subsidiary any amounts which may from time to time become due
under any loans or advances to such Subsidiary from the Company or such other Subsidiary, or from transferring any such Subsidiary's
property or assets to the Company or to any other Subsidiary; other than as disclosed in the Prospectus, the Company does not own, directly or
indirectly, any capital stock or other equity securities of any other corporation or any ownership interest in any partnership, joint venture or
other association;

(d) the Company and the Subsidiaries are in compliance in all material respects with all applicable laws, rules, regulations, orders, decrees and
judgments, including those relating to transactions with affiliates;

(e) neither the Company nor any Subsidiary is in breach of or in default under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under), its respective organizational documents, or in the performance or observance of any
obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or their respective properties is bound,
except for such breaches or defaults which could not have a Material Adverse Effect;

(f) the execution, delivery and performance of this Agreement, and consummation of the transactions contemplated herein and in the
agreements described in the Prospectus under the caption "Relationship with Resource America" (the "Separation Agreements") will not (A)
conflict with, or result in any breach of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both would
constitute a breach of, or default under), (i) any provision of the organizational documents of the Company or any Subsidiary, or (ii) any
provision of any license, indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or
their respective properties may be bound or affected, or under any federal, state, local or foreign law, regulation or rule or any decree, judgment
or order applicable to the Company or any Subsidiary, except in the case of this clause (ii) for such breaches or defaults which could not have a
Material Adverse Effect; or (B) result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the
Company or any Subsidiary;

(g) this Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the
Company enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, and by general equitable principles, and except to the extent that the indemnification and contribution
provisions of Section 9 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof, and as of
the first Date of Delivery, each of the Separation Agreements will have been duly authorized, executed and delivered by the Company and will
be a legal, valid and binding agreement of the Company enforceable in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and by general equitable principles;

(h) no approval, authorization, consent or order of or filing with any federal, state or local governmental or regulatory commission, board,
body, authority or agency is required in connection with the Company's execution, delivery and performance of this Agreement or the
Separation Agreements, its consummation of the transactions contemplated herein and therein, and its sale and delivery of the Shares, other
than (A) such as have been obtained, or will have been obtained at the Closing Time or the relevant Date of Delivery, as the case may be, under
the Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act"), (B) such approvals as have been obtained in connection with
the approval of the quotation of the Shares on The NASDAQ National Market and (C) any necessary qualification under the securities or blue
sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters;

(i) each of the Company and the Subsidiaries has all necessary licenses, authorizations, consents and approvals and has made all necessary
filings required under any federal, state or local law, regulation or rule, and has obtained all necessary authorizations, consents and approvals
from other persons, required in order to conduct their respective businesses as described in the Prospectus, except to the extent that any failure
to have any such licenses, authorizations, consents or approvals, to make any such filings or to obtain any such authorizations, consents or
approvals could not, individually or in the aggregate, have a Material Adverse Effect; neither the Company nor any of the Subsidiaries is
required by any applicable law to obtain accreditation or certification from any governmental agency or authority in order to provide the
products and services which it currently provides or which it proposes to provide as set forth in the Prospectus; neither the Company nor any of
the Subsidiaries is in violation of, in default under, or has received any notice
regarding a possible violation, default or revocation of any such license, authorization, consent or approval or any federal, state, local or foreign
law, regulation or rule or any decree, order or judgment applicable to the Company or any of the Subsidiaries the effect of which could result in
a Material Adverse Change; and no such license, authorization, consent or approval contains a materially burdensome restriction that is not
adequately disclosed in the Registration Statement and the Prospectus;

(j) each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the
Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are threatened by
the Commission, and the Company has complied to the Commission's satisfaction with any request on the part of the Commission for
additional information;

(k) the Preliminary Prospectus and the Registration Statement comply, and the Prospectus and any further amendments or supplements thereto
will, when they have become effective or are filed with the Commission, as the case may be, comply, in all material respects with the
requirements of the Securities Act and the Securities Act Regulations; the Registration Statement did not, and any amendment thereto will not,
in each case as of the applicable effective date, contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and
the Preliminary Prospectus does not, and the Prospectus or any amendment or supplement thereto will not, as of the applicable filing date and
at the Closing Time and on each Date of Delivery (if any), contain an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no warranty or representation with respect to any statement contained in the Registration
Statement or the Prospectus in reliance upon and in conformity with the information concerning the Underwriters and furnished in writing by
or on behalf of the Underwriters through the Representatives to the Company expressly for use in the Registration Statement or the Prospectus
(that information being limited to that described in the penultimate sentence of the first paragraph of Section 9(c) hereof);

(l) the statistical and market-related data included in the Prospectus and the Registration Statement are based on or derived from sources that
the Company believes to be reliable and accurate;

(m) the Preliminary Prospectus was and the Prospectus delivered to the Underwriters for use in connection with this offering will be identical to
the versions of the Preliminary Prospectus and Prospectus created to be transmitted to the Commission for filing via the Electronic Data
Gathering Analysis and Retrieval System ("EDGAR"), except to the extent permitted by Regulation S-T;
(n) there are no actions, suits, proceedings, inquiries or investigations pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary or any of their respective officers and directors or to which the properties, assets or rights of any such entity are
subject, at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority,
arbitral panel or agency which could result in a judgment, decree, award or order having a Material Adverse Effect;

(o) the financial statements, including the notes thereto, included in the Registration Statement and the Prospectus present fairly the
consolidated financial position of the entities to which such financial statements relate (the "Covered Entities") as of the dates indicated and the
consolidated results of operations and changes in financial position and cash flows of the Covered Entities for the periods specified; such
financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States and on a
consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission; the financial statement
schedules included in the Registration Statement and the amounts in the Prospectus under the captions "Summary - Summary Financial
Information," "Capitalization" and "Selected Consolidated Financial Data" fairly present the information shown therein and have been
compiled on a basis consistent with the financial statements included in the Registration Statement and the Prospectus; no other financial
statements or supporting schedules are required to be included in the Registration Statement; the other financial information included in the
Registration Statement and the Prospectus has been derived from the accounting records of the Company and its Subsidiaries and present fairly,
in all material respects, the information shown thereby;

(p) Grant Thornton LLP, whose reports on the consolidated financial statements of the Company and the Subsidiaries are filed with the
Commission as part of the Registration Statement and Prospectus and any other accounting firm that has certified Company financial
statements and delivered its reports with respect thereto, are, and were during the periods covered by their reports, independent public
accountants as required by the Securities Act and the Securities Act Regulations and, to the Company's knowledge, is not in violation of the
auditor independence requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated by the
Commission thereunder (the "Sarbanes-Oxley Act");

(q) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may be
otherwise stated in the Registration Statement or Prospectus, there has not been (A) any Material Adverse Change or any development that
could reasonably be expected to result in a Material Adverse Change, whether or not arising in the ordinary course of business, (B) any
transaction that is material to the Company and the Subsidiaries taken as a whole, contemplated or entered into by the Company or any of the
Subsidiaries, (C) any obligation, contingent or otherwise, directly or indirectly incurred by the Company or any Subsidiary that is material to
the
Company and Subsidiaries taken as a whole or (D) any dividend or distribution of any kind declared, paid or made by the Company on any
class of its capital stock;

(r) the Shares conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus;

(s) there are no persons with registration or other similar rights to have any equity or debt securities, including securities which are convertible
into or exchangeable for equity securities, registered pursuant to the Registration Statement or otherwise registered by the Company under the
Securities Act, except for Resource America, Inc. ("RAI"), as described in the Prospectus;

(t) the Shares have been duly authorized and, when issued and duly delivered against payment therefor as contemplated by this Agreement, will
be validly issued, fully paid and non-assessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, and the
issuance and sale of the Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under the
organizational documents of the Company or under any agreement to which the Company or any Subsidiary is a party or otherwise;

(u) the Shares have been registered pursuant to Section 12(g) of the Exchange Act and approved for listing under the symbol "ATLS" on The
NASDAQ National Market, subject to official notice of issuance;

(v) the Company has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares;

(w) except for Anthem Securities, Inc., neither the Company nor any of its affiliates (i) is required to register as a "broker" or "dealer" in
accordance with the provisions of the Exchange Act, or the rules and regulations thereunder (the "Exchange Act Regulations"), or (ii) directly,
or indirectly through one or more intermediaries, controls or has any other association with (within the meaning of Article I of the By-laws of
the National Association of Securities Dealers, Inc. (the "NASD")) any member firm of the NASD;

(x) the Company has not relied upon the Representatives or legal counsel for the Representatives for any legal, tax or accounting advice in
connection with the offering and sale of the Shares;

(y) any certificate signed by any officer of the Company or any Subsidiary delivered to the Representatives or to counsel for the Underwriters
pursuant to or in connection with this Agreement shall be deemed a representation and warranty by the Company to each Underwriter as to the
matters covered thereby;

(z) the form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements, with
any
applicable requirements of the organizational documents of the Company and the requirements of The NASDAQ National Market;

(aa) the Company and the Subsidiaries have good and marketable title in fee simple to all real property, if any, and good title to all personal
property owned by them, in each case free and clear of all liens, security interests, pledges, charges, encumbrances, mortgages and defects,
except such as are disclosed in the Prospectus or such as do not materially and adversely affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the Company and the Subsidiaries; any real property and buildings held under
lease by the Company or any Subsidiary are held under valid, existing and enforceable leases, with such exceptions as are disclosed in the
Prospectus or are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company or
such Subsidiary; and all of the leases and subleases material to the business of the Company and its Subsidiaries, taken as a whole, and under
which the Company or any Subsidiary holds properties described in the Prospectus, are in full force and effect, except where such would not
have a Material Adverse Effect, and the Company and its Subsidiaries have not received any written notice of any material claims of any sort
that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any such leases or subleases, or affecting or
questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease
or sublease, except where such could not have a Material Adverse Effect;

(bb) the descriptions in the Registration Statement and the Prospectus of the legal or governmental proceedings, contracts, leases and other
legal documents therein described present fairly the information required to be shown, and there are no legal or governmental proceedings,
contracts, leases, or other documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not described or filed as required; all agreements between the Company or any of the
Subsidiaries and third parties expressly referenced in the Prospectus (including without limitation the Separation Agreements) are legal, valid
and binding obligations of the Company or one or more of the Subsidiaries, enforceable in accordance with their respective terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally
and by general equitable principles;

(cc) the Company and each Subsidiary owns or possesses adequate licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights, software and design licenses, trade secrets, manufacturing processes, other intangible property rights and know-how
(collectively "Intangibles") necessary to entitle the Company and each Subsidiary to conduct its business as described in the Prospectus, and
neither the Company nor any Subsidiary has received notice of infringement of or conflict with (and neither the Company nor any Subsidiary
knows of any such infringement of or conflict with) asserted rights of others with respect to any Intangibles which could have a Material
Adverse Effect;
(dd) all derivative financial instruments, contracts or arrangements were entered into in the ordinary course of business and in accordance with
commercially reasonable business practices and applicable rules, regulations and policies of any entity or organization regulating such
transactions, with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of the Company
or applicable Subsidiary, and are in full force and effect, and the Company and its Subsidiaries, as applicable, have performed their respective
obligations thereunder required to be performed as of the date hereof, in all material respects;

(ee) the Company and each of the Subsidiaries makes and keeps books, records and accounts which, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of assets, and maintains 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 as applied in the United
States 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;

(ff) the Company and each of the Subsidiaries has filed on a timely basis all necessary federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof and have paid all taxes shown as due thereon; and no tax deficiency has been asserted
against any such entity, nor does any such entity know of any tax deficiency which is likely to be asserted against any such entity which, if
determined adversely to any such entity, could have a Material Adverse Effect; all tax liabilities are adequately provided for on the respective
books of such entities;

(gg) the Company and each of the Subsidiaries maintains insurance (issued by insurers of recognized financial responsibility) of the types and
in the amounts generally deemed adequate for their respective businesses and consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to, insurance covering real and personal property owned or leased by the Company
and the Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance
is in full force and effect;

(hh) neither the Company nor any of the Subsidiaries is in violation, or has received notice of any violation with respect to, any applicable
environmental, safety or similar law applicable to the business of the Company or any of the Subsidiaries; the Company and the Subsidiaries
have received all permits, licenses or other approvals required of them under applicable federal and state occupational safety and health and
environmental laws and regulations to conduct their respective businesses, and the Company and the Subsidiaries are in compliance with all
terms and conditions of any such permit, license or approval, except any such violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which could not, individually or in the aggregate, result in a Material Adverse
Change;

(ii) neither the Company nor any Subsidiary is in violation of or has received notice of any violation with respect to any federal or state law
relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wages and hours law, nor any state
law precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which could have a Material
Adverse Effect;

(jj) the Company and each of the Subsidiaries are in compliance in all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA");
no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or
any of the Subsidiaries would have any liability; the Company and each of the Subsidiaries have not incurred and do not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder ("Code"); and each "pension
plan" for which the Company and each of its Subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such
qualification;

(kk) neither the Company nor any of the Subsidiaries nor any officer or director purporting to act on behalf of the Company or any of the
Subsidiaries has at any time (i) made any contributions to any candidate for political office, or failed to disclose fully any such contributions, in
violation of law,
(ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by applicable law, (iii) made any payment outside the ordinary course of business
to any investment officer or loan broker or person charged with similar duties of any entity to which the Company or any of the Subsidiaries
sells or from which the Company or any of the Subsidiaries buys loans or servicing arrangements for the purpose of influencing such agent,
officer, broker or person to buy loans or servicing arrangements from or sell loans to the Company or any of the Subsidiaries, or (iv) engaged in
any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been
and are reflected in the normally maintained books and records of the Company and the Subsidiaries;

(ll) there are no material outstanding loans or advances or material guarantees of indebtedness by the Company or any of the Subsidiaries to or
for the benefit of any of the officers or directors of the Company or any of the Subsidiaries or any of the members of the families of any of
them;
(mm) neither the Company nor any of the Subsidiaries nor, to the knowledge of the Company, any employee or agent of the Company or any
of the Subsidiaries, has made any payment of funds of the Company or of any Subsidiary or received or retained any funds in violation of any
law, rule or regulation or of a character required to be disclosed in the Prospectus;

(nn) all securities issued by the Company, any of the Subsidiaries or any partnerships or other entities established or sponsored by the Company
or any Subsidiary, have been issued and sold in compliance with (i) all applicable federal and state securities laws, (ii) the laws of the
applicable jurisdiction of organization or formation of the issuing entity and, (iii) with respect to the securities of APL, the requirements of the
American Stock Exchange;

(oo) the participation, joint development, joint operating, farm-out and other agreements relating to rights of the Company and its Subsidiaries
with respect to the ownership, lease or operation of oil and gas properties, the acquisition of interests in oil and gas properties or the exploration
for, development of or production of oil and gas reserves thereon, constitute valid and binding agreements of the Company and its Subsidiaries
that are parties thereto and, to the best knowledge of the Company, of the other parties thereto, enforceable in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights
generally and by general equitable principles;

(pp) except as otherwise disclosed in the Prospectus, (i) neither the Company nor any of the Subsidiaries nor, to the best knowledge of the
Company, any other owners of the property at any time or any other party has at any time, handled, stored, treated, transported, manufactured,
spilled, leaked, or discharged, dumped, transferred or otherwise disposed of or dealt with, Hazardous Materials (as hereinafter defined) on, to or
from the Company's or any Subsidiary's properties, other than by any such action taken in compliance with all applicable Environmental
Statutes, (ii) the Company and its Subsidiaries do not intend to use any properties for the purpose of handling, storing, treating, transporting,
manufacturing, spilling, leaking, discharging, dumping, transferring or otherwise disposing of or dealing with Hazardous Materials other than
by any such action taken in compliance with all applicable Environmental Statutes, (iii) neither the Company nor any of the Subsidiaries knows
of any seepage, leak, discharge, release, emission, spill, or dumping of Hazardous Materials into waters on or adjacent to any real property
owned or occupied by any such party, or onto lands from which Hazardous Materials might seep, flow or drain into such waters; (iv) neither
the Company nor any of the Subsidiaries has received any notice of, or has any knowledge of any occurrence or circumstance which, with
notice or passage of time or both, would give rise to a claim under or pursuant to any federal, state or local environmental statute or regulation
or under common law, pertaining to Hazardous Materials on or originating from any assets described in the Prospectus or any real property
owned or occupied by any such party or arising out of the conduct of any such party, including without limitation a claim under or pursuant to
any Environmental Statute
(hereinafter defined); (v) no real property owned or operated by the Company or any of the Subsidiaries is included or, to the best of the
Company's knowledge, proposed for inclusion on the National Priorities List issued pursuant to CERCLA (as hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or, to the best of the Company's knowledge, proposed for inclusion on any similar
list or inventory issued pursuant to any other Environmental Statute or issued by any other Governmental Authority (as hereinafter defined);

As used herein, "Hazardous Material" shall include, without limitation any flammable explosives, radioactive materials, hazardous materials,
hazardous wastes, toxic substances, or related materials, asbestos or any hazardous material as defined by any federal, state or local
environmental law, ordinance, rule or regulation including without limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Sections 9601-9675 ("CERCLA"), the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Sections 1801-1819, the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901-6992K, the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001-11050, the Toxic Substances Control Act, 15 U.S.C. Sections
2601-2671, the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136-136y, the Clean Air Act, 42 U.S.C. Sections
7401-7642, the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Sections 1251-1387, the Safe Drinking Water Act, 42
U.S.C. Sections 300f-300j-26, and the Occupational Safety and Health Act, 29 U.S.C. Sections 651-678, as any of the above statutes may be
amended from time to time, and in the regulations promulgated pursuant to each of the foregoing (individually, an "Environmental Statute") or
by any federal, state or local governmental authority having or claiming jurisdiction over the properties and assets described in the Prospectus
(a "Governmental Authority");

(qq) in connection with this offering, the Company has not offered and will not offer its Common Stock or any other securities convertible into
or exchangeable or exercisable for Common Stock in a manner in violation of the Securities Act. The Company has not distributed and will not
distribute any prospectus or other offering material in connection with the offer and sale of the Shares;

(rr) the Company has complied and will comply with all the provisions of Florida Statutes, Section 517.075 (Chapter 92-198, Laws of Florida);
and neither the Company nor any of the Subsidiaries or affiliates does business with the government of Cuba or with any person or affiliate
located in Cuba;

(ss) the Company has not incurred any liability for any finder's fees or similar payments in connection with the transactions herein
contemplated;

(tt) no relationship, direct or indirect, exists between or among the Company or any of the Subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of the Subsidiaries on the other hand, which is required by the Securities
Act and the Securities Act Regulations to be described in the Registration Statement and the Prospectus and which is not so described;
(uu) neither the Company nor any of the Subsidiaries is and, after giving effect to the offering and sale of the Shares, will be (i) an "investment
company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), (ii) a "public utility company," "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" thereof under PUHCA, or (iii) subject to rates or terms of service regulation under federal or state law;

(vv) there are no existing or, to the knowledge of the Company, threatened labor disputes with the employees of the Company or any of the
Subsidiaries which are likely to have individually or in the aggregate a Material Adverse Effect;

(ww) Wright & Company, whose report is referenced in the Prospectus, was, as of the date of such report, and is, as of the date hereof, an
independent petroleum engineer with respect to the Company and its Subsidiaries; and the information underlying the estimates of reserves of
the Company and its Subsidiaries which was supplied by the Company to Wright & Company for purposes of auditing the reserve reports and
estimates of the Company and its Subsidiaries, including, without limitation, production, costs of operation and development, current prices for
production, agreements relating to current and future operations and sales of production, was true and correct in all material respects on the
dates such estimates were made and such information was supplied and was prepared in accordance with customary industry practices; other
than normal production of the reserves and intervening spot market product price fluctuations described in the Prospectus, the Company is not
aware of any facts or circumstances that would result in an adverse change in the reserves, or the present value of future net cash flows
therefrom, as described in the Prospectus, that could result in a Material Adverse Effect; estimates of such reserves and present values as
described in the Prospectus comply in all material respects with the applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act.

(xx) the consummation of the transactions contemplated by the Separation Agreements and each of the documents, agreements and instruments
to be executed and delivered in connection therewith have been duly authorized by all necessary corporate action, including, but not limited to,
any vote of the stockholders of the Company which may be required by applicable state law or the requirements of The NASDAQ National
Market; the Separation Agreements are, or at the Closing Time will be, in full force and effect, and neither the Company nor any of the other
parties thereto is in breach or default of its obligations thereunder (nor has any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default thereunder); and

(yy) no consent, approval, authorization or order of, or qualification with, any governmental body or agency, other than those obtained, is
required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered; the Company
has not offered, or caused the Representatives to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter the customer's or supplier's level or type of
business with the Company or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.

4. Certain Covenants:

The Company hereby agrees with each Underwriter:

(a) to furnish such information as may be required and otherwise to cooperate in qualifying the Shares for offering and sale under the securities
or blue sky laws of such jurisdictions (both domestic and foreign) as the Representatives may designate and to maintain such qualifications in
effect as long as requested by the Representatives for the distribution of the Shares, provided that the Company shall not be required to qualify
as a foreign corporation or to consent to the service of process under the laws of any such state (except service of process with respect to the
offering and sale of the Shares);

(b) if, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, the Company will endeavor to cause such post-effective amendment to
become effective as soon as possible and will advise the Representatives promptly and, if requested by the Representatives, will confirm such
advice in writing, when such post-effective amendment has become effective;

(c) to prepare the Prospectus in a form approved by the Underwriters and file such Prospectus (or a term sheet as permitted by Rule 434) with
the Commission pursuant to Rule 424(b) under the Securities Act not later than 10:00
a.m. (New York City time), on the day following the execution and delivery of this Agreement or on such other day as the parties may mutually
agree and to furnish promptly (and with respect to the initial delivery of such Prospectus, not later than 10:00 a.m. (New York City time) on the
day following the execution and delivery of this Agreement or on such other day as the parties may mutually agree to the Underwriters copies
of the Prospectus (or of the Prospectus as amended or supplemented if the Company shall have made any amendments or supplements thereto
after the effective date of the Registration Statement) in such quantities and at such locations as the Underwriters may reasonably request for
the purposes contemplated by the Securities Act Regulations, which Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the version created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted
by Regulation S-T;

(d) to advise the Representatives promptly and (if requested by the Representatives) to confirm such advice in writing, when any post-effective
amendment to the Registration Statement becomes effective under the Securities Act Regulations;

(e) to advise the Representatives immediately, confirming such advice in writing, of (i) the receipt of any comments from, or any request by,
the Commission for amendments or supplements to the Registration Statement or Prospectus or for additional information with respect thereto,
or (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing
or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes and, if the Commission or any other government agency or authority
should issue any such order, to make every reasonable effort to obtain the lifting or removal of such order as soon as possible; to advise the
Representatives promptly of any proposal to amend or supplement the Registration Statement or Prospectus and to file no such amendment or
supplement to which the Representatives shall reasonably object in writing;

(f) to furnish to the Underwriters for a period of five years from the date of this Agreement (i) as soon as available, copies of all annual,
quarterly and current reports or other communications supplied to holders of shares of Common Stock, (ii) as soon as practicable after the filing
thereof, copies of all reports filed by the Company with the Commission, the NASD or any securities exchange and (iii) such other information
as the Underwriters may reasonably request regarding the Company and the Subsidiaries;

(g) to advise the Underwriters promptly of the happening of any event known to the Company within the time during which a Prospectus
relating to the Shares is required to be delivered under the Securities Act Regulations which, in the judgment of the Company or in the
reasonable opinion of the Representatives or counsel for the Underwriters, would require the making of any change in the Prospectus then
being used so that the Prospectus would not include an untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with any law and, during such time, to promptly prepare and furnish to
the Underwriters copies of the proposed amendment or supplement before filing any such amendment or supplement with the Commission and
thereafter promptly furnish at the Company's own expense to the Underwriters and to dealers, copies in such quantities and at such locations as
the Representatives may from time to time reasonably request of an appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law;

(h) to file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission;

(i) prior to filing with the Commission any amendment to the Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 under the Securities Act, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the
consent of the Representatives to the filing;

(j) to furnish promptly to each Representative a signed copy of the Registration Statement, as initially filed with the Commission, and of all
amendments or supplements thereto (including all exhibits filed therewith or incorporated by reference therein) and such number of conformed
copies of the foregoing as the Representatives may reasonably request;

(k) to furnish to each Representative, not less than two business days before filing with the Commission subsequent to the effective date of the
Prospectus and during the period referred to in paragraph (f) above, a copy of any document proposed to be filed with the Commission pursuant
to Section 13, 14, or 15(d) of the Exchange Act and during such period to file all such documents in the manner and within the time periods
required by the Exchange Act, the Exchange Act Regulations and the Sarbanes-Oxley Act;

(l) to apply the net proceeds of the sale of the Shares in accordance with its statements under the caption "Use of Proceeds" in the Prospectus;

(m) to make generally available to its security holders and to deliver to the Representatives as soon as practicable, but in any event not later
than the end of the fiscal quarter first occurring after the first anniversary of the effective date of the Registration Statement an earnings
statement complying with the provisions of Section 11(a) of the Securities Act (in form, at the option of the Company, complying with the
provisions of Rule 158 of the Securities Act Regulations,) covering a period of 12 months beginning after the effective date of the Registration
Statement;

(n) to use its best efforts to maintain the quotation of the Shares on The NASDAQ National Market and to file with The NASDAQ National
Market all documents and notices required in connection therewith;

(o) to engage and maintain, at its expense, a registrar and transfer agent for the Shares;

(p) to refrain during a period of 180 days from the date of the Prospectus, without the prior written consent of the Representatives, from,
directly or indirectly, (i) offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or
contract to sell, granting any option for the sale of, or otherwise disposing of or transferring, (or entering into any transaction or device which is
designed to, or could be expected to, result in the disposition by any person at any time in the future of), any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or filing any registration statement under the Securities Act with
respect to any of the foregoing, or (ii) entering into any swap or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not
apply to (A) the Shares to be sold hereunder, or (B) any shares of Common Stock issued by the Company upon the exercise of an option
outstanding on the date hereof and referred to in the Prospectus;
(q) not to, and to use its best efforts to cause its officers, directors and affiliates not to, (i) take, directly or indirectly prior to termination of the
underwriting syndicate contemplated by this Agreement, any action designed to stabilize or manipulate the price of any security of the
Company, or which may cause or result in, or which might in the future reasonably be expected to cause or result in, the stabilization or
manipulation of the price of any security of the Company, to facilitate the sale or resale of any of the Shares,
(ii) sell, bid for, purchase or pay anyone any compensation for soliciting purchases of the Shares or (iii) pay or agree to pay to any person any
compensation for soliciting any order to purchase any other securities of the Company;

(r) to cause each 1% or greater stockholder, officer and director of the Company to furnish to the Representatives, prior to the first Date of
Delivery, a letter or letters, substantially in the form of Exhibit B hereto, pursuant to which each such person shall agree not to, directly or
indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or
exchangeable for Common Stock or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case for a period of 180 days from the date of the
Prospectus, without the prior written consent of the Representatives on behalf of the Underwriters;

(s) [Intentionally omitted];

(t) [Intentionally omitted];

(u) if at any time during the 90-day period after the Registration Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in the reasonable opinion of the Representatives, the market price of the Common Stock
has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus) and after written notice from the Representatives advising the Company to the effect set forth above, to
forthwith prepare, consult with the Representatives concerning the substance of, and disseminate a press release or other public statement,
reasonably satisfactory to the Representatives, responding to or commenting on such rumor, publication or event;

(v) that the Company will comply with all of the provisions of any undertakings in the Registration Statement;

(w) [Intentionally omitted];

(x) that the Company (i) will comply with all applicable securities and other applicable laws, rules and regulations, including without
limitation, the rules and regulations of the NASD, in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program and (ii) will pay all reasonable fees and disbursements of counsel incurred by
the Underwriters in connection with the Directed Share Program and any stamp duties, similar taxes or duties or other taxes, if any, incurred by
the Underwriters in connection with the Directed Share Program.

5. Payment of Expenses:

(a) The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is terminated, including expenses, fees and taxes in connection with
(i) the preparation and filing of the Registration Statement, each Preliminary Prospectus, the Prospectus, and any amendments or supplements
thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment),
(ii) the preparation, issuance and delivery of the certificates for the Shares to the Underwriters, including any stock or other transfer taxes or
duties payable upon the sale of the Shares to the Underwriters, (iii) the printing of this Agreement and any dealer agreements and furnishing of
copies of each to the Underwriters and to dealers (including costs of mailing and shipment), (iv) the qualification of the Shares for offering and
sale under state laws that the Company and the Representatives have mutually agreed are appropriate and the determination of their eligibility
for investment under state law as aforesaid (including the legal fees and filing fees and other disbursements of counsel for the Underwriters and
the printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) filing for
review of the public offering of the Shares by the NASD (including the legal fees and filing fees and other disbursements of counsel for the
Underwriters relating thereto), (vi) the fees and expenses of any transfer agent or registrar for the Shares and miscellaneous expenses referred
to in the Registration Statement, (vii) the fees and expenses incurred in connection with the inclusion of the Shares in The NASDAQ National
Market, (viii) making road show presentations with respect to the offering of the Shares, including accommodations, transportation and other
expenses incurred by or on behalf of the Underwriters, (ix) preparing and distributing bound volumes of transaction documents for the
Representatives and its legal counsel and (x) the performance of the Company's other obligations hereunder. Upon the request of the
Representatives, the Company will provide funds in advance for filing fees.

(b) If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement
with respect to themselves, severally, for all out-of-pocket expenses (such as printing, facsimile, courier service, direct computer expenses,
accommodations, travel and the fees and disbursements of Underwriters' counsel) and any other advisors, accountants, appraisers, etc.
reasonably incurred by such Underwriters in connection with this Agreement or the transactions contemplated herein.
6. Conditions of the Underwriters' Obligations:

(a) The obligations of the Underwriters hereunder to purchase Shares at the Closing Time or on each Date of Delivery, as applicable, are
subject to the accuracy of the representations and warranties on the part of the Company hereunder on the date hereof and at the Closing Time
and on each Date of Delivery, as applicable, the performance by the Company of its obligations hereunder and to the satisfaction of the
following further conditions at the Closing Time or on each Date of Delivery, as applicable:

(b) The Company shall furnish to the Underwriters at the Closing Time and on each Date of Delivery an opinion of Ledgewood Law Firm,
P.C., counsel for the Company and the Subsidiaries, addressed to the Underwriters and dated the Closing Time and each Date of Delivery and
in form and substance satisfactory to Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Underwriters, stating that:

(i) the Company has an authorized capitalization as set forth or described in the Prospectus; the outstanding equity interests, as applicable, of
the Company and the Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable (or all capital
contributions required to be made on the date hereof in connection therewith have been so made), and except as disclosed in the Prospectus
with respect to APL, all of the outstanding equity securities of the Subsidiaries are directly or indirectly owned of record and beneficially by the
Company; except as disclosed in the Prospectus, there are no outstanding (i) securities or obligations of the Company or any of the Subsidiaries
convertible into or exchangeable for any equity securities of the Company or any such Subsidiary, (ii) warrants, rights or options to subscribe
for or purchase from the Company or any such Subsidiary any such equity securities or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company or any such Subsidiary to issue any equity securities, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or options;

(ii) each of the Company and the Subsidiaries (all of which are named in an exhibit to the Registration Statement) has been duly organized or
formed and is validly existing as a corporation, limited partnership or limited liability company, as applicable, in good standing under the laws
of its respective jurisdiction of organization or formation, with full corporate, partnership or limited liability company, as applicable, power and
authority to own its respective properties and to conduct its respective businesses as described in the Registration Statement and Prospectus
and, in the case of the Company, to execute and deliver this Agreement and to consummate the transactions described in this Agreement;
(iii) the Company and the Subsidiaries are duly qualified or licensed by each jurisdiction in which they conduct their respective businesses and
in which the failure, individually or in the aggregate, to be so licensed could have a Material Adverse Effect, and the Company and the
Subsidiaries are duly qualified, and are in good standing, in each jurisdiction in which they own or lease real property or maintain an office and
in which such qualification is necessary except where the failure to be so qualified and in good standing could not have a Material Adverse
Effect; except as disclosed in the Prospectus, no Subsidiary is prohibited or restricted, directly or indirectly, from paying dividends to the
Company, or from making any other distribution with respect to such Subsidiary's equity securities or from repaying to the Company or any
other Subsidiary any amounts which may from time to time become due under any loans or advances to such Subsidiary from the Company or
such other Subsidiary, or from transferring any such Subsidiary's property or assets to the Company or to any other Subsidiary; other than as
disclosed in the Prospectus, the Company does not own, directly or indirectly, any equity securities of any other corporation or any ownership
interest in any partnership, limited liability company, joint venture or other association;

(iv) to the best of such counsel's knowledge, the Company and the Subsidiaries are in compliance in all material respects with all applicable
laws, orders, rules, regulations and orders, including those relating to transactions with affiliates;

(v) to the best of such counsel's knowledge, neither the Company nor any of the Subsidiaries is in violation of any term or provision of its
organizational documents, is in breach of, or in default under (nor has any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under), any license, indenture, mortgage, deed of trust, loan or credit agreement or any other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by which any of them or their respective properties may be bound or
affected or under any law, regulation or rule or any decree, judgment or order applicable to the Company or any of the Subsidiaries, except
such breaches or defaults which would not have a material adverse effect on the assets, business, operations, earnings, prospects, properties, or
condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole;

(vi) the execution, delivery and performance of this Agreement and the Separation Agreements by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not (A) conflict with, or result in any breach of, or constitute a default under
(nor constitute any event which with notice, lapse of time, or both would constitute a breach of or default under), (i) any provisions of the
certificate of incorporation, by-laws, partnership agreement, limited
liability company agreement or other organizational document, as applicable, of the Company or any Subsidiary, (ii) any provision of any
license, indenture, mortgage, deed of trust, loan, credit or other agreement or instrument known to such counsel and to which the Company or
any Subsidiary is a party or by which any of them or their respective properties or assets may be bound or affected except such conflicts,
breaches or defaults that could not, individually or in the aggregate, have a Material Adverse Effect, (iii) any law or regulation binding upon or
applicable to the Company or any Subsidiary or any of their respective properties or assets, or (iv) any decree, judgment or order known to such
counsel to be applicable to the Company or any Subsidiary; or (B) result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or assets of the Company or the Subsidiaries;

(vii) this Agreement and the Separation Agreements have been duly authorized, executed and delivered by the Company and are legal, valid
and binding agreements of the Company enforceable in accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and by general principles of equity, and except that
enforceability of the indemnification and contribution provisions set forth in Section 9 of this Agreement may be limited by the federal or state
securities laws of the United States or public policy underlying such laws;

(viii) no approval, authorization, consent or order of or filing with any federal or state governmental or regulatory commission, board, body,
authority or agency is required in connection with the execution, delivery and performance of this Agreement and the Separation Agreements,
the consummation of the transactions contemplated herein and therein, and the sale and delivery of the Shares by the Company as contemplated
herein, other than such as have been obtained or made, and except that such counsel need express no opinion as to any necessary qualification
under the state securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters;

(ix) to the best of such counsel's knowledge, each of the Company and the Subsidiaries has all necessary licenses, authorizations, consents and
approvals and has made all necessary filings required under any federal, state or local law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from other persons, required to conduct their respective businesses, as described in the Prospectus,
except to the extent the failure to have such licenses, authorizations, consents or approvals could not, individually or in the aggregate, have a
Material Adverse Effect; to the best of such counsel's knowledge, neither the Company nor any Subsidiary is in violation of, in default under,
or has received any notice regarding a possible violation, default or revocation of any such license, authorization, consent or
approval or any federal, state, local or foreign law, regulation or decree, order or judgment applicable to the Company or any of the
Subsidiaries, except any such violation, default or revocation that could not, individually or in the aggregate, have a Material Adverse Effect;

(x) the Company is not (i) subject to registration as an investment company under the Investment Company Act of 1940, as amended, and the
transactions contemplated by this Agreement will not cause the Company to become an investment company subject to registration under such
Act; or (ii) a "public utility company," "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" thereof under the
Public Utility Holding Company Act of 1935, as amended ("PUHCA");

(xi) the Shares have been duly authorized and when the Shares have been issued and duly delivered against payment therefor as contemplated
by this Agreement, the Shares will be validly issued, fully paid and non-assessable, and the Underwriters will acquire good and marketable title
to the Shares, free and clear of any pledge, lien, encumbrance, security interest, or other claim;

(xii) the issuance and sale of the Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under
the certificate of incorporation, charter or by-laws of the Company, or under any agreement known to such counsel to which the Company or
any of the Subsidiaries is a party or, to such counsel's knowledge, otherwise;

(xiii) to the best of such counsel's knowledge, there are no persons with registration or other similar rights to have any equity or debt securities,
including securities that are convertible into or exchangeable for equity securities, registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act applicable to the offering contemplated by this Agreement;

(xiv) the Shares conform in all material respects to the descriptions thereof contained in the Registration Statement and Prospectus;

(xv) the form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the organizational documents of the Company and the requirements of The NASDAQ National Market;

(xvi) the Registration Statement has become effective under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the best of such counsel's
knowledge, no proceedings with respect thereto have been commenced or threatened;

(xvii) as of the effective date of the Registration Statement, the Registration Statement and the Prospectus (except as to the financial statements
and other financial and statistical data contained therein, as to which such counsel need express no opinion) complied as to form in all material
respects with the requirements of the Securities Act, the Exchange Act, the Securities Act Regulations and the Exchange Act Regulations;

(xviii) the statements under the captions "Capitalization," "Business - Governmental Regulation," "Business - Credit Facilities," "Description of
Capital Stock," "Relationship with Resource America," "Principal Stockholder" and "Shares Eligible for Future Sale," in the Registration
Statement and the Prospectus, insofar as such statements constitute a summary of the legal matters referred to therein, constitute accurate
summaries thereof in all material respects;

(xix) the 8-A Registration Statement complied as to form in all material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and the Initial Shares and the Option Shares have been validly registered
under the Securities Act, the Exchange Act and the Securities Act Regulations and the Exchange Act Regulations;

(xx) there are no actions, suits or proceedings, inquiries, or investigations pending or, to the best of such counsel's knowledge, threatened
against the Company or any of the Subsidiaries or any of their respective officers and directors or to which the properties, assets or rights of
any such entity are subject, at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board,
body, authority, arbitral panel or agency which are required to be described in the Prospectus but are not so described;

(xxi) there are no contracts or documents of a character which are required to be filed as exhibits to the Registration Statement or required to be
described or summarized in the Prospectus which have not been so filed, summarized or described, and all such summaries and descriptions, in
all material respects, fairly and accurately set forth the material provisions of such contracts and documents;

(xxii) to the best of such counsel's knowledge, the Company and each Subsidiary owns or possesses adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights, software and design licenses, trade secrets, manufacturing processes, other
intangible property rights and know-how (collectively "Intangibles") necessary to entitle the Company and each Subsidiary to
conduct its business as described in the Prospectus, and neither the Company, nor any Subsidiary, has received notice of infringement of or
conflict with (and knows of no such infringement of or conflict with) asserted rights of others with respect to any Intangibles which could
materially and adversely affect the business, prospects, properties, assets, results of operations or condition (financial or otherwise) of the
Company or any Subsidiary; and

(xxiii) to the best of such counsel's knowledge, each of the Company and the Subsidiaries has filed on a timely basis all necessary federal, state,
local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes shown as due thereon;
and no tax deficiency has been asserted against any such entity, nor does any such entity know of any tax deficiency which is likely to be
asserted against any such entity which, if determined adversely to any such entity, could materially and adversely affect the business, prospects,
properties, assets, results of operations or condition (financial or otherwise) of any such entity, respectively.

In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company,
independent public accountants of the Company, representatives of the Representatives, at which the contents of the Registration Statement and
Prospectus were discussed and, although such counsel is not passing upon and does not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or Prospectus (except as and to the extent stated in subparagraphs (xiv),
(xvii), and (xix) above), they have no reason to believe that the Registration Statement, the Preliminary Prospectus or the Prospectus, as of their
respective effective or issue date, and as of the date of such counsel's opinion, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood that, in each case, such counsel need express no view with
respect to the financial statements and other financial and statistical data included in the Registration Statement, Preliminary Prospectus or
Prospectus).

(c) RAI and its counsel shall have provided to the Representatives (i) a detailed schedule of the activities RAI intends to take to achieve the
Spin-off (as defined in the form of Master Separation and Distribution Agreement filed as an exhibit to the Registration Statement), including a
timeline for receipt of information, preparation of a draft, filing and related conferences for the private letter ruling request to the Internal
Revenue Service (the "Service") and (ii) a letter of counsel to RAI in connection with the Spin-off to the effect that such counsel has reviewed
and is familiar with applicable tax law and precedent relating to tax-free distributions such as the Spin-off and the facts and circumstances of
RAI and its subsidiaries relevant to such analysis, and believes that the Spin-off will qualify as a tax-free distribution to the stockholders of
RAI under such applicable law and precedent;
(d) [Intentionally omitted];

(e) The Representatives shall have received from Grant Thornton LLP, letters dated, respectively, as of the date of this Agreement, the Closing
Time and each Date of Delivery, as the case may be, addressed to the Representatives, in form and substance satisfactory to the
Representatives, relating to the financial statements, including any pro forma financial statements, of the Company and the Subsidiaries, and
such other matters customarily covered by comfort letters issued in connection with registered public offerings.

In the event that the letters referred to above set forth any changes in indebtedness, decreases in total assets or retained earnings or increases in
borrowings, it shall be a further condition to the obligations of the Underwriters that (A) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the Representatives deems such explanation unnecessary, and (B) such
changes, decreases or increases do not, in the sole judgment of the Representatives, make it impractical or inadvisable to proceed with the
purchase and delivery of the Shares as contemplated by the Registration Statement.

(f) The Representatives shall have received at the Closing Time and on each Date of Delivery the favorable opinion of Ledgewood Law Firm,
P.C., dated the Closing Time or such Date of Delivery, addressed to the Representatives and in form and substance satisfactory to the
Representatives.

(g) No amendment or supplement to the Registration Statement or Prospectus shall have been filed to which the Underwriters shall have
objected in writing.

(h) Prior to the Closing Time and each Date of Delivery (i) no stop order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus or Prospectus has been issued, and no proceedings for such purpose shall
have been initiated or threatened, by the Commission, and no suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or threatening of any proceedings for any of such purposes, has occurred, (ii) all requests for additional
information on the part of the Commission shall have been complied with to the reasonable satisfaction of the Representatives, and
(iii) the Registration Statement and the Prospectus shall not contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not
misleading.

(i) All filings with the Commission required by Rule 424 under the Securities Act to have been filed by the Closing Time shall have been made
within the applicable time period prescribed for such filing by such Rule.

(j) Between the time of execution of this Agreement and the Closing Time or the relevant Date of Delivery there shall not have been any
Material Adverse Change, and no transaction which is material and unfavorable to the Company
shall have been entered into by the Company or any of the Subsidiaries, in each case, which in the Representatives' sole judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares as contemplated by the Registration Statement.

(k) The Shares shall have been approved for inclusion in The NASDAQ National Market.

(l) The NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.

(m) The Representatives shall have received lock-up agreements from each officer, director and 1% or greater stockholder of the Company, in
the form of Exhibit B attached hereto, and such letter agreements shall be in full force and effect.

(n) The Company will, at the Closing Time and on each Date of Delivery, deliver to the Underwriters a certificate of its Chairman of the Board,
Chief Executive Officer, President, Chief Operating Officer or Vice President and Chief Accounting Officer or Chief Financial Officer, to the
effect that:

(i) the representations and warranties of the Company in this Agreement are true and correct, as if made on and as of the date hereof, and the
Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the date
hereof;

(ii) no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto and no order directed at
any document incorporated by reference therein ("Incorporated Document") has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act;

(iii) when the Registration Statement became effective and at all times subsequent thereto up to the date hereof, the Registration Statement and
the Prospectus, and any amendments or supplements thereto contained all material information required to be included therein by the Securities
Act or the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and in all material respects
conformed to the requirements of the Securities Act or the Exchange Act and the applicable rules and regulations of the Commission
thereunder, as the case may be; the Registration Statement and the Prospectus, and any amendments or supplements thereto, did not and do not
include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading; and, since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amendment or supplemented Prospectus which has not been so set forth; and

(iv) subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been
(a) any Material Adverse Change, (b) any transaction that is material to the Company and the Subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (c) any obligation, direct or contingent, that is material to the Company and the
Subsidiaries considered as one enterprise, incurred by the Company or the Subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the equity securities or outstanding indebtedness of the Company or any Subsidiary that is material to the Company
and the Subsidiaries considered as one enterprise, (e) any dividend or distribution of any kind declared, paid or made on the equity securities of
the Company or any Subsidiary(1), or (f) any loss or damage (whether or not insured) to the property of the Company or any Subsidiary which
has been sustained or will have been sustained which has a Material Adverse Effect.

(o) [Intentionally omitted];

(p) The Company shall have furnished to the Underwriters such other documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus, the representations, warranties and statements of the Company contained herein,
and the performance by the Company of its covenants contained herein, and the fulfillment of any conditions contained herein as of the Closing
Time or any Date of Delivery, as the Underwriters may reasonably request.

7. Termination:

The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of the Representatives, at any
time prior to the Closing Time or any Date of Delivery, (i) if any of the conditions specified in Section 6 shall not have been fulfilled when and
as required by this Agreement to be fulfilled, or (ii) if there has been since the respective dates as of which information is given in the
Registration Statement, any Material Adverse Change, or any development involving a prospective Material Adverse Change, or material
change in management of the Company or any Subsidiary, whether or not arising in the ordinary course of business, or (iii) if there has
occurred any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic, political or other
conditions the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Representatives,
impracticable to market the Shares or enforce contracts for the sale of the Shares, or (iv) if trading in any securities of the Company has been
suspended by the Commission or by The NASDAQ National Market, or if trading generally on


(1) Add exception for APL quarterly distribution if declared or made since effective time.
the New York Stock Exchange or in The NASDAQ over-the-counter market has been suspended (including an automatic halt in trading
pursuant to market-decline triggers, other than those in which solely program trading is temporarily halted), or limitations on prices for trading
(other than limitations on hours or numbers of days of trading) have been fixed, or maximum ranges for prices for securities have been
required, by such exchange or the NASD or the over-the-counter market or by order of the Commission or any other governmental authority, or
(v) if there has been any downgrade in the rating of any of the Company's debt securities or preferred stock by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or (vi) any federal or state statute, regulation,
rule or order of any court or other governmental authority has been enacted, published, decreed or otherwise promulgated which, in the
reasonable opinion of the Representatives, materially adversely affects or will materially adversely affect the business or operations of the
Company, or (vii) any action has been taken by any federal, state or local government or agency in respect of its monetary or fiscal affairs
which, in the reasonable opinion of the Representatives, has a material adverse effect on the securities markets in the United States.

If the Representatives elect to terminate this Agreement as provided in this Section 7, the Company and the Underwriters shall be notified
promptly by telephone, promptly confirmed by facsimile.

If the sale to the Underwriters of the Shares, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted
under this Agreement or if such sale is not carried out because the Company shall be unable to comply in all material respects with any of the
terms of this Agreement, the Company shall not be under any obligation or liability under this Agreement (except to the extent provided in
Sections 5 and 9 hereof) and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the
extent provided in Section 9 hereof) or to one another hereunder.

8. Increase in Underwriters' Commitments:

If any Underwriter shall default at the Closing Time or on a Date of Delivery in its obligation to take up and pay for the Shares to be purchased
by it under this Agreement on such date, the Representatives shall have the right, within 36 hours after such default, to make arrangements for
one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Shares which such
Underwriter shall have agreed but failed to take up and pay for (the "Defaulted Shares"). Absent the completion of such arrangements within
such 36-hour period, (i) if the total number of Defaulted Shares does not exceed 10% of the total number of Shares to be purchased on such
date, each non-defaulting Underwriter shall take up and pay for (in addition to the number of Shares which it is otherwise obligated to purchase
on such date pursuant to this Agreement) the portion of the total number of Shares agreed to be purchased by the defaulting Underwriter on
such date in the proportion that its underwriting obligations hereunder bears to the underwriting obligations of all non-defaulting Underwriters;
and (ii) if the total number of Defaulted Shares exceeds 10% of such total, the Representatives may terminate this
Agreement by notice to the Company, without liability of any party to any other party except that the provisions of Sections 5 and 9 hereof
shall at all times be effective and shall survive such termination.

Without relieving any defaulting Underwriter from its obligations hereunder, the Company agrees with the non-defaulting Underwriters that it
will not sell any Shares hereunder on such date unless all of the Shares to be purchased on such date are purchased on such date by the
Underwriters (or by substituted Underwriters selected by the Representatives with the approval of the Company or selected by the Company
with the approval of the Representatives).

If a new Underwriter or Underwriters are substituted for a defaulting Underwriter in accordance with the foregoing provision, the Company or
the non-defaulting Underwriters shall have the right to postpone the Closing Time or the relevant Date of Delivery for a period not exceeding
five business days in order that any necessary changes in the Registration Statement and Prospectus and other documents may be effected.

The term "Underwriter" as used in this Agreement shall refer to and include any Underwriter substituted under this Section 8 with the same
effect as if such substituted Underwriter had originally been named in this Agreement.

9. Indemnity and Contribution by the Company and the Underwriters:

(a) The Company agrees to indemnify, defend and hold harmless each Underwriter and any person who controls any Underwriter within the
meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (including
the reasonable cost of investigation) which, jointly or severally, any such Underwriter or controlling person may incur under the Securities Act,
the Exchange Act or otherwise, insofar as such loss, expense, liability, damage or claim arises out of or is based upon (A) any breach of any
representation, warranty or covenant of the Company contained herein, (B) any failure on the part of the Company to comply with any
applicable law, rule or regulation relating to the offering of securities being made pursuant to the Prospectus, (C) any untrue statement or
alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any
post-effective amendment thereof by the Company), the Prospectus (the term Prospectus for the purpose of this Section 9 being deemed to
include any Preliminary Prospectus, the Prospectus and the Prospectus as amended or supplemented by the Company), (D) any application or
other document, or any amendment or supplement thereto, executed by the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction (domestic or foreign) in order to qualify the Shares under the securities or blue sky laws thereof
or filed with the Commission or any securities association or securities exchange (each an "Application"), (E) any omission or alleged omission
to state a material fact required to be stated in any such Registration Statement, Prospectus or any Application or necessary to make the
statements made therein, in the light of the circumstances under which they were made, not misleading, or (F) any untrue statement or alleged
untrue statement of any material fact contained in any
audio or visual materials used in connection with the marketing of the Shares, including, without limitation, slides, videos, films and tape
recordings; except insofar as any such loss, expense, liability, damage or claim arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in and in conformity with information furnished in writing by the
Underwriters through the Representatives to the Company expressly for use in such Registration Statement, Prospectus or Application. The
indemnity agreement set forth in this Section 9(a) shall be in addition to any liability which the Company may otherwise have.

(b) If any action is brought against an Underwriter or controlling person in respect of which indemnity may be sought against the Company
pursuant to subsection (a) above, such Underwriter shall promptly notify the Company in writing of the institution of such action, and the
Company shall assume the defense of such action, including the employment of counsel and payment of expenses; provided, however, that any
failure or delay to so notify the Company will not relieve the Company of any obligation hereunder, except to the extent that its ability to
defend is actually impaired by such failure or delay. Such Underwriter or controlling person shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person
unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such action, or
the Company shall not have employed counsel to have charge of the defense of such action within a reasonable time or such indemnified party
or parties shall have reasonably concluded (based on the advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the Company and paid as
incurred (it being understood, however, that the Company shall not be liable for the expenses of more than one separate firm of attorneys for
the Underwriters or controlling persons in any one action or series of related actions in the same jurisdiction (other than local counsel in any
such jurisdiction) representing the indemnified parties who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such claim or action effected without its consent.

(c) Each Underwriter agrees, severally and not jointly, to indemnify, defend and hold harmless the Company, the Company's directors, the
Company's officers that signed the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (including the reasonable cost
of investigation) which, jointly or severally, the Company, or any such person may incur under the Securities Act, the Exchange Act or
otherwise, but only insofar as such loss, expense, liability, damage or claim arises out of or is based upon (A) any untrue statement or alleged
untrue statement of a material fact contained in and in conformity with information furnished in writing by such Underwriter through the
Representatives to the Company expressly for use in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the Company), the Prospectus, or any Application, or (B) any omission or
alleged omission to state a material fact in connection with such information required to be stated either in such Registration Statement,
Prospectus or any Application or necessary to make such information, in the light of the circumstances under which made, not misleading. The
statements set forth in the 5th and 7th through 10th paragraphs under the caption "Underwriting" in the Preliminary Prospectus and the
Prospectus (to the extent such statements relate to the Underwriters) constitute the only information furnished by or on behalf of any
Underwriter through the Representatives to the Company for purposes of Section 3(k) and this
Section 9. The indemnity agreement set forth in this Section 9(c) shall be in addition to any liabilities that such Underwriter may otherwise
have.

If any action is brought against the Company, or any such person in respect of which indemnity may be sought against any Underwriter
pursuant to the foregoing paragraph, the Company or such person shall promptly notify the Representatives in writing of the institution of such
action and the Representatives, on behalf of the Underwriters, shall assume the defense of such action, including the employment of counsel
and payment of expenses. The Company or such person shall have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Company or such person unless the employment of such counsel shall have been
authorized in writing by the Representatives in connection with the defense of such action or the Representatives shall not have employed
counsel to have charge of the defense of such action within a reasonable time or such indemnified party or parties shall have reasonably
concluded (based on the advice of counsel) that there may be defenses available to it or them which are different from or additional to those
available to the Underwriters (in which case the Representatives shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being
understood, however, that the Underwriters shall not be liable for the expenses of more than one separate firm of attorneys in any one action or
series of related actions in the same jurisdiction (other than local counsel in any such jurisdiction) representing the indemnified parties who are
parties to such action). Anything in this paragraph to the contrary notwithstanding, no Underwriter shall be liable for any settlement of any such
claim or action effected without the written consent of the Representatives.

(d) If the indemnification provided for in this Section 9 is unavailable or insufficient to hold harmless an indemnified party under subsections
(a), (b) and (c) of this Section 9 in respect of any losses, expenses, liabilities, damages or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, expenses, liabilities, damages or claims (i) in such proportion as is appropriate to reflect the relative benefits received by
the Company and the Underwriters from the offering of the Shares or (ii) if (but only if) the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company, and of the Underwriters in
connection with the statements or omissions which resulted in such losses, expenses, liabilities, damages or claims, as well as any other
relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by
the Company bear to the underwriting discounts and commissions received by the Underwriters. The relative fault of the Company and of the
Underwriters shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission relates to information supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim or action.

(e) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in subsection (d)(i) and, if applicable
(ii), above. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to their respective underwriting commitments and not joint.

(f) The Company agrees to indemnify and hold harmless each Underwriter and its affiliates and each person, if any, who controls each
Underwriter and its affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement
or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to
participants in connection with the Directed Share Program, or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading; (ii) as a result of the failure of any participant to pay
for and accept delivery of Directed Shares that the participant has agreed to purchase; or (iii) related to, arising out of, or in connection with the
Directed Share Program.

10. Survival:

The indemnity and contribution agreements contained in Section 9 and the covenants, warranties and representations of the Company contained
in Sections 3, 4 and 5 of this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of any Underwriter, or any person who controls any Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, or by or on behalf of the Company, its directors and officers or any person who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall survive any termination of
this Agreement or the sale and delivery of the Shares. The Company and each Underwriter agree promptly to notify the others of the
commencement of any litigation or proceeding against it and, in the case of the Company, against any of the Company's officers and directors,
in connection with the sale and delivery of the Shares, or in connection with the Registration Statement or Prospectus.

11. Notices:

Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the
Underwriters, shall be sufficient in all respects if delivered to Friedman, Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington,
Virginia 22209, Attention:
Syndicate Department; if to the Company, shall be sufficient in all respects if delivered to the Company at the offices of the Company at 311
Rouser Road, Moon Township, Pennsylvania 15108 Attention: Edward E. Cohen.

12. Governing Law; Headings:

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement have been inserted
as a matter of convenience of reference and are not a part of this Agreement.

13. Parties at Interest:

The Agreement herein set forth has been and is made solely for the benefit of the Underwriters, the Company and the controlling persons,
directors and officers referred to in Sections 9 and 10 hereof, and their respective successors, assigns, executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have
any right under or by virtue of this Agreement.

14. Counterparts and Facsimile Signatures:

This Agreement may be signed by the parties in counterparts which together shall constitute one and the same agreement among the parties. A
facsimile signature shall constitute an original signature for all purposes.
If the foregoing correctly sets forth the understanding among the Company and the Underwriters, please so indicate in the space provided
below for the purpose, whereupon this Agreement shall constitute a binding agreement among the Company, the Selling Stockholders and the
Underwriters.

Very truly yours,

                                                        ATLAS AMERICA, INC.

                                                   By:____________________________
                                                                 By:
                                                                Title:

Accepted and agreed to as
of the date first above written:

FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
McDONALD INVESTMENTS, INC.

By FRIEDMAN, BILLINGS, RAMSEY & CO., INC.

                                                 By:_______________________________

Name:
Title:

For themselves and as Representatives of the other Underwriters named on Schedule I hereto.
                                   Schedule I
                                           Number of Initial   Number of Option
Name of Party Selling Shares               Shares to be Sold   Shares to be Sold
--------------------------------------------------------------------------------
     Atlas America, Inc.                       2,300,000            345,000
                                      Schedule II
                                                          Number of Initial
Underwriter                                            Shares to be Purchased
-----------------------------------------------------------------------------
Friedman, Billings, Ramsey & Co., Inc.                   [               ]
McDonald Investments, Inc.                               [____________]
[INSERT NAMES OF OTHER UNDERWRITER]                      [____________]

     Total.................................                  2,300,000
                                                             =========
                                                                  Exhibit 5.1

March 17, 2004

Atlas America, Inc.
311 Rouser Road
Moon Township, PA 15108

Ladies and Gentlemen:

We have acted as counsel to Atlas America, Inc. ("Atlas"), a Delaware corporation, in connection with the preparation and filing by Atlas of a
registration statement on Form S-1 under the Securities Act of 1933, as amended, File No. 333-112653 (the "Registration Statement")with
respect to the offer and sale of up to 2,645,000 shares of common stock of Atlas (the "Common Stock"). In connection therewith, you have
requested our opinion as to certain matters referred to below.

In our capacity as such counsel, we have familiarized ourselves with the actions taken by Atlas in connection with the registration of the
Common Stock. We have examined the originals or certified copies of such records, agreements, certificates of public officials and others, and
such other documents, including the Registration Statement, as we have deemed relevant and necessary as a basis for the opinions hereinafter
expressed. In such examination, we have assumed the genuineness of all signatures on original documents and the authenticity of all documents
submitted to us as originals, the conformity to original documents of all copies submitted to us as conformed or photostatic copies, and the
authenticity of the originals of such latte documents.

Based upon and subject to the foregoing, we are of the opinion that:

1. Atlas is a corporation which has been duly formed, is validly existing and is in good standing under the Delaware General Corporation Law.

2. When sold as set forth in the Registration Statement, the Common Stock will be validly issued, fully paid and non-assessable.
We consent to the reference to this opinion and to Ledgewood Law Firm, P.C. in the Prospectus included as part of the Registration Statement,
and to the inclusion of this opinion as an exhibit to the Registration Statement.

Very truly yours,
                                                      /s/ Ledgewood Law Firm, P.C.
                                                      ----------------------------
                                                      LEDGEWOOD LAW FIRM, P.C.
                                                                   Exhibit 10.2

                                         MASTER NATURAL GAS GATHERING AGREEMENT

THIS MASTER NATURAL GAS GATHERING AGREEMENT is made as of February 2, 2000, among ATLAS PIPELINE PARTNERS,
L.P., a Delaware limited partnership, and ATLAS PIPELINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
(collectively, "Gatherer"), ATLAS AMERICA, INC., a Delaware corporation ("Atlas America"), RESOURCE ENERGY, INC., a Delaware
corporation ("Resource Energy"), and VIKING RESOURCES CORPORATION, a Pennsylvania corporation ( "Viking Resources," and
collectively with Atlas America and Resource Energy, "Shipper").

                                                                     Recitals:

A. Gatherer owns a natural gas gathering system and related facilities consisting of approximately 888 miles of pipelines located in New York,
Ohio and Pennsylvania, and operated as a private use gathering system as more particularly described in Exhibit A (as same may be added to or
extended, the "Gathering System").

B. Shipper has now or may in the future form affiliates for purposes of carrying on Shipper's energy industry business. For purposes of this
Agreement,
(i) "Affiliate" means, with respect to any person, any other person that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the person in question; and (ii) the term "control" means (a) direct or indirect beneficial
ownership of 50% or more of the voting securities or voting interest of a person or, in the case of a limited partnership, of 50% or more of the
general partnership interest, either directly or through an entity which the person controls or (b) the possession of the power to direct the
management of a person, whether through contract or otherwise; provided, however, that Investment Programs (as such term is hereinafter
defined) shall not be deemed to be Affiliates of Shipper for purposes of this Agreement.

C. Shipper and Affiliates own interests in certain wells connected to the Gathering System, which are more particularly described in Exhibit B
("Shipper's Existing Well Interests").

D. Shipper and Affiliates may drill additional wells, acquire interests in other wells or operate (with the authority to determine natural gas
gathering arrangements) other wells (excluding Future Investment Program Well Interests, as such term is hereinafter defined), connect them to
the Gathering System or a Third Party Gathering System (as such term is hereinafter defined) after the date of this Agreement in accordance
with the terms of the Omnibus Agreement (as such term is hereinafter defined) ("Shipper's Future Well Interests").

E. Shipper and Affiliates have agreements or other arrangements with respect to the gathering of natural gas from interests in wells owned by
third parties and connected to the Gathering System as of the date of this Agreement, including well interests owned by Investment Programs
(as such term is hereinafter defined), which are more particularly described in Exhibit C ("Existing Third Party Well Interests").
F. Shipper and Affiliates have sponsored or may in the future sponsor Investment Programs (as such term is hereinafter defined) which, on or
after December 1, 1999, have drilled or may in the future drill wells or acquire interests in other wells and connect them to the Gathering
System or connect them to Third Party Gathering Systems (as such term is hereinafter defined) all as more particularly provided for in the
Omnibus Agreement (including wells for which drilling has commenced on or after December 1, 1999, "Future Investment Program Well
Interests").

G. Gatherer and Shipper desire to provide for the gathering and redelivery of the gas produced from Shipper's Existing Well Interests, Shipper's
Future Well Interests, Existing Third Party Well Interests and Future Investment Program Well Interests ("Shipper's Gas"), all as more fully
provided herein.

NOW, THEREFORE, in consideration of the premises, and the mutual covenants and agreements herein set forth, and intending to be legally
bound, the parties agree as follows:

                                                                   Article 1.
                                                                 DEFINITIONS

Unless otherwise defined herein, the following terms shall have the following meanings:

"Agreement" means this Master Natural Gas Gathering Agreement, as it may be amended, modified or supplemented from time to time.

"Common Units" means common units of limited partnership interest of Atlas Pipeline Partners, L.P.

"Day" means a period of time beginning at 7:00 a.m., Eastern Time, on each calendar day and ending at 7:00 a.m., Eastern Time, on the next
succeeding calendar day.

"Delivery Points" means the points on the Gathering System described in Exhibit D-1. Exhibit D-1 will be revised from time to time to reflect
any additional Delivery Points that may be established as a result of the Omnibus Agreement or as may be otherwise agreed to by Shipper and
Gatherer.

"Force Majeure Event" means any act of God, strike, lockout, or other industrial disturbance, act of a public enemy, sabotage, war (whether or
not an actual declaration is made thereof), blockade, insurrection, riot, epidemic, landslide, lightning, earthquake, flood, storm, fire, washout,
arrest and restraint of rules and peoples, civil disturbance, explosion, breakage or accident to machinery or line or pipe, hydrate obstruction of
line or pipe, lack of pipeline capacity, repair, maintenance, improvement, replacement, or alteration to plant or line of pipe or related facility,
failure or delay in transportation, temporary failure of gas supply or markets, freezing of the well or delivery facility, well blowout, cratering,
partial or entire failure of the gas well, the act of any court, agency or governmental authority, or any other cause, whether of the kind
enumerated or otherwise, not within the reasonable control of the party claiming suspension.

                                                                         2
"General Partner" means Atlas Pipeline Partners GP, LLC, a Delaware limited liability company.

"Gross Sale Price" shall mean the price, per mcf, actually received by the Seller for natural gas sold by it, without deduction for brokerage fees,
commissions or offsets.

"Investment Program" means a Person for whom Shipper or a direct or indirect subsidiary of Shipper acts as a general partner, managing
partner or manager and the securities of which have been offered and sold to investors.

"mcf" means one thousand (1,000) cubic feet of gas measured at a base temperature of sixty degrees (60(Degree)) Fahrenheit and at a pressure
base of fourteen and seventy-three one-hundredths (14.73) psia.

"mmcf" means one million (1,000,000) cubic feet of gas measured at a base temperature of sixty degrees (60(Degree)) Fahrenheit and at a
pressure base of fourteen and seventy-three one-hundredths (14.73) psia.

"Omnibus Agreement" means the Omnibus Agreement among Gatherer and Shipper of even date herewith.

"Partnership Agreement" means the First Amended and Restated Agreement of Limited Partnership of Atlas Pipeline Partners, L.P. of even
date herewith.

"Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association
or other entity.

"psia" means pounds per square inch absolute.

"psig" means pounds per square inch gauge.

"Receipt Points" means the points on the Gathering System described in Exhibit D-2. Exhibit D-2 will be revised from time to time to reflect
any additional Receipt Points that may be established as a result of the Omnibus Agreement or as may be otherwise agreed to by Shipper and
Gatherer.

"Shipper's Field Fuel" means Shipper's allocated share of actual Gathering System fuel requirements, shrinkage, and lost and unaccounted for
gas. Such allocations shall be based upon the proportion volume of natural gas that Shipper's Gas bears to the aggregate gathered by Gatherer
during the relevant period.

                                                                         3
"Third Party Gathering System" means a natural gas gathering system owned by a Person other than Gatherer or a subsidiary of Gatherer.

                                                                Article 2.
                                                           GATHERING SERVICES

2.1. Receipt of Gas. Subject to the terms, limitations, and conditions of this Agreement, Shipper dedicates, and will cause its Affiliates to
dedicate, to this Agreement, and agrees, and will cause its Affiliates to agree, to deliver exclusively to the Receipt Points, and Gatherer agrees
to accept at the Receipt Points, on a fully interruptible basis, all of Shipper's Gas; provided, however, that Gatherer shall only be obligated to
accept on any Day for gathering hereunder that volume of Shipper's Gas which Gatherer determines, in its sole discretion, it has available
capacity to receive.

2.2. Redelivery of Gas. Gatherer will gather, compress, and redeliver, on a fully interruptible basis, to the Delivery Points, and Shipper will
accept, a quantity of gas equal, on a mcf basis, to the quantity of Shipper's Gas received at the Receipt Points less Shipper's Field Fuel.

2.3. Shipper's Field Fuel. Shipper's Field Fuel will be calculated monthly by Gatherer by allocating such quantities of actual Gathering System
fuel requirements, shrinkage, and lost and unaccounted for gas between all shippers using the Gathering System. Gatherer may retain and use
Shipper's Field Fuel as fuel for compression and other operations on the Gathering System.

2.4. Commingling Shipper's Gas. Gatherer shall have the right to commingle Shipper's Gas with other natural gas in the Gathering System.
Gatherer may extract, or permit to be extracted, from Shipper's Gas condensate to the extent necessary to meet the quality requirements of the
receiving pipeline at the Delivery Points or for proper functioning of the Gathering System.

                                                                 Article 3.
                                                           TITLE AND LIABILITY

3.1. Shipper's Gas. Except for Shipper's Field Fuel and products removed in treating Shipper's Gas, title to Shipper's Gas shall remain with
Shipper or, with respect to Shipper's Gas from Existing Third Party Well Interests, the owners of such wells.

3.2. Adverse Claims. Shipper shall indemnify, hold harmless and defend Gatherer, the General Partner and the officers, agents, employees and
contractors of Gatherer and the General Partner (each, an "Indemnified Person") against any liability, loss or damage whatsoever, including
costs and attorneys fees (collectively, a "Loss"), suffered by an Indemnified Person, where such Loss arises, directly or indirectly, out of any
demand, claim, action, cause of action or suit brought by any Person asserting ownership of or an interest in Shipper's Gas.

                                                                         4
3.3. Possession and Control. As between the parties hereto, Gatherer shall be deemed to be in control and possession of Shipper's Gas after
Gatherer receives Shipper's Gas at any Receipt Point and until Shipper's Gas is delivered at any Delivery Point; provided, however, that
Gatherer shall not, by any such possession and control, be deemed to have title to Shipper's Gas it receives. Shipper shall be deemed to be in
control and possession of Shipper's Gas at all other times.

3.4. Indemnity. The party deemed to be in control and possession of Shipper's Gas shall be responsible for and shall indemnify the other party
with respect to any Losses arising in connection with or related to Shipper's Gas when it is in the indemnifying party's control and possession;
provided, that no party shall be responsible for any Losses arising from the other party's negligence or breach of this agreement.

                                                                 Article 4.
                                                            DELIVERY PRESSURE

4.1. Receipt Points. Shipper shall deliver Shipper's Gas at a pressure sufficient to effect delivery into the Gathering System at the Receipt
Points, but not in excess of the maximum pressure specified by Gatherer from time to time.

4.2. Compression. Gatherer shall maintain all existing compression facilities, unless Shipper shall otherwise consent in writing, and shall install
such additional compression facilities as may be necessary or appropriate under good industry practices and commercially reasonable.

4.3. Wellhead Equipment. With respect to Shipper's Existing Well Interests, Shipper's Future Well Interests and Future Investment Program
Well Interests, Shipper shall install, operate and maintain, at its sole expense, all wellhead and pressure regulating equipment necessary to
prevent Shipper's delivery pressure at the Receipt Point from exceeding the maximum pressure specified by Gatherer from time to time.

4.4. Inspection. Gatherer shall have the right at any time, but not the obligation, to inspect Shipper's facilities at the Receipt Points, and
Gatherer may immediately cease accepting Shipper's Gas if the pressure in Shipper's facilities exceeds the maximum pressure reasonably
established by Gatherer from time to time, or require Shipper to install equipment necessary to limit the pressure to such maximum.

                                                                   Article 5.
                                                                 GAS QUALITY

5.1. Minimum Specifications. Shipper's Gas delivered into the Gathering System shall be commercially free from liquids of any kind, air, dust,
gum, gum forming constituents, harmful or noxious vapors, or other solid or liquid matter which, in the sole judgment of Gatherer, may
interfere with the merchantability of Shipper's Gas or cause injury to or interfere with proper operation of the lines, regulators, meters or other
equipment of the Gathering System. Shipper's Gas shall also conform to applicable quality specifications of the receiving pipeline at each
applicable Delivery Point.

                                                                         5
5.2. Suspension. Gatherer may, at its option, (i) refuse to accept delivery of any Shipper's Gas not meeting the above-described quality
specifications or (ii) accept delivery of all or any part of Shipper's Gas (notwithstanding the deficiency in quality) and in such event Shipper
shall be responsible for all damages to the Gathering System, including costs of repair, due to its failure to comply with such quality
specifications.

                                                              Article 6.
                                                      MEASUREMENT AND TESTING

6.1. Measurement Equipment. Measurement of Shipper's Gas shall take place at the Receipt Points. Shipper will install, or cause to be installed,
at or near the Receipt Points, orifice meters or other measuring equipment necessary in Gatherer's judgment to accurately measure the volumes
of Shipper's Gas being delivered into the Gathering System to the extent such meters or other measuring equipment have not been installed as
of the date of this Agreement. Such measuring equipment shall be comparable to the measuring equipment of other parties delivering gas into
the Gathering System. Shipper shall be responsible for, and bear the cost of, acquiring, installing, maintaining and operating such measurement
equipment.

6.2. Chart Integration. Gatherer shall be responsible for reading the meters at the Receipt Points. Gatherer shall furnish, install, remove, and
integrate all recording charts used in such meters in accordance with Gatherer's standard practices.

6.3. Delivery Points. The measurement of and tests for quality of Shipper's Gas redelivered at the Delivery Points shall be governed by and
determined in accordance with the requirements of the receiving pipeline at each Delivery Point.

6.4. Unit of Volume. The unit of volume for purposes of measurement shall be one (1) cubic foot of gas at a temperature base of sixty degrees
(60(Degree)) Fahrenheit and at a pressure base of fourteen and seventy-three one-hundredths (14.73) psia.

6.5. Testing Procedures. Shipper shall follow the meter calibrations schedule established by Gatherer for each meter on the Gathering System.
Such calibrations shall occur at least once every twelve (12) months but not more frequently than once every six (6) months. No testing,
calibration, or adjustment of a meter or related equipment shall be performed without Gatherer first being given five (5) days' notice thereof
and having the opportunity to be present.

6.6. Meter Inaccuracy. If, at any time, any meter is found to be out of service or registering inaccurately in any percentage, it shall be adjusted
at once by Shipper to read accurately within the limits prescribed by the meter's manufacturer. If such equipment is out of service or inaccurate
by an amount exceeding three percent (3%) of a reading corresponding to the average flow rate for the period since the last test, the previous
readings shall be corrected for the period that the meter is known to be inaccurate, or, if not known, a period of one-half (1/2) the elapsed time
since the last test. The volume of Shipper's

                                                                         6
Gas delivered during such period shall be estimated by Gatherer either (i) by using the data recorded by any check measuring equipment if
installed and accurately registered, (ii) by correcting the error if the percentage of error is ascertainable by calibration, test, or mechanical
calculation or, if neither such method is feasible, (iii) by estimating the quantity delivered based upon deliveries under similar conditions during
a period when the equipment registered accurately. No volume correction shall be made for metering inaccuracies of three percent (3%) or less.

6.7. Meter Testing. If Gatherer requests to have any meter tested, then Shipper shall have the meter tested in the presence of and to the
satisfaction of Gatherer. If the meter tested proves to be accurate within plus or minus three percent (3%) at its normal operating range, then the
cost of testing and recalibrating the meter shall be borne by Gatherer. Shipper will schedule all required tests within ten (10) days of a request
by Gatherer. Shipper will notify Gatherer at least five (5) working days prior to the test of the date, time, and location of such test.

6.8. Books and Records. Gatherer shall keep and maintain proper books of account during the term of this Agreement and for a period of three
(3) years thereafter showing (a) the total volume of Shipper's Gas transported through the Gathering System from the Receipt Points to the
Delivery Points and (b) the volume of gas allocated to each Receipt Point. Gatherer shall also preserve, or cause to be preserved, for at least one
(1) year all test data, charts, and similar data pertaining to the measurement and testing of Shipper's Gas, unless a longer period is prescribed by
applicable regulations. Shipper shall have the right during normal business hours, after reasonable notice to Gatherer, to inspect Gatherer's
books and records not older than three (3) years from the date of request for inspection. Such inspections shall take place at Gatherer's office.
Any costs attributable to such audits or inspections shall be borne by Shipper.

                                                                 Article 7.
                                                              GATHERING FEES

7.1. Consideration. As consideration for Gatherer's gathering Shipper's Gas, Atlas America and Resource Energy, jointly and severally, shall
pay to Gatherer one of the following fees, as applicable.

7.2. Gathering Fees For Gathering Production from Existing Third Party Well Interests, Shipper's Future Well Interests and Future Investment
Program Well Interests. The gathering fees for gathering production from Existing Third Party Well Interests, Shipper's Future Well Interests
and, except as set forth in Section 7.4 hereof, Future Investment Program Well Interests shall be the greater of Thirty Five Cents for each mcf
($0.35/mcf) delivered by Shipper at the Receipt Points and sixteen percent (16%) of the Gross Sale Price for each such mcf.

7.3. Gathering Fee For Gathering Production From Shipper's Existing Well Interests. The gathering fees for gathering production from
Shipper's Existing Well Interests shall be the greater of Forty Cents for each mcf
($0.40/mcf) delivered by Shipper at the Receipt Points and sixteen percent (16%) of the Gross Sale Price for each such mcf.

                                                                         7
7.4. Fees Payable to Gatherer for Shipper's Future Well Interests in Wells Not Connected to the Gathering System. In the event that Shipper
shall connect Shipper's Future Well Interests or Future Investment Program Well Interests to a Third Party Gathering System pursuant to
Section 2.3.3(ii) of the Omnibus Agreement and Gatherer shall assume the cost of constructing that connection, Shipper shall pay Gatherer a
fee that shall be equal to the excess, if any, of the greater of (i) Thirty Five Cents for each mcf ($0.35/mcf) delivered by Shipper at the Receipt
Points for the Third Party Gathering System and sixteen percent (16%) of the Gross Sale Price for each such mcf, over (ii) the gathering fees
charged by the Third Party Gathering System.

7.5. Assignment of Rights and Obligations; Agreement to Fees by Affiliates. Viking Resources assigns to Atlas America and Resource Energy,
and shall cause its Affiliates to assign to Atlas America and Resource Energy, all of their rights and obligations under and pursuant to gathering
arrangements between the Affiliate or Viking Resources and owners of Existing Third Party Well Interests.

                                                                  Article 8.
                                                           BILLING AND PAYMENT

8.1. Statements and Payments. In connection with fees payable to Gatherer under Article 7 of this Agreement, Gatherer shall prepare and
submit to Shipper each month a statement showing for the prior month (i) the volume of Shipper's Gas received at the Receipt Points, (ii)
Shipper's Field Fuel, and
(iii) the volume of Shipper's Gas delivered to the Delivery Points. Shipper shall provide Gatherer, within thirty (30) days after the end of each
month, a statement of the gathering fees due for such month. Shipper's statement shall set forth (i) the volumes of Shipper's Gas for which
payments have been received; (ii) an allocation of such Shipper's Gas among the three gathering fee categories established by Sections 7.2, 7.3
and 7.4, respectively; (iii) an itemization of the Gross Sale Price or Prices received for the Shipper's Gas in each category; and (iv) a calculation
of the gathering fees for such Shipper's Gas. Gatherer shall have the right to inspect Shipper's books and records relating to such Shipper's Gas
for purposes of verifying the accuracy of Shipper's statement. Gatherer shall advise Shipper within 30 days of Gatherer's receipt of Shipper's
statement if Gatherer believes Shipper's statement to be inaccurate in any respect. If Gatherer does not so advise Shipper, Shipper's statement
shall be deemed to be correct. The gathering fee shall be due and payable upon Gatherer's receipt of Shipper's statement. Each of Gatherer and
Shipper shall preserve its records relating to any statement delivered pursuant to this Section 8.1 for a period of at least three (3) years after
such statement is delivered.

8.2. Payment Default. If Shipper fails to pay Gatherer in accordance with Section 8.1, Gatherer may, at its option and without limiting any
other remedies, either, singularly or in combination, (i) terminate this Agreement forthwith and without notice or (ii) suspend performance
under this Agreement until all indebtedness under this Agreement is paid in full.

                                                                          8
8.3. Overdue Payments. Any overdue balance shall accrue daily interest charges at the rate equal to the lesser of (i) 15% per annum or (ii) the
maximum lawful rate of interest.

8.4. Remittance of Revenues. If any revenues for sales of Shipper's Gas are paid directly to Gatherer, Gatherer shall remit such revenues to
Shipper within fifteen (15) days; provided, however, that Gatherer may offset from any such revenues any amounts as shall then be due and
payable to Gatherer under this Agreement.

8.5. Gathering Fees Payable to Shipper. Shipper shall have sole and exclusive responsibility for settling with all Persons having an interest in
Shipper's Gas and collecting gathering fees payable to Shipper with respect thereto. Shipper's obligations hereunder shall be without regard to
receipt or collection by Shipper of any such fees.

                                                                    Article 9.
                                                                     TERM

9.1. Term. Subject to the other provisions of this Agreement, this Agreement shall become effective as of its date and shall remain in effect so
long as gas is produced from any of Shipper's Existing Well Interests, Shipper's Future Well Interests, Future Investment Program Well
Interests or Existing Third Party Well Interests in economic quantities without a lapse of more than ninety (90) days.

9.2. Uneconomic Operation. Notwithstanding anything contained herein to the contrary, if at any time Gatherer determines, in its sole
discretion, that continued operation of all or any part of the Gathering System is not economically justified, Gatherer may cease receiving
Shipper's Gas from the relevant part of the Gathering System and terminate this Agreement as to such part of the Gathering System (the
"Terminated System") by giving at least ninety
(90) days' notice to Shipper. In such event, and concurrently with such notice, Gatherer shall offer Shipper the right to purchase the Terminated
System from Gatherer for $10.00. Shipper shall exercise such right on or before sixty (60) days after receipt of the termination notice. Shipper
shall be responsible for all costs and expenses related to such purchase, including filing fees, and such purchase shall be without recourse,
representation or warranty. Closing on the purchase shall be on the day specified in the termination notice as the termination date. If the
Terminated System is acquired by Shipper and remains connected to any other portion of the Gathering System, Shipper shall have the right to
deliver natural gas from the Terminated System to the Gathering System, and this Agreement shall continue in effect with respect to the natural
gas so delivered by Shipper.

9.3. Removal of General Partner. In the event that the General Partner is removed as general partner of Gatherer pursuant to Section 11.2 of the
Partnership Agreement under circumstances where cause (as such term is defined in Section 1.1 of the Partnership Agreement) for such
removal does not exist and the General Partner does not consent to that removal, then Shipper and Affiliates shall have no obligation under this
Agreement with respect to wells drilled by Shipper on or after the effective date of such removal.

                                                                        9
                                                                  Article 10.
                                                               FORCE MAJEURE

10.1. Non-Performance. No failure or delay in performance, whether in whole or in part, by either Gatherer or Shipper shall be deemed to be a
breach hereof (other than the obligation to pay amounts when due under this Agreement) when such failure or delay is occasioned by or due to
a Force Majeure Event.

10.2. Force Majeure Notice. The party affected by a Force Majeure Event shall give notice to the other party as soon as reasonably possible of
the Force Majeure Event and the expected duration of the Force Majeure Event.

10.3. Remedy of a Force Majeure Notice. The affected party will use all reasonable efforts to remedy each Force Majeure Event and resume
full performance under this Agreement as soon as reasonably practicable, except that the settlement of strikes, lockouts or other labor disputes
shall be entirely within the discretion of the affected party.

                                                          Article 11.
                                             GOVERNMENTAL RULES AND REGULATIONS

This Agreement and all operations hereunder shall be subject to all valid laws, orders, directives, rules, and regulations of any governmental
body, agency, or official having jurisdiction in the premises, whether state or federal. Notwithstanding any other provisions in this Agreement,
in the event the Federal Energy Regulatory Commission or other governmental authority imposes a rule, regulation, order, law or statute which
directly or indirectly materially and adversely affects a party's ability to perform its obligations under this Agreement, then the party so affected
may terminate this Agreement as to the wells or portions of the Gathering System affected thereby by giving ten
(10) days prior written notice to the other parties.

                                                                    Article 12.
                                                                  INSURANCE

Shipper and Gatherer shall procure and maintain the insurance coverage described in Exhibit E.

                                                                    Article 13.
                                                                     TAXES

Shipper shall pay or cause to be paid all taxes and assessments imposed on Shipper hereunder with respect to Shipper's Gas gathered hereunder
prior to and including its delivery to Gatherer. Shipper shall pay to Gatherer all taxes, levies or charges which Gatherer may be required to
collect from Shipper by reason of all services performed for Shipper hereunder other than taxes or assessments with respect to Gatherer's
income, capital, properties, franchises or similar matters relating solely to Gatherer's general business activities or partnership or corporate
existence or those of any of its subsidiaries. Neither party shall be responsible or liable for any taxes or other statutory charges levied or
assessed against any of the facilities of the other party used for the purposes of carrying out the provisions of this Agreement.

                                                                         10
                                                                 Article 14.
                                                              MISCELLANEOUS

14.1. Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and governed by the laws of the Commonwealth of
Pennsylvania, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws
of another state. Each party hereby submits to the jurisdiction of the state and federal courts in the Commonwealth of Pennsylvania and to
venue, respectively, in Philadelphia, Pennsylvania and the Eastern District of Pennsylvania.

14.2. Notice. All notices or requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must
be given by depositing same in the United States mail, addressed to the party to be notified, postpaid, and registered or certified with return
receipt requested or by delivering such notice in person or by telecopier to such party. Notice given by personal delivery or mail shall be
effective upon actual receipt. Notice given by telecopier shall be effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. All
notices to be sent to a party pursuant to this Agreement shall be sent to 311 Rouser Road, P.O. Box 611, Moon Township, Pennsylvania 15108,
Facsimile: (412) 262-2820, Attention: Tony C. Banks at such other address as such party may stipulate to the other parties in the manner
provided in this Section.

14.3. Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the matters contained herein, superseding the
provisions of all other contracts or agreements, whether oral or written, that are in conflict with the provisions hereof.

14.4. Effect of Waiver or Consent. No waiver or consent, express or implied, by any party to or of any breach or default by any party in the
performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a party to
complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder until the applicable statute of limitations period has run.

14.5. Amendment or Modification. This Agreement may be amended or modified from time to time only by the written agreement of all the
parties hereto; provided, however, that Gatherer may not, without the prior approval of the conflicts committee of the General Partner, agree to
any amendment or modification of this Agreement that, in the reasonable discretion of the General Partner, will adversely affect the Common
Unit holders.

                                                                        11
14.6. Assignment. No party shall have the right to assign its rights or obligations under this Agreement without the consent of the other parties
hereto.

14.7. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed
the same document. All counterparts shall be construed together and shall constitute one and the same instrument.

14.8. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable substitute provision to effect the original intent of the parties.

14.9. Further Assurances. In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto
agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

14.10. Third Party Beneficiaries. The provisions of this Agreement are enforceable solely by the parties to it, and no Common Unit holder or its
assignee or any other Person shall have the right, separate and apart from Gatherer, to enforce any provision of this Agreement or to compel
any party to this Agreement to comply with its terms.

14.11. Headings. The headings throughout this Agreement are inserted for reference purposes only, and are not to be construed or taken into
account in interpreting the terms and provisions of any Article, nor to be deemed in any way to qualify, modify or explain the effects of any
such term or provision.

                                                                        12
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date first written above.

                                                                Shipper:

                                                       ATLAS AMERICA, INC.

                                            By:______________________________________

                                            Name:____________________________________

                                             Its:_____________________________________

                                                     RESOURCE ENERGY, INC.

                                            By:______________________________________

                                            Name:____________________________________

                                             Its:_____________________________________

                                               VIKING RESOURCES CORPORATION

                                            By:______________________________________

                                            Name:____________________________________

                                             Its:_____________________________________

                                                               Gatherer:

                                       ATLAS PIPELINE OPERATING PARTNERSHIP, L.P.

                                                  By: Atlas Pipeline Partners GP, LLC,
                                                           its general partner

                                            By:______________________________________

                                            Name:____________________________________

                                             Its:_____________________________________

                                                 ATLAS PIPELINE PARTNERS, L.P.

                                                  By: Atlas Pipeline Partners GP, LLC,
                                                           its general partner

                                            By:______________________________________

                                            Name:____________________________________

                                             Its:_____________________________________

                                                                   13
         EXHIBIT A
GATHERING SYSTEM DESCRIPTION
             EXHIBIT B
SHIPPER'S EXISTING WELL INTERESTS
             EXHIBIT C
EXISTING THIRD PARTY WELL INTERESTS
  EXHIBIT D-1
DELIVERY POINTS
  EXHIBIT D-2
RECEIPT POINTS
       EXHIBIT E
INSURANCE REQUIREMENTS
                                                                EXHIBIT 10.3

                                                          OMNIBUS AGREEMENT

THIS OMNIBUS AGREEMENT is made as of February 2, 2000 among ATLAS AMERICA, INC., a Delaware corporation ("Atlas America"),
RESOURCE ENERGY, INC., a Delaware corporation ("Resource Energy"), and VIKING RESOURCES CORPORATION, a Pennsylvania
corporation (collectively with Atlas America and Resource Energy, the "Resource Entities"), and ATLAS PIPELINE OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership, and ATLAS PIPELINE PARTNERS, L.P., a Delaware limited partnership
(collectively, the "MLP").

                                                               R E C I T A L S:

A. The MLP has acquired from the Resource Entities and their Affiliates (as such term in hereafter defined) natural gas gathering systems and
related facilities consisting of approximately 888 miles of intrastate pipelines located in New York, Ohio and Pennsylvania.

B. The Resource Entities have sponsored in the past, and intend to sponsor in the future, oil and gas drilling programs in areas served by the
MLP's gathering systems. In connection with the transfer of the gathering systems to the MLP, the Resource Entities have undertaken to enter
into arrangements with the MLP regarding adding wells to the MLP gathering system (Article 2), providing consultation services to the MLP in
the construction of additions or extensions to the gathering systems (Article 3), providing certain funds to the MLP for construction (Article 4)
and disposing of their ownership interests in the general partners of investment programs and of the MLP (Article 5).

NOW, THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree
as follows:

                                                         ARTICLE 1. DEFINITIONS

Unless otherwise defined in this Agreement, the following terms shall have the following meanings:

"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the Person in question. As used herein, the term "control" means (i) direct or indirect beneficial
ownership of 50% or more of the voting securities or voting interest of a Person or, in the case of a limited partnership, of 50% or more of the
general partnership interest, either directly or through an entity which the Person controls or (ii) the possession of the power to direct the
management of a Person, whether through contract or otherwise. For the purposes of this Agreement, each Investment Program shall be
deemed to be an Affiliate of the appropriate Resource Entity.

"Agreement" means this Omnibus Agreement, as it may be amended, modified or supplemented from time to time.
"Applicable Period" means the period commencing on the date hereof and ending on the date on which the General Partner ceases to be the
General Partner of the MLP.

"Common Units" means common units of limited partnership interest of Atlas Pipeline Partners, L.P.

"Connectable Well" means a Resource Entity Well that is drilled within 2,500 feet of the Gathering System, such distance to be measured from
the outside edge of the wellhead of the Resource Entity Well to the nearest point of intersection with the Gathering System.

"Flow Line" means small diameter (two inches or less) sales or flow line from a wellhead, or such other type of line as may connect a well to a
gathering system in accordance with standard industry practice.

"Gathering System" means the natural gas pipelines and related facilities now owned or hereafter acquired by the MLP.

"General Partner" means Atlas Pipeline Partners GP, LLC, a Delaware limited liability company.

"Identified Third Party Gathering System" has the meaning set forth in
Section 2.5.

"Investment Program" means a Person for whom a Resource Entity or a subsidiary of a Resource Entity acts as a general partner, managing
partner or manager (each, a "Manager") and the securities of which have been offered and sold to investors.

"Master Natural Gas Gathering Agreement" means the Master Natural Gas Gathering Agreement among the Resource Entities and the MLP of
even date herewith.

"Other Delivery Point" means a delivery point other than the Gathering System.

"Partnership Agreement" means the First Amended and Restated Agreement of Limited Partnership of Atlas Pipeline Partners, L.P. of even
date herewith.

"Person" means an individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association
or other entity.

"Resource Entity Well" means any natural gas well both drilled and operated by a Resource Entity for itself or for an Affiliate.

"Third Party Gathering System" means a natural gas gathering system owned by a Person other than the MLP or a subsidiary of the MLP.

"Transfer" means a sale of all or substantially all of the assets of a Person, the disposition of more than 50% of the capital stock (or partnership
or membership interests) of a Person or a merger or consolidation that results in a Resource Entity's owning, directly or indirectly, less than
50% of a Person's capital stock (or partnership or membership interests), but shall exclude transfers or pledges of assets or capital stock (or
partnership or membership interests) of a Person to a financial institution or other lender in connection with a secured funding arrangement.

                                                                         2
                                     ARTICLE 2. CONNECTIONS TO RESOURCE ENTITY WELLS

2.1. Construction of Flow Lines from Connectable Wells. The Resource Entities jointly and severally agree that, at their sole cost and expense,
they will construct up to 2,500 feet of Flow Line from any Connectable Well to the Gathering System. Such Flow Lines shall be the property of
the owner of the relevant Resource Entity Well.

2.2. Drilling New Wells. On or before December 31, 2002, the Resource Entities agree to drill, on behalf of themselves or their Affiliates, in
the aggregate at least 225 Connectable Wells, which number shall include those Connectable Wells drilled by any Investment Program during
1999.

2.3. Construction of Flow Lines from Other Resource Entity Wells.

2.3.1. Resource Entities' Right to Require Extension of the Gathering System. With respect to Resource Entity Wells other than Connectable
Wells, if a Resource Entity constructs a Flow Line from any such Resource Entity Well to within 1,000 feet of the Gathering System (such
distance to be measured from the end of the related Flow Line from the Resource Entity Well to the nearest point of intersection with the
Gathering System), the Resource Entities shall be entitled to require the MLP, at the MLP's sole cost and expense, to extend the Gathering
System to meet such Flow Line. The Resource Entities shall give the MLP written notice of the intent to drill a Resource Entity Well subject to
this Section. Within 30 days of the date of the Resource Entities' notice, the MLP shall advise the Resource Entities whether it wishes to
exercise its rights under this Section. If the MLP exercises its rights under this Section, the Resource Entities shall complete construction of the
Gathering System extension within 60 days after the date designated by the Resource Entities as the date the Resource Entity Well will be
completed as a producing natural gas well.

2.3.2. MLP's Right to Extend the Gathering System. With respect to Resource Entity Wells other than Connectable Wells and those described
in Section 2.3.1, the MLP shall have the right, at its sole cost and expense, to extend the Gathering System to within 2,500 feet of any Resource
Entity Well and to require the Resource Entities to construct, at the Resource Entities' sole cost and expense, up to 2,500 feet of Flow Line
from the Resource Entity Well to the Gathering System extension (such distance to be measured from the end of the Flow Line from the
Resource Entity Well to the nearest point of intersection with the Gathering System). The Resource Entities shall give the MLP written notice
of the intent to drill a Resource Entity Well subject to this Section. Within 30 days of the date of the Resource Entities' notice, the MLP shall
advise the Resource Entities in writing whether the MLP wishes to exercise its rights under this Section. If the MLP exercises its rights under
this Section, it shall complete construction of the Gathering System extension within 60 days after the date designated by the Resource Entities
as the date the Resource Entity Well will be completed as a producing natural gas well.

                                                                         3
2.3.3. Connections with Other Delivery Points and Third Party Gathering Systems. In the event the MLP does not exercise its rights under
Section 2.3.2, the Resource Entities may:

(i) connect the Resource Entity Well to an Other Delivery Point, in which event the MLP shall be entitled to assume the costs of constructing
the connecting Flow Line. If the MLP elects to assume such costs, it shall pay such costs to the Resource Entities within 30 days of receipt of
Resource Entities' invoice therefor and the Flow Line shall be the property of the MLP and part of the Gathering System; or

(ii) connect the Resource Entity Well to a Third Party Gathering System, in which event the MLP shall be entitled to assume the costs of
constructing the connecting Flow Line. If the MLP elects to assume such costs, it shall pay such costs to the Resource Entities within 30 days
of receipt of the invoice therefor and the Flow Line shall be the property of the MLP and part of the Gathering System. In addition, the
Resource Entities shall pay to the MLP fees as required under Section 7.4 of the Master Natural Gas Gathering Agreement.

2.4. Well Connections. All well connections to Resource Entity Wells shall be at the direction of and in accordance with instructions and
requirements of the MLP consistent with other wells connected to the Gathering System. Any such well shall be required to adhere to all of the
operating, safety, pressure, and measurement provisions contained in the Master Natural Gas Gathering Agreement.

2.5. Consulting Services in Connection with Acquisitions. The Resource Entities agree to assist the MLP in seeking to identify for possible
acquisition Third Party Gathering Systems and to provide consulting services to MLP in evaluating and acquiring any such identified gathering
system. Further, the Resource Entities agree to give the MLP written notice of the identification by any of them of any Third Party Gathering
System for possible acquisition by such Resource Entity or any Affiliate (each, an "Identified Third Party Gathering System"). Such notice
shall identify the gathering system and its seller and the proposed sales price of the Identified Third Party Gathering System, and shall include
all written information about the Identified Third Party Gathering System provided to the Resource Entities by or on behalf of the seller as well
as any information or analyses compiled by the Resource Entities from other sources. Within 30 days of the date of the Resource Entities'
notice, the MLP shall advise the Resource Entities in writing whether MLP wishes to acquire the Identified Third Party Gathering System. If
the MLP advises the Resource Entities of its intent to acquire the Identified Third Party Gathering System, the Resource Entities shall refrain
from making an offer for the Identified Third Party Gathering System except as permitted hereunder. If the MLP (i) advises the Resource
Entities that it does not intend to acquire the Identified Third Party Gathering System, (ii) advises the Resource Entities of its intent to acquire
the Identified Third Party Gathering System but does not complete the acquisition within 60 days of the MLP's notice of its intent to the
Resource Entities or (iii) fails to timely advise the Resource Entities of its intent, any of the Resource Entities shall be free to acquire the
Identified Third Party Gathering System.

                                                                         4
                                      ARTICLE 3. CONSTRUCTION MANAGEMENT SERVICES

3.1. Services to be Provided. In the event the MLP expands the Gathering System or constructs a new addition to the Gathering System,
whether pursuant to Article 2 or otherwise, the Resource Entities agree to provide to the MLP construction management services in connection
with any such expansion as requested by the MLP. In providing construction management services hereunder, the Resource Entities shall
provide the services of a general contractor with respect to the applicable construction project.

3.2. Construction Contract. For each such construction project, the MLP and the relevant Resource Entity shall enter into a construction
contract based substantially on the most current versions of AIA Document A111 (Standard Form of Agreement Between Owner and
Contractor) and AIA Document A201 (General Conditions of the Contract for Construction), provided that the basis of payment shall be the
cost of the work (including an allocable portion of the Resource Entity's employee salaries and benefits) and the MLP shall not be required to
employ an architect. The Resource Entities shall not be entitled to any other compensation for the performance of construction management
services hereunder.

                                         ARTICLE 4. STAND-BY FINANCING COMMITMENT

4.1. Financing Commitment. For the period commencing on the date hereof and ending on the fifth anniversary hereof, Atlas America and
Resource Energy agree to provide to the MLP funding of up to an aggregate of One Million Five Hundred Thousand Dollars ($1,500,000) per
annum to finance the cost of expanding the Gathering System or constructing new additions to the Gathering System. Atlas America and
Resource Energy, jointly and severally, commit to provide such funding, upon the MLP's written request therefor, by purchasing Common
Units at a price equal to the arithmetic average of the closing prices of the Common Units on the American Stock Exchange, or, if the
American Stock Exchange is not the principal trading market for such security, on the principal trading market for such security, for the twenty
consecutive trading days ending on the trading day prior to the purchase, or, if the fair market value of the Common Units cannot be calculated
for such period on any of the foregoing bases, the average fair market value during such period as reasonably determined in good faith by the
members of the managing board of the General Partner.

4.2. Procedures. The MLP shall give Atlas America and Resource Energy written notice of its intent to exercise its rights under Section 4.1.
Thereafter, Common Units shall be issued to the appropriate Resource Entity, against delivery of the purchase price therefor in immediately
available funds, within five business days of the date of each construction invoice issued by the Resource Entity to the MLP pursuant to Article
3. Each Common Unit so issued shall, upon receipt of payment therefor and issuance, be duly authorized, validly issued and fully paid.

4.3. Prohibited Uses. The MLP agrees to use the funds it obtains pursuant to this Article 4 for the purposes of financing initial construction
costs only and further agrees that it will not request or use such funds for any other purpose, including capital improvements or maintenance to
existing pipeline.

                                                                        5
                                                  ARTICLE 5. THE GENERAL PARTNER

5.1. New Investment Programs. Until the earlier of the expiration of the Applicable Period or the closing of the Transfers described in the first
sentence of Section 5.2, the Resource Entities agree that they shall cause a Manager of one of the Investment Programs currently existing to be
designated as the Manager for Investment Programs organized after the date hereof and that the wells of Investment Programs organized after
the date hereof shall be deemed to be Future Investment Program Well Interests for the purposes of the Master Natural Gas Gathering
Agreement.

5.2. Disposition of Interest in the General Partner. The Resource Entities agree that they will not Transfer to any Person their ownership interest
in the General Partner unless they simultaneously (i) Transfer to the same Person their ownership interest in the Manager of each of the
Investment Programs and (ii) cause their Affiliates having an ownership interest in the General Partner or any Manager of an Investment
Program to Transfer such interest to the same Person. The provisions of this Section shall not apply to a Transfer to a wholly- or
majority-owned direct or indirect subsidiary or parent of any of the Resource Entities so long as the Resource Entities' or their parent continue
to control the relevant general partner.

                                                         ARTICLE 6. TERMINATION

This Agreement shall terminate, and no party shall have any further obligation hereunder, in the event that the General Partner is removed as
general partner of the MLP pursuant to Section 11.2 of the Partnership Agreement under circumstances where cause (as such term is defined in
Section 1.1 of the Partnership Agreement) for such removal does not exist and the General Partner does not consent to that removal.

                                                       ARTICLE 7. MISCELLANEOUS

7.1. Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and governed by the laws of the Commonwealth of
Pennsylvania, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws
of another state. Each party hereby submits to the jurisdiction of the state and federal courts in the Commonwealth of Pennsylvania and to
venue in, respectively, Philadelphia, Pennsylvania and the Eastern District of Pennsylvania.

7.2. Notice. All notices or requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the party to be notified, postpaid, and registered or certified with return receipt
requested or by delivering such notice in person or by telecopier to such party. Notice given by personal delivery or mail shall be effective
upon actual receipt. Notice given by telecopier shall be effective upon actual receipt if received during the recipient's normal business hours, or
at the beginning of the recipient's next business day after receipt if not received during the recipient?s normal business hours. All notices to be
sent to a party pursuant to this Agreement shall be sent to 311 Rouser Road, P.O. Box 611, Moon Township, PA 15108, Facsimile: (412)
262-2820, Attention: Tony C. Banks or at such other address as such party may stipulate to the other parties in the manner provided in this
Section.

7.3. Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the matters contained herein, superseding all
other contracts or agreements, whether oral or written, that are in conflict with the provisions hereof.

                                                                         6
7.4. Effect of Waiver or Consent. No waiver or consent, express or implied, by any party to or of any breach or default by any party in the
performance by such party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a party to
complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder until the applicable statute of limitations period has run.

7.5. Amendment or Modification. This Agreement may be amended or modified from time to time only by the written agreement of all the
parties hereto; provided, however, that the MLP may not, without the prior approval of the conflicts committee of the General Partner, agree to
any amendment or modification of this Agreement that, in the reasonable discretion of the General Partner, will adversely affect the Common
Unit holders.

7.6. Assignment. No party shall have the right to assign its rights or obligations under this Agreement without the consent of the other parties
hereto.

7.7. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the
same document. All counterparts shall be construed together and shall constitute one and the same instrument.

7.8. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable substitute provision to effect the original intent of the parties.

7.9. Further Assurances. In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto
agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

7.10. Third Party Beneficiaries. The provisions of this Agreement are enforceable solely by the parties to it, and no Common Unit holder or its
assignee or any other Person shall have the right, separate and apart from the MLP, to enforce any provision of this Agreement or to compel
any party to this Agreement to comply with its terms.

7.11. Headings. The headings throughout this Agreement are inserted for reference purposes only, and are not to be construed or taken into
account in interpreting the terms and provisions of any Article, nor to be deemed in any way to qualify, modify or explain the effects of any
such term or provision.

                                                                        7
IN WITNESS WHEREOF, the parties have executed this Agreement on, and effective as of, the date first written above.

                                                              THE MLP:

                                       ATLAS PIPELINE OPERATING PARTNERSHIP, L.P.

                                                   By: Atlas Pipeline Partners GP, LLC
                                                            Its general partner

                                                                  By:

Name:
Its:

                                                 ATLAS PIPELINE PARTNERS, L.P.

                                                   By: Atlas Pipeline Partners GP, LLC
                                                            Its general partner

                                                                  By:

Name:
Its:

                                                    THE RESOURCE ENTITIES:

                                                       ATLAS AMERICA, INC.

                                                                  By:

Name:
Its:

                                                     RESOURCE ENERGY, INC.

                                                                  By:

Name:
Its:

                                               VIKING RESOURCES CORPORATION

                                                                  By:

Name:
Its:
             CREDIT AGREEMENT

            Dated as of March 12, 2004

                      Among

             ATLAS AMERICA, INC.,
                 as Borrower

                 AIC, INC.
         ATLAS AMERICA, INC. (PA),
       ATLAS ENERGY CORPORATION,
        ATLAS ENERGY GROUP, INC.,
       ATLAS ENERGY HOLDINGS, INC.
           ATLAS NOBLE CORP.,
     ATLAS PIPELINE PARTNERS GP, LLC
          ATLAS RESOURCES INC.,
                REI-NY, INC.,
         RESOURCE AMERICA, INC.,
         RESOURCE ENERGY, INC.,
     VIKING RESOURCES CORPORATION
               as Guarantors

WACHOVIA BANK, NATIONAL ASSOCIATION,
   as Administrative Agent and Issuing Bank

          BANK OF OKLAHOMA, N.A.
                      And
     U.S. BANK, NATIONAL ASSOCIATION
           as Co-Documentation Agents

                        and

     THE LENDERS SIGNATORY HERETO

$75,000,000 Senior Secured Revolving Credit Facility

    WACHOVIA CAPITAL MARKETS, LLC
           as Lead Arranger
                                               TABLE OF CONTENTS

                                                                                                           Page
                                                                                                           ----
ARTICLE I Definitions and Accounting Matters.................................................................2
     Section 1.01     Terms Defined Above....................................................................2
     Section 1.02     Certain Defined Terms..................................................................2
     Section 1.03     Accounting Terms and Determinations...................................................15
ARTICLE II Commitments......................................................................................15
     Section   2.01   Loans and Letters of Credit...........................................................15
     Section   2.02   Borrowings, Continuations and Conversions, Letters of Credit..........................16
     Section   2.03   Changes of Commitments................................................................18
     Section   2.04   Fees..................................................................................18
     Section   2.05   Several Obligations...................................................................19
     Section   2.06   Notes.................................................................................19
     Section   2.07   Prepayments...........................................................................19
     Section   2.08   Borrowing Base........................................................................20
     Section   2.09   Assumption of Risks...................................................................21
     Section   2.10   Obligation to Reimburse and to Prepay.................................................22
     Section   2.11   Lending Offices.......................................................................23
ARTICLE III Payments of Principal and Interest..............................................................23
     Section 3.01     Repayment of Loans....................................................................23
     Section 3.02     Interest..............................................................................23
ARTICLE IV Payments; Pro Rata Treatment; Computations; Etc..................................................24
     Section   4.01   Payments..............................................................................24
     Section   4.02   Pro Rata Treatment....................................................................25
     Section   4.03   Computations..........................................................................25
     Section   4.04   Non-receipt of Funds by the Administrative Agent......................................25
     Section   4.05   Set-off, Sharing of Payments, Etc.....................................................25
     Section   4.06   Taxes.................................................................................26
ARTICLE V Capital Adequacy..................................................................................29
     Section   5.01   Additional Costs......................................................................29
     Section   5.02   Limitation on LIBOR Loans.............................................................30
     Section   5.03   Illegality............................................................................30
     Section   5.04   Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03..............................30
     Section   5.05   Compensation..........................................................................31
ARTICLE VI Conditions Precedent.............................................................................31
     Section 6.01     Initial Funding.......................................................................31
     Section 6.02     Initial and Subsequent Loans and Letters of Credit....................................33


                                                           i
                                               TABLE OF CONTENTS
                                                                                                           Page
                                                                                                           ----
     Section 6.03     Conditions Precedent for the Benefit of Lenders.......................................33
     Section 6.04     No Waiver.............................................................................33
ARTICLE VII Representations and Warranties..................................................................33
     Section   7.01   Corporate Existence...................................................................33
     Section   7.02   Financial Condition...................................................................34
     Section   7.03   Litigation............................................................................34
     Section   7.04   No Breach.............................................................................34
     Section   7.05   Authority.............................................................................34
     Section   7.06   Approvals.............................................................................34
     Section   7.07   Use of Loans..........................................................................35
     Section   7.08   ERISA.................................................................................35
     Section   7.09   Taxes.................................................................................36
     Section   7.10   Titles, etc...........................................................................36
     Section   7.11   No Material Misstatements.............................................................37
     Section   7.12   Investment Company Act................................................................37
     Section   7.13   Public Utility Holding Company Act....................................................37
     Section   7.14   Partnership Interests.................................................................37
     Section   7.15   Capitalization and Subsidiaries.......................................................37
     Section   7.16   Location of Business and Offices......................................................38
     Section   7.17   Defaults..............................................................................38
     Section   7.18   Environmental Matters.................................................................38
     Section   7.19   Compliance with the Law...............................................................39
     Section   7.20   Insurance.............................................................................40
     Section   7.21   Hedging Agreements....................................................................40
     Section   7.22   Restriction on Liens..................................................................40
     Section   7.23   Material Agreements...................................................................40
     Section   7.24   Gas Imbalances........................................................................41
     Section   7.25   Relationship of Obligors..............................................................41
ARTICLE VIII Affirmative Covenants..........................................................................41
     Section   8.01   Reporting Requirements................................................................41
     Section   8.02   Litigation............................................................................43
     Section   8.03   Maintenance, Etc......................................................................43
     Section   8.04   Environmental Matters.................................................................44
     Section   8.05   Further Assurances....................................................................44
     Section   8.06   Performance of Obligations............................................................45
     Section   8.07   Engineering Reports...................................................................45
     Section   8.08   Title Curative........................................................................46
     Section   8.09   Additional Collateral.................................................................46
     Section   8.10   Corporate Identity....................................................................48
     Section   8.11   ERISA Information and Compliance......................................................49
     Section   8.12   Parent and Atlas Holdings Guarantees..................................................49
ARTICLE IX Negative Covenants...............................................................................49
     Section 9.01     Debt..................................................................................49
     Section 9.02     Hedging Agreements....................................................................50


                                                          ii
                                                TABLE OF CONTENTS
                                                                                                            Page
                                                                                                            ----
     Section   9.03    Liens.................................................................................51
     Section   9.04    Investments, Loans and Advances.......................................................51
     Section   9.05    Dividends, Distributions and Redemptions..............................................52
     Section   9.06    Sales and Leasebacks..................................................................52
     Section   9.07    Nature of Business....................................................................52
     Section   9.08    Limitation on Leases..................................................................52
     Section   9.09    Mergers, Etc..........................................................................52
     Section   9.10    Proceeds of Notes and Letters of Credit...............................................53
     Section   9.11    ERISA Compliance......................................................................53
     Section   9.12    Sale or Discount of Receivables.......................................................54
     Section   9.13    Current Ratio.........................................................................54
     Section   9.14    Funded Debt to EBITDA.................................................................54
     Section   9.15    Tangible Net Worth....................................................................54
     Section   9.16    Parent's Consolidated Interest Coverage Ratio.........................................55
     Section   9.17    Payment on Intercompany Debt to Parent................................................55
     Section   9.18    Sale of Oil and Gas Properties and APL Intersets......................................55
     Section   9.19    Environmental Matters.................................................................55
     Section   9.20    Transactions with Affiliates..........................................................55
     Section   9.21    Subsidiaries..........................................................................56
     Section   9.22    Negative Pledge Agreements............................................................56
     Section   9.23    Gas Imbalances, Take-or-Pay or Other Prepayments......................................56
     Section   9.24    Accounting Changes....................................................................56
ARTICLE X Events of Default; Remedies.......................................................................56
     Section 10.01     Events of Default.....................................................................56
     Section 10.02     Remedies..............................................................................58
     Section 10.03     Present Assignment of Interests.......................................................58
ARTICLE XI The Administrative Agent.........................................................................59
     Section   11.01   Appointment, Powers and Immunities....................................................59
     Section   11.02   Reliance by Administrative Agent......................................................60
     Section   11.03   Defaults..............................................................................60
     Section   11.04   Rights as a Lender....................................................................60
     Section   11.05   Indemnification.......................................................................60
     Section   11.06   Non-Reliance on Administrative Agent and other Lenders................................61
     Section   11.07   Action by Administrative Agent........................................................61
     Section   11.08   Resignation or Removal of Administrative Agent........................................61
ARTICLE XII Miscellaneous...................................................................................62
     Section   12.01   Waiver................................................................................62
     Section   12.02   Notices...............................................................................62
     Section   12.03   Payment of Expenses, Indemnities, etc.................................................62
     Section   12.04   Amendments, Etc. Release of Parent and Atlas Holdings Guarantees......................64
     Section   12.05   Successors and Assigns................................................................64
     Section   12.06   Assignments and Participations........................................................64
     Section   12.07   Invalidity............................................................................66
     Section   12.08   Counterparts..........................................................................66


                                                           iii
                                                TABLE OF CONTENTS
                                                                                                            Page
                                                                                                            ----
     Section   12.09   References, Use of Word "Including"...................................................66
     Section   12.10   Survival..............................................................................66
     Section   12.11   Captions..............................................................................66
     Section   12.12   NO ORAL AGREEMENTS....................................................................66
     Section   12.13   GOVERNING LAW, SUBMISSION TO JURISDICTION.............................................66
     Section   12.14   Interest..............................................................................68
     Section   12.15   Confidentiality.......................................................................68
     Section   12.16   USA Patriot Act Notice................................................................69
Annex I                List of Percentage Shares, Maximum Revolving Credit Amounts
EXHIBITS
Exhibit    A           Form of Note
Exhibit    B           Form of Borrowing, Continuation and Conversion Request
Exhibit    C           Form of Compliance Certificate
Exhibit    D           Security Instruments
Exhibit    E           Form of Assignment Agreement
Exhibit    F           Form of Letter in Lieu

SCHEDULES
Schedule   2.01(b)     Existing Letters of Credit
Schedule   7.03        Litigation
Schedule   7.10        Ownership Report
Schedule   7.14        Partnership Interests
Schedule   7.15        Subsidiary Interests
Schedule   7.20        Insurance
Schedule   7.21        Hedging Agreements
Schedule   7.23        Material Agreements
Schedule   7.24        Gas Imbalance Status for Obligors and Subsidiaries
Schedule   9.01        Debt


                                                           iv
                                                           CREDIT AGREEMENT

THIS CREDIT AGREEMENT dated as of March 12, 2004, among ATLAS AMERICA, INC., a Delaware corporation (the "Borrower"); AIC,
INC., a Delaware corporation ("AIC"); ATLAS AMERICA, INC., a Pennsylvania corporation ("Atlas PA"); ATLAS ENERGY
CORPORATION, an Ohio corporation ("AEC"), ATLAS ENERGY GROUP, INC., an Ohio corporation ("Atlas Energy"); ATLAS ENERGY
HOLDINGS, INC., a Delaware corporation ("Atlas Holdings"), ATLAS NOBLE CORP., a Delaware corporation ("Atlas Noble"); ATLAS
PIPELINE PARTNERS GP, LLC, a Delaware limited liability company, ("Atlas Pipeline"), ATLAS RESOURCES, INC., a Pennsylvania
corporation ("Atlas Resources"); REI-NY, INC., a Delaware corporation ("REI"); RESOURCE AMERICA, INC., a Delaware corporation
("Parent"); RESOURCE ENERGY, INC., a Delaware corporation ("Resource Energy"); and VIKING RESOURCES CORPORATION, a
Pennsylvania corporation ("Viking"), (AEC, AIC, Atlas Energy, Atlas Holdings, Atlas Noble, Atlas Pipeline, Atlas PA, Atlas Resources,
Parent, REI, Resource Energy, and Viking collectively, the "Guarantors"; the Borrower and the Guarantors collectively, the "Obligors"); each
of the lenders that is a signatory hereto or which becomes a signatory hereto as provided in Section
12.06 (individually, together with its successors and assigns, a "Lender" and, collectively, the "Lenders"); WACHOVIA BANK, NATIONAL
ASSOCIATION, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity the "Administrative
Agent"), BANK OF OKLAHOMA, N.A. and U.S. BANK, NATIONAL ASSOCIATION as co-documentation agents (in such capacity,
together with its successors in such capacity, the "Co-Documentation Agents"), and WACHOVIA BANK, NATIONAL ASSOCIATION, as
issuing bank (in such capacity, together with its successors in such capacity, the "Issuing Bank").

                                                                RECITALS

A. WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent, issuing bank and a lender, the Obligors (except for Atlas
Pipeline) and the lenders thereto a party (the "Prior Lenders") are parties to that certain Credit Agreement dated as of July 31, 2002, as
amended (the "Prior Credit Agreement"), pursuant to which the Prior Lenders agreed to make loans to and extensions of credit to the Borrower,
as evidenced by promissory notes (the "Prior Notes") of the Borrower in favor of the Prior Lenders issued pursuant to the Prior Credit
Agreement, which notes and other indebtedness, obligations and liabilities under the Prior Credit Agreement (the "Prior Debt") were secured
by liens and security interests (the "Existing Liens") granted by Borrower and certain Guarantors and guaranteed by certain of the Guarantors.

B. The Obligors, the Prior Lenders and the Administrative Agent have executed that certain Assignment of Notes, Documents and Liens dated
as of even date herewith ("Assignment of Notes, Documents and Liens"), pursuant to which, with the consent of the Obligors, Administrative
Agent, as agent for the Prior Lenders, and the Prior Lenders have assigned to the Lenders all of their rights, titles and interests in and to the
Prior Credit Agreement, the Prior Notes, the Existing Liens and certain other loan documents, and assigned to the Administrative Agent for the
benefit of the Lenders such security documents and the liens and security interests securing the Prior Debt.

C. The Borrower has requested that the Administrative Agent and the Lenders amend, extend and rearrange all of the Prior Debt as secured by
the Existing Liens, restate the Prior Credit Agreement and provide certain loans to and extensions of credit on behalf of the Borrower.

D. The Administrative Agent, Co-Documentation Agents, and the Lenders have agreed to amend, extend and rearrange the Prior Debt as
secured by the Existing Liens, restate the Prior Credit Agreement and to make such loans and extensions of credit subject to the terms and
conditions of this Agreement.
E. Each of the Borrower, Guarantors, the Lenders and Administrative Agent intend that loans and letters of credit outstanding under the Prior
Credit Agreement, shall, on the Closing Date, be amended, restated and converted into Loans and Letters of Credit under this Agreement (but
shall not be deemed to be repaid or terminated), all Existing Liens securing the Prior Debt of the Borrower pursuant to the Prior Credit
Agreement shall be continued and renewed and shall remain in full force and effect as security for the payment of all Indebtedness of the
Borrower under this Agreement, and the Prior Credit Agreement shall be amended and restated in its entirety in the form of this Agreement.

NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained and of the loans, extensions of
credit and commitments hereinafter referred to, the parties hereto agree to amend and restate the Prior Credit Agreement as follows:

                                                                   ARTICLE I
                                                       Definitions and Accounting Matters

Section 1.01 Terms Defined Above. As used in this Agreement, the terms "Administrative Agent," "AEC," "AIC," "Assignment of Notes,
Documents and Liens," "Atlas Energy," "Atlas Holdings," "Atlas Noble," "Atlas PA," "Atlas Pipeline," "Atlas Resources," "Borrower,"
"Guarantors," "Issuing Bank," "Lender," "Lenders," "Obligors," "Parent," "PNC," "Prior Credit Agreement," "Prior Debt," "Prior Lenders,"
"REI," "Resource Energy," "Co-Documentation Agent," and "Viking" shall have the meanings indicated above.

Section 1.02 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I
or in other provisions of this Agreement in the singular to have equivalent meanings when used in the plural and vice versa):

Additional Costs shall have the meaning assigned such term in Section 5.01(a).

Adjusted LIBOR shall mean, with respect to any LIBOR Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Administrative Agent to be equal to the quotient of (i) LIBOR for such Loan for the Interest Period for such Loan divided by
(ii) 1 minus the Reserve Requirement for such Loan for such Interest Period.

Affected Loans shall have the meaning assigned such term in Section 5.04.

Affiliate of any Person shall mean (i) any Person directly or indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person referred to in clause (i) above and (iii) if any Person in clause (i) above
is an individual, any member of the immediate family (including parents, spouse and children) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or
trust. For purposes of this definition, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power
for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be deemed to "control" (including, with its correlative meanings,
"controlled by" and "under common control with") such corporation or other Person.

Agreement shall mean this Credit Agreement, as the same may from time to time be further amended or supplemented.

                                                                          2
Aggregate Maximum Revolving Credit Amounts at any time shall equal the sum of the Maximum Revolving Credit Amounts of the Lenders
($75,000,000), as the same may be reduced pursuant to Section 2.03(b).

Aggregate Revolving Credit Commitments at any time shall equal the amount calculated in accordance with Section 2.03.

Applicable Lending Office shall mean, for each Lender and for each Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such other offices of such Lender (or of an Affiliate of such Lender)
as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are
to be made and maintained.

Applicable Margin shall mean the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on
the Borrowing Base Utilization as in effect from time to time:
               ---------------------------------------------------------------------------------------------
                      Borrowing Base Utilization                         Applicable Margin
               ---------------------------------------------------------------------------------------------
                                                               LIBOR Loans             Base Rate Loans
               ---------------------------------------------------------------------------------------------
               Less than or equal to 50%                          1.75%                     0.25%
               ---------------------------------------------------------------------------------------------
               Greater than 50%,                                  2.00%                     0.50%
               but less than or equal to 75%
               ---------------------------------------------------------------------------------------------
               Greater than 75%                                   2.25%                     0.75%
               ---------------------------------------------------------------------------------------------



Each change in the Applicable Margin resulting from a change in the Borrowing Base Utilization shall take effect on the day such change in the
Borrowing Base Utilization occurs.

Assignment shall have the meaning assigned such term in Section 12.06(b).

APL shall mean Atlas Pipeline Partners, L.P., a Delaware limited partnership.

APL Collateral Value shall mean the collateral value attributable to the APL units pledged by Obligors as determined by the Lenders in
accordance with the procedures set forth under Section 2.08.

APL Units shall mean common and subordinated equity units issued by APL to Obligors.

Atlas Pipeline shall mean Atlas Pipeline Partners, GP, LLC, a Delaware limited liability company.

Base Rate shall mean, with respect to any Base Rate Loan, for any day, a rate per annum equal to the higher of (i) the Federal Funds Rate for
any such day plus 1/2 of 1% or (ii) the Prime Rate for such day. Each change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate.

Base Rate Loans shall mean Loans that bear interest at rates based upon the Base Rate.

Borrowing Base shall mean at any time an amount equal to the amount determined in accordance with Section 2.08.

Borrowing Base Deficiency shall mean, and occur at any time when, the amount by which the aggregate outstanding principal amount of the
Loans plus the LC Exposure exceeds the Borrowing Base, whether as the result of a redetermination, a scheduled reduction, or otherwise.

                                                                       3
Borrowing Base Period shall mean the period from the Closing Date until August 1, 2004, and each six-month period commencing August 1,
2004, and each February 1 and August 1 thereafter.

Borrowing Base Utilization shall mean at any time, an amount equal to the quotient of (i) the aggregate principal amount of Loans outstanding
plus LC Exposure, divided by (ii) the Borrowing Base.

Business Day shall mean any day other than a day on which commercial banks are authorized or required to close in Texas or North Carolina
and, where such term is used in the definition of "Quarterly Date" or if such day relates to a borrowing or continuation of, a payment or
prepayment of principal of or interest on, or a conversion of or into, or the Interest Period for, a LIBOR Loan or a notice by the Borrower with
respect to any such borrowing or continuation, payment, prepayment, conversion or Interest Period, any day which is also a day on which
dealings in Dollar deposits are carried out in the London interbank market.

Change of Control means the occurrence of any of the following events:
(a) any Person or two or more Persons, other than the Parent and its Subsidiaries, acting as a group shall acquire beneficial ownership (within
the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act, and including holding proxies to vote for the
election of directors other than proxies held by the Borrower's management or their designees to be voted in favor of persons nominated by the
Borrower's Board of Directors) of 35% or more of the outstanding voting securities of the Borrower, measured by voting power (including both
ordinary shares and any preferred stock or other equity securities entitling the holders thereof to vote with the holders of common stock in
elections for directors of the Borrower), (b) the Borrower shall fail beneficially to own, directly or indirectly, 85% of the outstanding shares of
voting capital stock of AIC, Atlas Energy, AEC, Atlas Noble, Atlas PA, Atlas Resources, REI, Resource Energy, or Viking and any other
Wholly Owned Subsidiary now or hereafter existing, (c) the Borrower shall fail beneficially to own, directly or indirectly, 51% of the
membership interests of Atlas Pipeline, or (d) the first day on which a majority of the Board of Directors of either the Borrower or Parent are
not Continuing Directors.

Closing Date shall mean the date upon which the conditions precedent for initial funding set forth in Section 6.01 are satisfied.

Code shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute.

                                Commitment shall mean for any Lender, its Revolving Credit Commitment.

Consolidated Interest Coverage Ratio shall mean the ratio of (i) EBITDA for such Person and its Consolidated Subsidiaries on a consolidated
basis for the fiscal quarter ending on such date to (ii) cash interest payments made for such Person and its Consolidated Subsidiaries on a
consolidated basis for such fiscal quarter.

Consolidated Net Income shall mean with respect to such Person and its Consolidated Subsidiaries, for any period, the aggregate of the net
income (or loss) of such Person and its Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following:
(i) the net income of any other entity in which such Person or any Consolidated Subsidiary has an interest (which interest does not cause the net
income of such other entity to be consolidated with the net income of such Person and its Consolidated Subsidiaries in accordance with
GAAP), except to the extent of the amount of dividends or distributions actually paid in such period by such other entity to such Person or to a
Consolidated Subsidiary, as the case may be; (ii) the net

                                                                         4
income (but not loss) of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement,
instrument or Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any entity acquired in a pooling-of-interests transaction for any period
prior to the date of such transaction; (iv) any gains or losses attributable to discontinued operations, in an aggregate amount not to exceed
$5,000,000 or to Property sales not in the ordinary course of business, and (v) the cumulative effect of a change in accounting principles and
any gains or losses attributable to writeups or write downs of assets.

Consolidated Subsidiaries shall mean each Subsidiary of a Person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the financial statements of such Person in accordance with GAAP.

Consolidated Tangible Net Worth shall mean with respect to a Person at any time, (i) the consolidated assets of such Person and its
Consolidated Subsidiaries including all items which should be classified as assets on the consolidated financial statements of such Person and
its Consolidated Subsidiaries, but excluding the amount of goodwill, patents, trademarks, service marks, tradenames, copyright and
organization expenses (to the extent reflected in determining consolidated assets of such Person and its Consolidated Subsidiaries) less (ii) all
items which should be classified as liabilities on the consolidated financial statements of such Person and its Consolidated Subsidiaries.

Continuing Directors means any member of the Board of Directors of the Borrower who (x) is a member of such Board of Directors as of the
date of this Agreement or (y) was nominated for election or elected to such Board of Directors with the affirmative vote of two-thirds of the
Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

Cumulative Net Income Amount shall mean, as of the date of determination, an amount equal to the sum of (a) 50% of the Borrower's
cumulative Consolidated Net Income during the period from January 1, 2004, to, and including, the date of determination and (b) $5,000,000.

Debt shall mean, for any Person the sum of the following (without duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments (including principal, interest, fees and charges); (ii) all obligations of such
Person (whether contingent or otherwise) in respect of bankers' acceptances, letters of credit, surety or other bonds and similar instruments; (iii)
all obligations of such Person to pay the deferred purchase price of Property or services (other than for borrowed money); (iv) all obligations
under leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases in respect of which such Person
is liable (whether contingent or otherwise); (v) all obligations under operating leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination, based on the purchase price or appraisal value of the Property subject
to such lease plus a marginal interest rate, and used primarily as a financing vehicle for, or to monetize, such Property; (vi) all Debt (as
described in the other clauses of this definition) and other obligations of others secured by a Lien on any asset of such Person, whether or not
such Debt is assumed by such Person;
(vii) all Debt (as described in the other clauses of this definition) and other obligations of others guaranteed by such Person or in which such
Person otherwise assures a creditor against loss of the debtor or obligations of others; (viii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (ix) obligations to
deliver goods or services including Hydrocarbons in consideration of advance payments; (x) obligations to pay for goods or services whether or
not such goods or services are actually received or utilized by such Person; (xi) any capital stock of such Person in which such Person has a
mandatory obligation to redeem such stock;

                                                                         5
(xii) any Debt of a Subsidiary for which such Person is liable either by agreement or because of a Governmental Requirement; (xiii) the
undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received
payment; and (xiv) all obligations of such Person under Hedging Agreements.

Default shall mean an Event of Default or an event which with notice or lapse of applicable grace period or both would become an Event of
Default.

Dollars and $ shall mean lawful money of the United States of America.

EBITDA shall mean, for any period, the sum of Consolidated Net Income for such period plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, income taxes, depreciation, depletion and amortization.

Engineering Reports shall have the meaning assigned such term in
Section 2.08.

Environmental Laws shall mean any and all Governmental Requirements pertaining to health or the environment in effect in any and all
jurisdictions in which any Obligor or any Subsidiary is conducting or at any time has conducted business, or where any Property of any Obligor
or any Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation
or protection laws. The term "oil" shall have the meaning specified in OPA, the terms "hazardous substance" and "release" or "threatened
release" have the meanings specified in CERCLA, and the terms "solid waste" and "disposal" or "disposed" have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (ii) to the extent the laws of the state in
which any Property of any Obligor or any Subsidiary is located establish a meaning for "oil," "hazardous substance," "release," "solid waste" or
"disposal" which is broader than that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply.

ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute.

ERISA Affiliate shall mean each trade or business (whether or not incorporated) which together with the Borrower or any Subsidiary would be
deemed to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the
Code.

ERISA Event shall mean (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder, (ii) the
withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or
condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer,
any Plan.

Event of Default shall have the meaning assigned such term in Section 10.01.

                                                                       6
Excepted Liens shall mean: (i) Liens for taxes, assessments or other governmental charges or levies not yet due or which are being contested in
good faith by appropriate action and for which adequate reserves have been maintained; (ii) Liens in connection with worker's compensation,
unemployment insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in
good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (iii) operators' Liens in
favor of Persons other than Obligors, Subsidiaries and their Affiliates, vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties or statutory landlord's liens, each of which is in respect of obligations that
have not been outstanding more than 90 days or which are being contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved in leases by lessors or farmout agreements by farmors for
royalties and for compliance with the terms of the farmout agreements or leases in the case of leasehold estates, to the extent that any such Lien
referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is
held by any Obligor or any Subsidiary or materially impair the value of such Property subject thereto; (v) encumbrances (other than to secure
the payment of borrowed money or the deferred purchase price of Property or services), easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any rights of way or other Property of any Obligor or any Subsidiary for the purpose of roads,
pipelines, transmission lines, transportation lines, distribution lines for the transportation of gas, oil, or timber, and other like purposes, or for
the joint or common use of real estate, rights of way, facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in
title of any rights of way or other Property which in the aggregate do not materially impair the use of such rights of way or other Property for
the purposes of which such rights of way and other Property are held by any Obligor or any Subsidiary or materially impair the value of such
Property subject thereto; (vi) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and
other obligations of a like nature incurred in the ordinary course of business; (vii) the Existing Liens and (viii) Liens permitted by the Security
Instruments.

Existing Letters of Credit shall mean the issued and outstanding letters of credit issued under the Existing Credit Agreement more particularly
described on Schedule 2.01(b) attached hereto, which Existing Letters of Credit shall be deemed Letters of Credit hereunder.

Federal Funds Rate shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a member of the Federal Reserve System arranged by federal funds
brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such- day, provided that (i)
if the date for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published
for any day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent on such day on such
transactions as determined by the Administrative Agent.

Fee Letter shall mean that certain letter agreement from Wachovia Bank, National Association and Wachovia Capital Markets, LLC to the
Borrower dated January 27, 2004, concerning certain fees in connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.

Financial Statements shall mean the financial statement or statements of the Borrower and its Consolidated Subsidiaries described or referred to
in
Section 7.02.

                                                                          7
Funded Debt shall mean, for any Person the sum of the following (without duplication): (i) all obligations of such Person for borrowed money
or evidenced by bonds, debentures, notes or other similar instruments (including principal, interest, fees and charges); (ii) all obligations of
such Person (whether contingent or otherwise) in respect of bankers' acceptances, letters of credit, surety or other bonds and similar
instruments; (iii) all obligations of such Person to pay the deferred purchase price of Property or services (other than for borrowed money); (iv)
all obligations under leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases in respect of
which such Person is liable (whether contingent or otherwise); (v) obligations to pay for goods or services whether or not such goods or
services are actually received or utilized by such Person; (vi) any capital stock of such Person in which such Person has a mandatory obligation
to redeem such stock;
(vii) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly
received payment; and (viii) all obligations of such Person under Hedging Agreements.

GAAP shall mean generally accepted accounting principles in the United States of America in effect from time to time.

Governmental Authority shall include the country, the state, county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person or such Person's Property, and any court, agency, department,
commission, board, bureau or instrumentality of any of them including monetary authorities which exercises valid jurisdiction over any such
Person or such Person's Property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental
Authority having jurisdiction over, where applicable, any Obligor, their Subsidiaries or any of their Property or the Administrative Agent, any
Lender or any Applicable Lending Office.

Governmental Requirement shall mean any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or requirement (whether or not having the force of law), including,
without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental
Authority.

Guarantor shall mean each of the parties named as "Guarantors" in the opening paragraph of this Agreement and each of the parties that from
time to time become a party to a Guaranty Agreement pursuant to the terms of this Agreement provided that at such time that Parent ceases
beneficially to own, directly or indirectly, 80% or more of the outstanding shares of voting capital stock of the Borrower, Parent shall cease to
be a Guarantor and at such time that Atlas Holdings is liquidated and dissolved as permitted under Section 9.09, Atlas Holdings shall cease to
be a Guarantor.

Guarantor Subsidiary shall mean each Subsidiary of Borrower (whether now existing or hereafter created or acquired) who is (or should have
been) a Guarantor.

Guaranty Agreement shall mean an agreement executed by a Guarantor in form and substance satisfactory to the Administrative Agent
guarantying, unconditionally, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

Hedging Agreements shall mean any commodity, interest rate or currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.

Highest Lawful Rate means, as of a particular date, the highest non-usurious rate of interest, if any, permitted from day to day by applicable
law. To the extent Texas law is applicable, the Lenders hereby notify and

                                                                        8
disclose to the Borrower that, for purposes of Texas Finance Code ss.303.001, as it may from time to time be amended, the "applicable ceiling"
shall be the "weekly ceiling" from time to time in effect as limited by Texas Finance Code ss.303.009; provided, however, that to the extent
permitted by applicable law, the Lender reserves the right to change the "applicable ceiling" from time to time by further notice and disclosure
to the Borrower.

Hydrocarbon Interests shall mean all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests
and production payment interests, including any reserved or residual interests of whatever nature.

Hydrocarbons shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.

Indebtedness shall mean any and all amounts owing or to be owing by the Borrower or any Obligor to the Administrative Agent, the Issuing
Bank and/or the Lenders or any Affiliates of Lenders in connection with the Loan Documents, any Letter of Credit Agreements, any Hedging
Agreements now or hereafter arising between the Borrower or any Obligor and the Administrative Agent, the Issuing Bank, any Lender or its
Affiliate and permitted by the terms of this Agreement, and all renewals, extensions and/or rearrangements of any of the foregoing.

Indemnified Parties shall have the meaning assigned such term in
Section 12.03(a)(ii).

Indemnity Matters shall mean any and all actions, suits, proceedings (including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature whatsoever incurred by such Person whether caused by the sole
or concurrent negligence of such Person seeking indemnification.

Initial Borrowing Base shall have the meaning assigned such term in
Section 2.08(a).

Initial Funding shall mean the funding of the initial Loans or issuance of the initial Letters of Credit upon satisfaction of the conditions set forth
in Sections 6.01 and 6.02.

Initial Reserve Report shall mean collectively the reports, copies of which have been delivered to the Administrative Agent, dated as of
October 1, 2003, prepared by Wright & Company, Inc.

Intercompany Debt shall mean Funded Debt that is owed by a Wholly Owned Subsidiary to the Borrower or any other Obligor or by the
Borrower or other Obligor to another Obligor, the Borrower or a Wholly Owned Subsidiary.

Intercompany Notes shall mean the promissory notes executed to evidence the Intercompany Debt.

Interest Period shall mean, with respect to any LIBOR Loan, the period commencing on the date such LIBOR Loan is made and ending on the
numerically corresponding day in the first, second, or third calendar month thereafter, as the Borrower may select as provided in Section 2.02,
except that each Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (i) no Interest Period may end after the Revolving Credit Termination Date; (ii) no Interest
Period for any LIBOR Loan may end after the due date of any installment, if any, provided for in Section 3.01 to the extent that such LIBOR
Loan would need to be prepaid

                                                                          9
prior to the end of such Interest Period in order for such installment to be paid when due; (iii) each Interest Period which would otherwise end
on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iv) no Interest Period shall have a duration of less than one month and,
if the Interest Period for any LIBOR Loans would otherwise be for a shorter period, such Loans shall not be available hereunder.

Issuing Bank shall have the meaning assigned to such term in the introductory paragraph to this Agreement, or any other Lender agreed to
between the Borrower and the Administrative Agent to issue Letters of Credit.

LC Commitment at any time shall mean $10,000,000.

LC Exposure at any time shall mean the difference between (i) the aggregate face amount of all undrawn and uncancelled Letters of Credit plus
(ii) the aggregate of all amounts drawn under all Letters of Credit and not yet reimbursed.

Letter of Credit Agreements shall mean the written agreements with the Issuing Bank, as issuing lender for any Letter of Credit, executed in
connection with the issuance by the Issuing Bank of the Letters of Credit, such agreements to be on the Issuing Bank's customary form for
letters of credit of comparable amount and purpose as from time to time in effect or as otherwise agreed to by the Borrower and the Issuing
Bank.

Letters of Credit shall mean the stand-by letters of credit issued pursuant to Section 2.01(b) and all reimbursement obligations pertaining to any
such letters of credit, and "Letter of Credit" shall mean any one of the Letters of Credit and the reimbursement obligations pertaining thereto.

LIBOR shall mean the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) of interest determined on the basis of the
rate for deposits in Dollars for a period equal to the applicable Interest Period commencing on the first day of such Interest Period appearing on
Dow Jones Market Service Page 3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest
Period. In the event that such rate does not appear on Dow Jones Market Service Page 3750, "LIBOR" shall be determined by the
Administrative Agent to be the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits in Dollars are
offered by leading reference banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially
equal to the amount of the applicable Loan.

LIBOR Loans shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Adjusted
LIBOR".

Lien shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not
limited to (i) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes or (ii) production payments and the like payable out of Oil and Gas Properties. The term
"Lien" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purposes of this Agreement, each Obligor or any Subsidiary shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a
financing.

                                                                         10
Loan Documents shall mean this Agreement, the Notes, all Letters of Credit, all Letter of Credit Agreements, the Fee Letter, the Security
Instruments, the Guaranty Agreements and the Assignment of Notes, Documents and Liens.

Loans shall mean the loans as provided for by Section 2.01(a) or any Continuations or Conversions thereof.

Majority Lenders shall mean, at any time while no Loans are outstanding, Lenders having at least sixty-seven percent (67%) of the Aggregate
Revolving Credit Commitments and, at any time while Loans are outstanding, Lenders holding at least sixty-seven percent (67%) of the
outstanding aggregate principal amount of the Loans (without regard to any sale by a Lender of a participation in any Loan under Section
12.06(c)).

Material Adverse Effect shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations or affairs of the Borrower and the Guarantors taken as a whole, or (ii) the
ability of the Borrower or any Guarantor to carry out its business as at the Closing Date (excluding the dissolution or liquidation of any
Guarantor pursuant to a merger to the extent permitted under Section 9.09) or meet its obligations under the Loan Documents on a timely basis,
or (iii) the Administrative Agent's and the Lenders' interests in the collateral securing the Indebtedness, or the Administrative Agents' or the
Lenders' ability to enforce their rights and remedies under this Agreement or any other Loan Document, at law or in equity.

Material Agreements shall have the meaning assigned to such term in
Section 7.23.

Maximum Revolving Credit Amount shall mean, as to each Lender, the amount set forth opposite such Lender's name on Annex I under the
caption "Maximum Revolving Credit Amounts" (as the same may be reduced pursuant to
Section 2.03(b) pro rata to each Lender based on its Percentage Share), as modified from time to time to reflect any assignments permitted by
Section 12.06(b).

Mortgaged Property shall mean the Property owned by the Obligors and which is subject to the Liens existing and to exist under the terms of
the Security Instruments.

Multiemployer Plan shall mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA.

Notes shall mean the Notes provided for by Section 2.06, together with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof.

Oil and Gas Properties shall mean Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; all operating agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; all Hydrocarbons in
and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered
thereby and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all
tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests; and all Properties, rights, titles,

                                                                        11
interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and
situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or
Property (excluding drilling rigs, automotive equipment or other personal property which may be on such premises for the purpose of drilling a
well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing.

Oil and Gas Properties Collateral Value shall mean the collateral value of the Oil and Gas Properties as determined by the Lenders in
accordance with the procedures set forth under Section 2.08.

Other Taxes shall have the meaning assigned such term in Section 4.06(b).

Ownership Report shall mean a report prepared by the Borrower on a well by well basis reflecting the working and net revenue interests for
each Obligor, and the gross working interest and gross revenue interests for each Partnership and such other information reasonably requested
by Lender in form attached hereto as Schedule 7.10.

Partnerships shall mean such partnerships listed on Schedule 7.14 and such other partnerships which are principally engaged in the acquisition
and development of Oil and Gas Properties as may be wholly or partially owned directly or indirectly by any Obligor from time to time
hereafter other than APL.

PBGC shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions.

Percentage Share shall mean the percentage of the Aggregate Revolving Credit Commitment to be provided by a Lender under this Agreement
as indicated on Annex I hereto, as modified from time to time to reflect any assignments permitted by Section 12.06(b).

Permitted Merger shall mean such merger or consolidation as is permitted under Section 9.09.

Person shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

Plan shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or contributed to by the Borrower, any Subsidiary or an
ERISA Affiliate or (ii) was at any time during the preceding six calendar years sponsored, maintained or contributed to, by the Borrower, any
Subsidiary or an ERISA Affiliate.

Post-Default Rate shall mean, in respect of any principal of any Loan or any other amount payable by the Borrower under this Agreement or
any other Loan Document, a rate per annum equal to two percent (2%) per annum above the Base Rate as in effect from time to time plus the
Applicable Margin (if any), but in no event to exceed the Highest Lawful Rate.

                                                                         12
Prime Rate shall mean the rate of interest from time to time announced publicly by the Administrative Agent as its prime commercial lending
rate. Such rate is set by the Administrative Agent as a general reference rate of interest, taking into account such factors as the Administrative
Agent may deem appropriate, it being understood that many of the Administrative Agent's commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that the Administrative Agent may make various
commercial or other loans at rates of interest having no relationship to such rate.

Principal Office shall mean the principal office of the Administrative Agent, presently located at 1001 Fannin, Suite 2255, Houston, Texas
77002-6709.

Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, moveable or immoveable, tangible or
intangible.

Quarterly Dates shall mean the first day of each January, April, July, and October in each year, the first of which shall be April 1, 2004;
provided, however, that if any such day is not a Business Day, such Quarterly Date shall be the next succeeding Business Day.

Redetermination Date shall mean the date that the redetermined Borrowing Base becomes effective subject to the notice requirements specified
in
Section 2.08(b) both for scheduled redeterminations and unscheduled redeterminations.

Regulation D shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be
amended or supplemented from time to time.

Regulatory Change shall mean, with respect to any Lender, any change after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders (including
such Lender or its Applicable Lending Office) of or under any Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration thereof.

Required Payment shall have the meaning assigned such term in Section 4.04.

Reserve Report shall mean a report, in form and substance satisfactory to the Administrative Agent, setting forth, as of each October 1 or April
1, immediately prior to the commencement of each Borrowing Base Period, as applicable (or such other date in the event of an unscheduled
redetermination);
(i) the oil and gas reserves attributable to all of the Obligors' Oil and Gas Properties whether owned directly or indirectly by such Person and
expressly including such reserves attributable to each Obligor's net ownership in the Partnerships' Oil and Gas Properties together with a
projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such
date, based upon the pricing assumptions consistent with SEC reporting requirements at the time and (ii) such other information as the
Administrative Agent may reasonably request.

Reserve Requirement shall mean, for any Interest Period for any LIBOR Loan, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks
of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes

                                                                        13
deposits by reference to which LIBOR is to be determined as provided in the definition of "LIBOR" or (ii) any category of extensions of credit
or other assets which include a LIBOR Loan.

Responsible Officer shall mean, as to any Person, the Chief Executive Officer, the President or any Vice President of such Person and, with
respect to financial matters, the term "Responsible Officer" shall include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower.

Revolving Credit Commitment shall mean, for any Lender, its obligation to make Loans and participate in the issuance of Letters of Credit as
provided in Section 2.01(b) up to the lesser of (i) such Lender's Maximum Revolving Credit Amount and (ii) such Lender's Percentage Share of
the then effective Borrowing Base.

Revolving Credit Termination Date shall mean the earlier to occur of
(i) the third anniversary date of the Closing Date, (ii) the date that the Commitments are terminated pursuant to Section 10.02, and (iii) the date
that the Commitments are fully terminated pursuant to Section 2.03(b).

Scheduled Redetermination Date shall have the meaning assigned such term in Section 2.08(b).

SEC shall mean the Securities and Exchange Commission or any successor Governmental Authority.

Security Instruments shall mean the agreements or instruments described or referred to in Exhibit D, and any and all other agreements or
instruments now or hereafter executed and delivered by the Obligors or any other Person (other than participation or similar agreements
between any Lender and any other lender or creditor with respect to any Indebtedness pursuant to this Agreement) in connection with, or as
security for the payment or performance of, the Notes, the Guarantees, the Hedge Agreements, this Agreement, or reimbursement obligations
under the Letters of Credit, as such agreements may be amended, supplemented or restated from time to time.

Special Entity shall mean any joint venture, limited liability company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which the Borrower or one or more of its other Subsidiaries is a member, owner, partner or
joint venturer and owns, directly or indirectly, at least a majority of the equity of such entity or controls such entity, but excluding any tax
partnerships that are not classified as partnerships under state law. For purposes of this definition, any Person which owns directly or indirectly
an equity investment in another Person which allows the first Person to manage or elect managers who manage the normal activities of such
second Person will be deemed to "control" such second Person (e.g. a sole general partner controls a limited partnership).

Subsidiary shall mean (i) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its Subsidiaries or by the Borrower and one or more of its Subsidiaries and
(ii) any Special Entity excluding APL.

Successful Public Offering means the completion of the offering as described in the Borrower's Form S-1 filed with the SEC on February 10,
2004, Registration No. 333-112653.

                                                                        14
Tax Matters Agreement means that agreement to be entered into between Parent and Borrower upon a Successful Public Offering under which
Parent and Borrower agree to pay income taxes on terms reasonably satisfactory to Administrative Agent.

Taxes shall have the meaning assigned such term in Section 4.06(a).

Transfer shall mean any sale, assignment, farm-out, conveyance or other transfer of any Oil and Gas Property, or any interest in any Oil and
Gas Property (including, without limitation, any working interest, overriding royalty interest, production payments, net profits interest, royalty
interest, or mineral fee interest) or in any Partnership or APL units of any Obligor, except for (i) the sale of Hydrocarbons in the ordinary
course of business on a current basis, or (ii) the sale or transfer of equipment in the ordinary course of business that is no longer necessary for
the business of any Obligor or is contemporaneously replaced by equipment of at least comparable value and use.

Transition Services Agreement means that agreement to be entered into between Parent and Borrower upon a Successful Public Offering under
which Parent and Borrower each agrees to provide for a fee to the other Person certain administrative, accounting and operational services
under terms reasonably acceptable to Administrative Agent.

Type shall mean, with respect to any Loan, a Base Rate Loan or a LIBOR Loan.

Wholly Owned Subsidiary shall mean a Subsidiary for which all of the outstanding shares of stock or other equity of such entity is owned
directly or indirectly by Borrower or one of Borrower's Wholly Owned Subsidiaries.

Section 1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted,
all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the Lenders hereunder shall be prepared, in accordance with GAAP,
applied on a basis consistent with the audited financial statements of the Borrower referred to in Section 7.02 (except for changes concurred
with by the Borrower's independent public accountants).

                                                                  ARTICLE II
                                                                  Commitments

Section 2.01 Loans and Letters of Credit.

(a) Loans. Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Borrower during the period from
and including (i) the Closing Date or (ii) such later date that such Lender becomes a party to this Agreement as provided in Section 12.06(b), to
and up to, but excluding, the Revolving Credit Termination Date in an aggregate principal amount at any one time outstanding up to, but not
exceeding, the amount of such Lender's Revolving Credit Commitment as then in effect; provided, however, that the aggregate principal
amount of all such Loans by all Lenders hereunder at any one time outstanding together with the LC Exposure shall not exceed the greater of
(i) the Borrowing Base and (ii) the Aggregate Revolving Credit Commitments. Subject to the terms of this Agreement, during the period from
the Closing Date to and up to, but excluding, the Revolving Credit Termination Date, the Borrower may borrow, repay and reborrow the
amount described in this Section 2.01(a).

                                                                        15
(b) Letters of Credit. During the period from and including the Closing Date to, but excluding, five (5) Business Days prior to the Revolving
Credit Termination Date, the Issuing Bank, as issuing bank for the Lenders, agrees to
[continue the Existing Letters of Credit and] extend credit for the account of any Obligor other than Parent at any time and from time to time by
issuing, renewing, extending or reissuing Letters of Credit; provided however, the LC Exposure at any one time outstanding shall not exceed
the lesser of (i) the LC Commitment or (ii) the Aggregate Revolving Credit Commitments, as then in effect, minus the aggregate principal
amount of all Loans then outstanding. The Lenders shall participate in such Letters of Credit according to their respective Percentage Shares.
Each of the Letters of Credit shall (i) be issued by the Issuing Bank, (ii) contain such terms and provisions as are reasonably required by the
Issuing Bank, (iii) be for the account of such Obligor other than Parent, and (iv) expire not later than the earlier of (A) twelve months from the
date of issuance of such Letter of Credit and (B) five (5) Business Days before the Revolving Credit Termination Date.

(c) Limitation on Types of Loans. Subject to the other terms and provisions of this Agreement, at the option of the Borrower, the Loans may be
Base Rate Loans or LIBOR Loans; provided that, without the prior written consent of the Majority Lenders, no more than five LIBOR Loans
may be outstanding at any time.

(d) Loans and Borrowings under the Prior Credit Agreement. On the Closing Date (or as soon as practicable with respect to (iv)):

(i) the Borrower shall pay all accrued and unpaid commitment fees, break funding fees under Section 5.05 and all other fees that are
outstanding under the Existing Credit Agreement for the account of each Prior Lender under the Prior Credit Agreement;

(ii) each "Base Rate Loan" and "LIBOR Loan" outstanding under the Prior Credit Agreement shall be deemed to be repaid with the proceeds of
a new Base Rate Loan or LIBOR Loan, as applicable, under this Agreement;

(iii) the Administrative Agent shall use reasonable efforts to cause such Prior Lender under the Prior Credit Agreement to deliver to the
Borrower as soon as practicable after the Closing Date, the Note issued by the Borrower to it under the Prior Credit Agreement, marked
"canceled" or otherwise similarly defaced; and

(iv) the Prior Credit Agreement and the commitments thereunder shall be superceded by this Agreement and such commitments shall terminate.

It is the intent of the parties that this Agreement not constitute a novation of the obligations and liabilities existing under the Prior Credit
Agreement or evidence repayment of any such obligations and liabilities and that this Agreement amend and restate in its entirety the Prior
Credit Agreement and re-evidence the obligations of the Borrower outstanding thereunder.

Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit.

(a) Borrowings. The Borrower shall give the Administrative Agent (which shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify (i) the aggregate amount of such borrowing, (ii) the Type and (iii) the date (which
shall be a Business Day) of the Loans to be borrowed, and (iv) (in the case of LIBOR Loans) the duration of the Interest Period therefor.

                                                                         16
(b) Minimum Amounts. If a borrowing consists in whole or in part of LIBOR Loans, such LIBOR Loans shall be in amounts of at least
$500,000 or any whole multiple of $250,000 in excess thereof. If a borrowing consists in whole or in part of Base Rate Loans, such Base Rate
Loans shall be in amounts of at least $500,000 or integral multiples of $250,000 in excess thereof.

(c) Notices. All borrowings, continuations and conversions shall require advance written notice to the Administrative Agent (which shall
promptly notify the Lenders) in the form of Exhibit B (or telephonic notice promptly confirmed by such a written notice), which in each case
shall be irrevocable, from the Borrower to be received by the Administrative Agent not later than 12:00 p.m. Charlotte, North Carolina time at
least one Business Day prior to the date of each Base Rate Loan borrowing and three Business Days prior to the date of each LIBOR Loan
borrowing, continuation or conversion. Without in any way limiting the Borrower's obligation to confirm in writing any telephonic notice, the
Administrative Agent may act without liability upon the basis of telephonic notice believed by the Administrative Agent in good faith to be
from the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of such telephonic notice except in the case of gross negligence or willful misconduct by the
Administrative Agent.

(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any LIBOR Loan beyond the expiration of the then current Interest
Period relating thereto by giving advance notice as provided in Section 2.02(c) to the Administrative Agent (which shall promptly notify the
Lenders) of such election, specifying the amount of such Loan to be continued and the Interest Period therefor. In the absence of such a timely
and proper election, the Borrower shall be deemed to have elected to convert such LIBOR Loan to a Base Rate Loan pursuant to Section
2.02(e). All or any part of any LIBOR Loan may be continued as provided herein, provided that (i) any continuation of any such Loan shall be
(as to each Loan as continued for an applicable Interest Period) in amounts of at least $500,000 or any whole multiple of $250,000 in excess
thereof and (ii) no Default shall have occurred and be continuing. If a Default shall have occurred and be continuing, each LIBOR Loan shall
be converted to a Base Rate Loan on the last day of the Interest Period applicable thereto.

(e) Conversion Options. The Borrower may elect to convert all or any part of any LIBOR Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice to the Administrative Agent (which shall promptly notify the Lenders) of
such election. Subject to the provisions made in this Section 2.02(e), the Borrower may elect to convert all or any part of any Base Rate Loan at
any time and from time to time to a LIBOR Loan by giving advance notice as provided in Section 2.02(c) to the Administrative Agent (which
shall promptly notify the Lenders) of such election. All or any part of any outstanding Loan may be converted as provided herein, provided that
(i) any conversion of any Base Rate Loan into a LIBOR Loan shall be (as to each such Loan into which there is a conversion for an applicable
Interest Period) in amounts of at least $500,000 or any whole multiple of $250,000 in excess thereof and (ii) no Default shall have occurred and
be continuing. If a Default shall have occurred and be continuing, no Base Rate Loan may be converted into a LIBOR Loan.

(f) Advances. Not later than 12:00 p.m. Charlotte, North Carolina time on the date specified for each the borrowing hereunder, each Lender
shall make available the amount of the Loan to be made by it on such date to the Administrative Agent, to an account which the Administrative
Agent shall specify, in immediately available funds, for the account of the Borrower. The amounts so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower, designated by the Borrower and maintained at the Principal Office.

                                                                       17
(g) Letters of Credit. The Borrower shall give the Issuing Bank (which shall promptly notify the Lenders of such request and their Percentage
Share of such Letter of Credit) advance notice to be received by the Issuing Bank not later than 12:00 p.m. Charlotte, North Carolina time not
less than three Business Days prior thereto of each request for the issuance, and at least ten Business Days prior to the date of the renewal or
extension, of a Letter of Credit hereunder which request shall specify (i) the amount of such Letter of Credit, (ii) the date (which shall be a
Business Day) such Letter of Credit is to be issued, renewed or extended, (iii) the duration thereof, (iv) the name and address of the beneficiary
thereof, and (v) such other information as the Issuing Bank may reasonably request, all of which shall be reasonably satisfactory to the Issuing
Bank. Subject to the terms and conditions of this Agreement, on the date specified for the issuance, renewal or extension of a Letter of Credit,
the Administrative Agent shall issue, renew or extend such Letter of Credit to the beneficiary thereof.

In conjunction with the issuance of each Letter of Credit, the Borrower shall execute a Letter of Credit Agreement. In the event of any conflict
between any provision of a Letter of Credit Agreement and this Agreement, the Borrower, the Issuing Bank, the Administrative Agent and the
Lenders hereby agree that the provisions of this Agreement shall govern.

The Issuing Bank will send to the Borrower and each Lender, immediately upon issuance of any Letter of Credit, or an amendment thereto, a
true and complete copy of such Letter of Credit, or such amendment thereto.

Section 2.03 Changes of Commitments.

(a) The Aggregate Revolving Credit Commitments shall at all times be equal to the lesser of (i) the Aggregate Maximum Revolving Credit
Amounts after adjustments resulting from reductions pursuant to Section 2.03(b) or (ii) the then effective Borrowing Base as determined from
time to time.

(b) The Borrower shall have the right to terminate or to reduce the amount of the Aggregate Maximum Revolving Credit Amounts at any time,
or from time to time, upon not less than thirty (30) days' prior notice to the Administrative Agent (who shall promptly notify the Lenders) of
each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which shall not
be less than $1,000,000 or any whole multiple of $1,000,000 in excess thereof; and no more than an amount by which the Aggregate Maximum
Revolving Credit Amounts would be less than the aggregate outstanding principal amount of the Loans plus the LC Exposure) and shall be
irrevocable and effective only upon receipt by the Administrative Agent.

(c) The Aggregate Maximum Revolving Credit Amounts once terminated or reduced may not be reinstated.

Section 2.04 Fees.

(a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender a commitment fee on the daily
average unused amount of the Borrowing Base for each Borrowing Base Period up to, but excluding, the earlier of the date the Aggregate
Revolving Credit Commitments are terminated or the Revolving Credit Termination Date at a rate per annum equal to 1/2 of 1%. Accrued
commitment fees shall be payable quarterly in arrears on each Quarterly Date and on the earlier of the date the Aggregate Revolving Credit
Commitments are terminated or the Revolving Credit Termination Date.

(b) Increase in Borrowing Base. The Borrower shall pay to the Administrative Agent, as a fee for the ratable account of the Lenders (i) a fee
equal to three-eighths of one percent (0.375%) of each marginal increase in the

                                                                        18
then current Borrowing Base after the Initial Borrowing Base. Any fee arising under this Section 2.04(b) is to be paid upon the effective date of
the related Borrowing Base increase.

(c) Letter of Credit Fees.

(i) The Borrower agrees to pay the Administrative Agent, for the account of each Lender, commissions for issuing the Letters of Credit on the
daily average outstanding of the maximum liability of the Issuing Bank existing from time to time under such Letter of Credit (calculated
separately for each Letter of Credit) at the rate per annum equal to the Applicable Margin in effect from time to time for LIBOR Loans,
provided that each Letter of Credit shall bear a minimum commission of $500 and further provided, during any period commencing on the date
of an Event of Default until the same is paid in full or all Events of Default are cured and waived, equal to the Post-Default Rate. Each Letter of
Credit shall be deemed to be outstanding up to the full face amount of the Letter of Credit until the Issuing Bank has received the canceled
Letter of Credit or a written cancellation of the Letter of Credit from the beneficiary of such Letter of Credit in form and substance acceptable
to the Issuing Bank, or for any reductions in the amount of the Letter of Credit (other than from a drawing), written notification from the
beneficiary of such Letter of Credit. Such commissions are payable in advance at issuance of the Letter of Credit for the first year thereof and
thereafter, quarterly in arrears on each Quarterly Date and upon cancellation or expiration of each such Letter of Credit.

(ii) The Borrower agrees to pay the Administrative Agent, for the account of the Issuing Bank, commissions for issuing the Letters of Credit
(calculated separately for each Letter of Credit) equal to 0.125% of the face amount of each Letter of Credit, payable upon issuance of such
Letter of Credit.

(d) Fee Letter. The Borrower shall pay to Administrative Agent for its account such other fees as are set forth in the Fee Letter on the dates
specified therein to the extent not paid prior to the Closing Date.

Section 2.05 Several Obligations. The failure of any Lender to make any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan or
provide funds on such date, but no Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other
Lender or to provide funds to be provided by such other Lender.

Section 2.06 Notes. The Loans made by each Lender shall be evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit A dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant to Section 12.06(b), payable to the order of such
Lender in a principal amount equal to its Maximum Revolving Credit Amount as originally in effect and otherwise duly completed and such
substitute Notes as required by Section
12.06(b). The date, amount, Type, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer may be endorsed by such Lender on the
schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender's or the Borrower's rights or obligations in respect of such Loans or affect the
validity of such transfer by any Lender of its Note.

                                                                        19
Section 2.07 Prepayments

(a) Voluntary Prepayments. The Borrower may prepay the Base Rate Loans upon not less than one (1) Business Day's prior notice to the
Administrative Agent (which shall promptly notify the Lenders), which notice shall specify the prepayment date (which shall be a Business
Day) and the amount of the prepayment (which shall be at least $100,000 or the remaining aggregate principal balance outstanding on the
Notes) and shall be irrevocable and effective only upon receipt by the Administrative Agent, provided that interest on the principal prepaid,
accrued to the prepayment date, shall be paid on the prepayment date. The Borrower may prepay LIBOR Loans on the same conditions as for
Base Rate Loans (except that prior notice to the Administrative Agent shall be not less than three (3) Business Days for LIBOR Loans) and in
addition such prepayments of LIBOR Loans shall be subject to the terms of Section 5.05 and shall be in an amount equal to all of the LIBOR
Loans for the Interest Period prepaid. In the event of a voluntary prepayment pursuant to this Section 2.07(a), Borrower shall be entitled to
reborrow such amounts pursuant to Section 2.01.

(b) Mandatory Prepayments. If a Borrowing Base Deficiency results from the redetermination of the Borrowing Base pursuant to Section
2.08(b) or (d), then the Borrower shall, within thirty (30) days notify Administrative Agent of Borrower's election to, (i) prepay the Loans in
two equal installments equal to one half of the aggregate principal amount sufficient to eliminate such Borrowing Base Deficiency, together
with interest on the principal amount paid accrued to the date of each such prepayment due ninety (90) days and one hundred and eighty (180)
days from the date of such redetermination, (ii) pledge, or cause any Subsidiary to pledge, additional unencumbered collateral of sufficient
value and character (as determined by the Administrative Agent and the Lenders in their sole discretion) that when added to the existing
collateral shall cause the Borrowing Base to equal or exceed the aggregate outstanding Loans plus the LC Exposure, or (iii) any combination of
(i) and (ii) satisfactory to the Administrative Agent and the Lenders. If, because of LC Exposure, a Borrowing Base Deficiency remains after
prepaying all of the Loans, the Borrower shall pay to the Administrative Agent on behalf of the Lenders an amount equal to such remaining
Borrowing Base Deficiency to be held as cash collateral as provided in
Section 2.10(b).

(c) Generally. Prepayments permitted or required under this Section 2.07 shall be without premium or penalty, except as required under Section
5.05 for prepayment of LIBOR Loans. Any prepayments on the Loans may be reborrowed subject to the then effective Aggregate Revolving
Credit Commitments.

Section 2.08 Borrowing Base.

(a) The Borrowing Base shall be determined in accordance with Section 2.08(b) by the Administrative Agent with the concurrence of the
Lenders and is subject to redetermination in accordance with Section 2.08(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next Redetermination Date. So long as any of the Commitments are in effect or any LC
Exposure or Loans are outstanding hereunder, this facility shall be governed by the then effective Borrowing Base. During the period from and
after the Closing Date until the first redetermination pursuant to Section 2.08 or adjusted pursuant to Section 8.07(b), the amount of the
Borrowing Base shall be $65,000,000 (the "Initial Borrowing Base") which amount is comprised of the APL Collateral Value, initially
determined to be $10,000,000, and the Oil and Gas Properties Collateral Value, initially determined to be $55,000,000.

(b) Upon receipt of the reports required by Section 8.07 and such other reports, data and supplemental information as may from time to time be
reasonably requested by the Administrative Agent (the "Engineering Reports"), the Borrowing Base shall be redetermined for each Borrowing
Base Period and each such redetermination shall be effective as of the date set forth in such notice of redetermination delivered by the
Administrative Agent to Borrower (the "Scheduled Redetermination Date"). The Oil and Gas Properties Collateral Value shall be determined
based upon the loan collateral value assigned to the

                                                                      20
Mortgaged Properties. The APL Collateral Value shall be determined based upon the loan collateral value assigned to the APL units pledged by
Obligors to secure the Indebtedness. The Borrowing Base shall be equal to the sum of the Oil and Gas Properties Collateral Value and the APL
Collateral Value and such other credit factors (including without limitation the assets, liabilities, cash flow, business, properties, prospects,
management and ownership of the Borrower and its Subsidiaries) which the Lenders deem significant. The Lenders' determination of the
Borrowing Base shall be in their sole discretion and shall not be subject to review or challenge. Upon each redetermination of the Borrowing
Base, the Administrative Agent shall recommend to the Lenders a new Borrowing Base and the Lenders in accordance with their customary
policies and procedures for extending credit to oil and gas reserve-based customers shall establish the redetermined Borrowing Base by
unanimous agreement in the event of any increase in the Borrowing Base and by agreement of at least the Majority Lenders in the event of any
redetermination to maintain or reduce the Borrowing Base. If the Borrower does not furnish the Engineering Reports by the date required, the
Lenders may nonetheless determine a new Borrowing Base. It is expressly understood that the Lenders shall have no obligation to determine
the Borrowing Base at any particular amount, either in relation to the Maximum Revolving Credit Amount or otherwise.

(c) The Borrower shall have the right to reduce the amount of the Borrowing Base upon not less than thirty (30) days' prior written notice to the
Administrative Agent (who shall promptly notify the Lenders) of the reduction, which shall specify the effective date thereof and the amount of
such reduction (which shall not be less than $1,000,000 or any whole multiple of $1,000,000 in excess thereof, no more than an amount which
would cause a Borrowing Base Deficiency) and shall be irrevocable and effective only upon receipt by the Administrative Agent. The
Borrowing Base once reduced at Borrower's election may not be reinstated by Borrower, nor shall Lenders be obligated to determine the
Borrowing Base at any subsequent Scheduled Redetermination Date or other Special Borrowing Base Determination at any particular amount,
either in relation to the Borrowing Base prior or subsequent to any such optional reduction by Borrower.

(d) In addition to "Scheduled Borrowing Base Determinations" pursuant to Section 2.08(b), the Borrower and the Majority Lenders may each
request one (1) additional redetermination of the Borrowing Base during each Borrowing Base Period. In the event the Borrower or Majority
Lenders request a "Special Borrowing Base Determination" pursuant to this Section 2.08(d), the Borrower shall deliver written notice of such
request to the Administrative Agent which shall include: (i) Engineering Report(s) prepared as of a date not more than thirty (30) calendar days
prior to the date of such request, and (ii) such other information as Administrative Agent and the Lenders shall request prepared as of a date not
more than thirty (30) calendar days prior to the date of such request. Likewise, in the event the Lenders exercise their option for a Special
Borrowing Base Determination, the Administrative Agent shall give the Borrower notice of the redetermined Borrowing Base which shall state
the effective date of the redetermination.

Section 2.09 Assumption of Risks. The Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither the Issuing Bank (except in the case of gross negligence or willful
misconduct on the part of the Issuing Bank or any of its employees), its correspondents nor any Lender shall be responsible for the validity,
sufficiency or genuineness of certificates or other documents or any endorsements thereon, even if such certificates or other documents should
in fact prove to be invalid, insufficient, fraudulent or forged; for errors, omissions, interruptions or delays in transmissions or delivery of any
messages by mail, telex, or otherwise, whether or not they be in code; for errors in translation or for errors in interpretation of technical terms;
the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; the failure of any
beneficiary or any transferee of any Letter of Credit to comply fully with conditions required in order to draw upon any Letter of

                                                                         21
Credit; or for any other consequences arising from causes beyond the Issuing Bank's control or the control of the Issuing Bank's
correspondents. In addition, neither the Issuing Bank, the Administrative Agent nor any Lender shall be responsible for any error, neglect, or
default of any of the Issuing Bank's correspondents; and none of the above shall affect, impair or prevent the vesting of any of the Issuing
Bank's, the Administrative Agent's or any Lender's rights or powers hereunder or under the Letter of Credit Agreements, all of which rights
shall be cumulative. The Issuing Bank and its correspondents may accept certificates or other documents that appear on their face to be in
order, without responsibility for further investigation of any matter contained therein regardless of any notice or information to the contrary. In
furtherance and not in limitation of the foregoing provisions, the Borrower agrees that any action, inaction or omission taken or not taken by
the Issuing Bank or by any correspondent for the Issuing Bank in good faith in connection with any Letter of Credit, or any related drafts,
certificates, documents or instruments, shall be binding on the Borrower and shall not put the Issuing Bank or its correspondents under any
resulting liability to the Borrower.

Section 2.10 Obligation to Reimburse and to Prepay.

(a) If a disbursement by the Issuing Bank is made under any Letter of Credit, the Borrower shall pay to the Administrative Agent within two (2)
Business Days after notice of any such disbursement is received by the Borrower, the amount of each such disbursement made by the Issuing
Bank under the Letter of Credit (if such payment is not sooner effected as may be required under this
Section 2.10 or under other provisions of the Letter of Credit), together with interest on the amount disbursed from and including the date of
disbursement until payment in full of such disbursed amount at a varying rate per annum equal to (i) the then applicable interest rate for Base
Rate Loans through the second Business Day after notice of such disbursement is received by the Borrower and
(ii) thereafter, the Post-Default Rate for Base Rate Loans (but in no event to exceed the Highest Lawful Rate) for the period from and including
the third Business Day following the date of such disbursement to and including the date of repayment in full of such disbursed amount. The
obligations of the Borrower under this Agreement with respect to each Letter of Credit shall be absolute, unconditional and irrevocable and
shall be paid or performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including, without
limitation, but only to the fullest extent permitted by applicable law, the following circumstances: (i) any lack of validity or enforceability of
this Agreement, any Letter of Credit or any of the Security Instruments; (ii) any amendment or waiver of (including any default), or any
consent to departure from this Agreement (except to the extent permitted by any amendment or waiver), any Letter of Credit or any of the
Security Instruments;
(iii) the existence of any claim, set-off, defense or other rights which the Borrower may have at any time against the beneficiary of any Letter
of Credit or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the
Issuing Bank, the Administrative Agent, any Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the
Security Instruments, the transactions contemplated hereby or any unrelated transaction; (iv) any statement, certificate, draft, notice or any
other document presented under any Letter of Credit proves to have been forged, fraudulent, insufficient or invalid in any respect or any
statement therein proves to have been untrue or inaccurate in any respect whatsoever; (v) payment by the Issuing Bank under any Letter of
Credit against presentation of a draft certificate which appears on its face to comply, but does not comply, with the terms of such Letter of
Credit; and (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

Notwithstanding anything in this Agreement to the contrary, the Borrower will not be liable for payment or performance that results from the
gross negligence or willful misconduct of the Issuing Bank, except (i) where the Borrower or any Subsidiary actually recovers the proceeds for
itself or the Issuing Bank of any payment made by the Issuing Bank in connection with such gross negligence or willful misconduct or (ii) in
cases where the Administrative Agent makes payment to the named beneficiary of a Letter of Credit.

                                                                        22
(b) In the event of the occurrence of any Event of Default, a payment or prepayment pursuant to Section 2.07(b) or the maturity of the Notes,
whether by acceleration or otherwise, an amount equal to the LC Exposure (or the excess in the case of Section 2.07(b)) shall be deemed to be
forthwith due and owing by the Borrower to the Issuing Bank, the Administrative Agent and the Lenders as of the date of any such occurrence;
and the Borrower's obligation to pay such amount shall be absolute and unconditional, without regard to whether any beneficiary of any such
Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent
permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the
Borrower may now or hereafter have against any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person
for any reason whatsoever. Such payments shall be held by the Issuing Bank on behalf of the Lenders as cash collateral securing the LC
Exposure in an account or accounts at the Principal Office; and the Borrower hereby grants to and by its deposit with the Administrative Agent
grants to the Administrative Agent a security interest in such cash collateral. In the event of any such payment by the Borrower of amounts
contingently owing under outstanding Letters of Credit and in the event that thereafter drafts or other demands for payment complying with the
terms of such Letters of Credit are not made prior to the respective expiration dates thereof, the Administrative Agent agrees, if no Event of
Default has occurred and is continuing or if no other amounts are outstanding under this Agreement, the Notes or the Security Instruments, to
remit to the Borrower amounts for which the contingent obligations evidenced by the Letters of Credit have ceased.

(c) Each Lender severally and unconditionally agrees that it shall promptly reimburse the Issuing Bank an amount equal to such Lender's
Percentage Share of any disbursement made by the Issuing Bank under any Letter of Credit that is not reimbursed according to this Section
2.10.

(d) Notwithstanding anything to the contrary contained herein, if no Default exists and subject to availability under the Aggregate Revolving
Credit Commitments (after reduction for LC Exposure), to the extent the Borrower has not reimbursed the Issuing Bank for any drawn upon
Letter of Credit within one
(1) Business Days after notice of such disbursement has been received by the Borrower, the amount of such Letter of Credit reimbursement
obligation shall automatically be funded by the Lenders as a Loan hereunder and used by the Lenders to pay such Letter of Credit
reimbursement obligation. If an Event of Default has occurred and is continuing, or if the funding of such Letter of Credit reimbursement
obligation as a Loan would cause the aggregate amount of all Loans outstanding to exceed the Aggregate Revolving Credit Commitments (after
reduction for LC Exposure), such Letter of Credit reimbursement obligation shall not be funded as a Loan, but instead shall accrue interest as
provided in Section 2.10(a).

Section 2.11 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable
Lending Office for Loans of such Type.

                                                             ARTICLE III
                                                    Payments of Principal and Interest

Section 3.01 Repayment of Loans.

(a) Loans. On the Revolving Credit Termination Date the Borrower shall repay the outstanding aggregate principal of the Notes.

(b) Generally. The Borrower will pay to the Administrative Agent, for the account of each Lender, the principal payments required by this
Section 3.01.

                                                                      23
Section 3.02 Interest.

(a) Interest Rates. The Borrower will pay to the Administrative Agent, for the account of each Lender, interest on the unpaid principal amount
of each Loan made by such Lender for the period commencing on the date such Loan is made to, but excluding, the date such Loan shall be
paid in full, at the following rates per annum:

(i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect from time to time) plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate; and

(ii) if such a Loan is a LIBOR Loan, for each Interest Period relating thereto, the Adjusted LIBOR for such Loan plus the Applicable Margin
(as in effect from time to time), but in no event to exceed the Highest Lawful Rate.

(b) Post-Default Rate. Notwithstanding the foregoing, the Borrower will pay to the Administrative Agent, for the account of each Lender
interest at the applicable Post-Default Rate on any Loan made by such Lender, and (to the fullest extent permitted by law) on any other amount
payable by the Borrower hereunder, under any Loan Document or under any Note held by such Lender to or for account of such Lender, for the
period commencing on the date of an Event of Default until the same is paid in full or all Events of Default are cured or waived.

(c) Due Dates. Accrued interest on Base Rate Loans shall be payable on each Quarterly Date commencing on April 1, 2004, and accrued
interest on each LIBOR Loan shall be payable on the last day of the Interest Period therefor, except that interest payable at the Post-Default
Rate shall be payable from time to time on demand and interest on any LIBOR Loan that is converted into a Base Rate Loan (pursuant to
Section 5.04) shall be payable on the date of conversion (but only to the extent so converted). Any accrued and unpaid interest on the Loans on
the Revolving Credit Termination Date shall be paid on such date.

(d) Determination of Rates. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative
Agent shall notify the Lenders to which such interest is payable and the Borrower thereof. Each determination by the Administrative Agent of
an interest rate or fee hereunder shall, except in cases of manifest error, be final, conclusive and binding on the parties.

                                                             ARTICLE IV
                                            Payments; Pro Rata Treatment; Computations; Etc.

Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement, the Notes, Letters of Credit, and the Letter of Credit Agreements shall be made in Dollars, in immediately
available funds, to the Administrative Agent at such account as the Administrative Agent shall specify by notice to the Borrower from time to
time, not later than 12:00 p.m. Charlotte, North Carolina time on the date on which such payments shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next succeeding Business Day). Such payments shall be made without
(to the fullest extent permitted by applicable law) defense, set-off or counterclaim. Each payment received by the Administrative Agent under
this Agreement or any Note for account of a Lender shall be paid promptly to such Lender in immediately available funds. Except as otherwise
provided in the definition of "Interest Period", if the due date of any payment under this Agreement or any Note would otherwise fall on a day
which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension. At the time of each payment to the Administrative Agent of any principal of or interest on any
borrowing, the Borrower shall notify the Administrative Agent of the Loans to which such payment shall apply. In the absence of such notice
the Administrative Agent may specify the Loans to which such payment shall apply, but to the extent possible such payment or prepayment
will be applied first to the Loans comprised of Base Rate Loans.

                                                                       24
Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 and each continuation and conversion under Section 2.02 shall be made from the Lenders pro rata in accordance with their
Percentage Share, each payment of fees under Sections 2.04(a), 2.04(b), and 2.04(c)(i) shall be made for account of the Lenders pro rata in
accordance with their Percentage Share, and each termination or reduction of the amount of the Aggregate Maximum Revolving Credit
Amounts under Section 2.03(b) shall be applied to the Commitment of each Lender, pro rata according to the amounts of its respective
Commitment; (ii) each payment of principal of Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with the
respective unpaid principal amount of the Loans held by the Lenders; and (iii) each payment of interest on Loans by the Borrower shall be
made for account of the Lenders pro rata in accordance with the amounts of interest due and payable to the respective Lenders; and (iv) each
reimbursement by the Borrower of disbursements under Letters of Credit shall be made for account of the Issuing Bank or, if funded by the
Lenders, pro rata for the account of the Lenders, in accordance with the amounts of reimbursement obligations due and payable to each
respective Lender.

Section 4.03 Computations. Interest on LIBOR Loans and fees shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for which such interest is payable, unless such calculation would
exceed the Highest Lawful Rate, in which case interest shall be calculated on the per annum basis of a year of 365 or 366 days, as the case may
be. Interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for which such interest is payable.

Section 4.04 Non-receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Lender or the
Borrower prior to the date on which such notifying party is scheduled to make payment to the Administrative Agent (in the case of a Lender) of
the proceeds of a Loan or a payment under a Letter of Credit to be made by it hereunder or (in the case of the Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that it does not intend to make the Required Payment to the Administrative Agent, the Administrative
Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make
the amount thereof available to the intended recipient(s) on such date and, if such Lender or the Borrower (as the case may be) has not in fact
made the Required Payment to the Administrative Agent, the recipient(s) of such payment shall, on demand, repay to the Administrative Agent
the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was
so made available by the Administrative Agent until, but excluding, the date the Administrative Agent recovers such amount at a rate per
annum which, for any Lender as recipient, will be equal to the Federal Funds Rate, and for the Borrower as recipient, will be equal to the Base
Rate plus the Applicable Margin.

Section 4.05 Set-off, Sharing of Payments, Etc.

(a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after consultation with the Administrative Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the Borrower or any Subsidiary at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans, or any other amount payable to such Lender hereunder, which is
not paid when due (regardless of whether such

                                                                       25
balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Administrative Agent thereof, provided that
such Lender's failure to give such notice shall not affect the validity thereof.

(b) If any Lender shall obtain payment of any principal of or interest on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any right of set-off, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Lender shall have received a greater percentage of the principal or interest (or reimbursement)
then due hereunder by the Borrower to such Lender than the percentage received by any other Lenders, it shall promptly (i) notify the
Administrative Agent and each other Lender thereof and (ii) purchase from such other Lenders participations in (or, if and to the extent
specified by such Lender, direct interests in) the Loans (or participations in Letters of Credit) made by such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal and/or interest on the Loans held by each of the Lenders (or
reimbursements of Letters of Credit). To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so
purchasing a participation (or direct interest) in the Loans made by other Lenders (or in interest due thereon, as the case may be) may exercise
all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder
of Loans (or Letters of Credit) in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right
or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.05 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this Section 4.05 to share the benefits of any recovery on such secured claim.

Section 4.06 Taxes.

(a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be made, in accordance with Section 4.01, free and clear
of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender, the Issuing Bank and the Administrative Agent, taxes imposed on its income, and
franchise or similar taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof) of which the Administrative Agent, the Issuing
Bank or such Lender, as the case may be, is a citizen or resident or in which such Lender has an Applicable Lending Office,
(ii) the jurisdiction (or any political subdivision thereof) in which the Administrative Agent, the Issuing Bank or such Lender is organized, or
(iii) any jurisdiction (or political subdivision thereof) in which such Lender, the Issuing Bank or the Administrative Agent is presently doing
business which taxes are imposed solely as a result of doing business in such jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to the Lenders, the Issuing Bank or the Administrative Agent (i) the sum payable
shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums
payable under this Section 4.06) such Lender, the Issuing Bank or the Administrative Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law.

                                                                          26
(b) Other Taxes. In addition, to the fullest extent permitted by applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this Agreement, any Assignment or any Security Instrument (hereinafter
referred to as "Other Taxes").

(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WILL INDEMNIFY
EACH LENDER AND THE ISSUING BANK AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES AND
OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL
AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR THE
ADMINISTRATIVE AGENT (ON THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY
LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO,
WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT
OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR
OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO
SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER, THE ISSUING
BANK OR THE ADMINISTRATIVE AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER,
ISSUING BANK OR THE ADMINISTRATIVE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER
TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR THE ADMINISTRATIVE AGENT HAS RECEIVED PAYMENT FROM
THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE
BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR
CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT
INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED) PROVIDED THAT THE BORROWER, UPON THE
REQUEST OF SUCH LENDER, THE ISSUING BANK OR THE ADMINISTRATIVE AGENT, AGREES TO RETURN SUCH REFUND
OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE ADMINISTRATIVE AGENT IN
THE EVENT SUCH LENDER OR THE ADMINISTRATIVE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.

(d) Lender Representations.

(i) Each Lender represents that it is either (1) a banking association or corporation organized under the laws of the United States of America or
any state thereof or (2) it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to this Agreement (A) under an applicable provision of a tax convention to which the United States of
America is a party or (B) because it is acting through a branch, agency or office in the United States of America and any payment to be
received by it hereunder is effectively connected with a trade or business in the United States of America. Each Lender that is not a banking
association or corporation organized under the laws of the United States of America or any state thereof agrees to provide to the Borrower and
the Administrative Agent on the Closing Date, or on the date of its delivery of the Assignment pursuant to which it becomes a Lender, and at
such other times as required by United States law or as the Borrower or the Administrative Agent shall reasonably request, two accurate and
complete original signed copies of either (A) Internal Revenue Service Form W-8ECI (or successor form)

                                                                       27
certifying that all payments to be made to it hereunder will be effectively connected to a United States trade or business (the "Form W-8ECI
Certification") or (B) Internal Revenue Service Form W-8BEN (or successor form) certifying that it is entitled to the benefit of a provision of a
tax convention to which the United States of America is a party which completely exempts from United States withholding tax all payments to
be made to it hereunder (the "Form W-8BEN Certification"). In addition, each Lender agrees that if it previously filed a Form W-8ECI
Certification, it will deliver to the Borrower and the Administrative Agent a new Form W-8ECI Certification prior to the first payment date
occurring in each of its subsequent taxable years; and if it previously filed a Form W8BEN Certification, it will deliver to the Borrower and the
Administrative Agent a new certification prior to the first payment date falling in the third year following the previous filing of such
certification. Each Lender also agrees to deliver to the Borrower and the Administrative Agent such other or supplemental forms as may at any
time be required as a result of changes in applicable law or regulation in order to confirm or maintain in effect its entitlement to exemption
from United States withholding tax on any payments hereunder, provided that the circumstances of such Lender at the relevant time and
applicable laws permit it to do so. If a Lender determines, as a result of any change in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Borrower
and the Administrative Agent of such fact. If a Lender is organized under the laws of a jurisdiction outside the United States of America, unless
the Borrower and the Administrative Agent have received a Form W-8BEN Certification or Form W-8ECI Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are not subject to United States withholding tax, the Borrower shall withhold
taxes from such payments at the applicable statutory rate. Each Lender agrees to indemnify and hold harmless the Borrower or Administrative
Agent, as applicable, from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by (i) the
Administrative Agent as a result of such Lender's failure to submit any form or certificate that it is required to provide pursuant to this Section
4.06 or (ii) the Borrower or the Administrative Agent as a result of their reliance on any such form or certificate which such Lender has
provided to them pursuant to this
Section 4.06.

(ii) For any period with respect to which a Lender has failed to provide the Borrower with the form required pursuant to this Section 4.06, if
any (other than if such failure is due to a change in a Governmental Requirement occurring subsequent to the date on which a form originally
was required to be provided), such Lender shall not be entitled to indemnification under Section 4.06 with respect to taxes imposed by the
United States which taxes would not have been imposed but for such failure to provide such forms; provided, however, that if a Lender, which
is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such taxes.

(iii) Any Lender claiming any additional amounts payable pursuant to this Section 4.06 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document requested by the Borrower or the Administrative Agent or to change the jurisdiction
of its Applicable Lending Office or to contest any tax imposed if the making of such a filing or change or contesting such tax would avoid the
need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.

                                                                        28
                                                                  ARTICLE V
                                                                Capital Adequacy

Section 5.01 Additional Costs.

(a) LIBOR Regulations, etc. The Borrower shall pay directly to each Lender from time to time such amounts as such Lender may determine to
be necessary to compensate such Lender for any costs which it determines are attributable to its making or maintaining of any LIBOR Loans or
issuing or participating in Letters of Credit hereunder or its obligation to make any LIBOR Loans or issue or participate in any Letters of Credit
hereunder, or any reduction in any amount receivable by such Lender hereunder in respect of any of such LIBOR Loans, Letters of Credit (such
increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or any Note in respect of any of such LIBOR
Loans or Letters of Credit (other than taxes imposed on the overall net income of such Lender or of its Applicable Lending Office for any of
such LIBOR Loans by the jurisdiction in which such Lender has its principal office or Applicable Lending Office); or (ii) imposes or modifies
any reserve, special deposit, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of such Lender, or the Commitment or Loans of such Lender or the London interbank market; or (iii) imposes
any other condition affecting this Agreement or any Note (or any of such extensions of credit or liabilities) or such Lender's Commitment or
Loans. Each Lender will notify the Administrative Agent and the Borrower of any event occurring after the Closing Date which will entitle
such Lender to compensation pursuant to this Section 5.01(a) as promptly as practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in
the United States. If any Lender requests compensation from the Borrower under this Section 5.01(a), the Borrower may, by notice to such
Lender, suspend the obligation of such Lender to make additional Loans of the Type with respect to which such compensation is requested
until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 5.04 shall be applicable).

(b) Regulatory Change. Without limiting the effect of the provisions of
Section 5.01(a), in the event that at any time (by reason of any Regulatory Change or any other circumstances arising after the Closing Date
affecting (A) any Lender, (B) the London interbank market or (C) such Lender's position in such market), the Adjusted LIBOR, as determined
in good faith by such Lender, will not adequately and fairly reflect the cost to such Lender of funding its LIBOR Loans, then, if such Lender so
elects, by notice to the Borrower and the Administrative Agent, the obligation of such Lender to make additional LIBOR Loans shall be
suspended until such Regulatory Change or other circumstances ceases to be in effect (in which case the provisions of Section 5.04 shall be
applicable).

(c) Capital Adequacy. Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Borrower shall
pay directly to any Lender from time to time on request such amounts as such Lender may reasonably determine to be necessary to compensate
such Lender or its parent or holding company for any costs which it determines are attributable to the maintenance by such Lender or its parent
or holding company (or any Applicable Lending Office), pursuant to any Governmental Requirement following any Regulatory Change, of
capital in respect of its Commitment, its Note, or its Loans or any interest held by it in any Letter of Credit, such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender or its parent or holding company
(or any Applicable Lending Office) to a level below that which such Lender or its parent or holding company (or any Applicable Lending
Office) could have achieved

                                                                        29
but for such Governmental Requirement. Such Lender will notify the Borrower that it is entitled to compensation pursuant to this Section
5.01(c) as promptly as practicable after it determines to request such compensation.

(d) Compensation Procedure. Any Lender notifying the Borrower of the incurrence of Additional Costs under this Section 5.01 shall in such
notice to the Borrower and the Administrative Agent set forth in reasonable detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to Section
5.01(a) or (b), or of the effect of capital maintained pursuant to Section 5.01(c), on its costs or rate of return of maintaining Loans or its
obligation to make Loans or issue Letters of Credit, or on amounts receivable by it in respect of Loans or Letters of Credit, and of the amounts
required to compensate such Lender under this Section 5.01, shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Any request for additional compensation under this Section 5.01 shall be paid
by the Borrower within thirty
(30) days of the receipt by the Borrower of the notice described in this Section 5.01(d).

Section 5.02 Limitation on LIBOR Loans. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any Adjusted
LIBOR for any Interest Period:

(i) the Administrative Agent determines (which determination shall be conclusive, absent manifest error) that quotations of interest rates for the
relevant deposits referred to in the definition of "Adjusted LIBOR" in Section 1.02 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for LIBOR Loans as provided herein; or

(ii) the Administrative Agent determines (which determination shall be conclusive, absent manifest error) that the relevant rates of interest
referred to in the definition of "Adjusted LIBOR" in Section 1.02 upon the basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined are not sufficient to adequately cover the cost to the Lenders of making or maintaining LIBOR Loans; then the
Administrative Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under
no obligation to make additional LIBOR Loans.

Section 5.03 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR Loans hereunder, then such Lender shall promptly notify the
Borrower thereof and such Lender's obligation to make LIBOR Loans shall be suspended until such time as such Lender may again make and
maintain LIBOR Loans (in which case the provisions of Section 5.04 shall be applicable).

Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03. If the obligation of any Lender to make LIBOR Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans which would otherwise be made by such Lender shall
be made instead as Base Rate Loans (and, if an event referred to in Section 5.01(b) or Section 5.03 has occurred and such Lender so requests by
notice to the Borrower, all Affected Loans of such Lender then outstanding shall be automatically converted into Base Rate Loans on the date
specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans.

                                                                        30
Section 5.05 Compensation. The Borrower shall pay to each Lender within thirty (30) days of receipt of written request of such Lender (which
request shall set forth, in reasonable detail, the basis for requesting such amounts and which shall be conclusive and binding for all purposes
provided that such determinations are made on a reasonable basis), such amount or amounts as shall compensate it for any loss, cost, expense
or liability which such Lender determines are attributable to:

(i) any payment, prepayment or conversion of a LIBOR Loan properly made by such Lender or the Borrower for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10.01) on a date other than the last day of the Interest Period for such Loan; or

(ii) any failure by the Borrower for any reason (including but not limited to, the failure of any of the conditions precedent specified in Article
VI to be satisfied) to borrow, continue or convert a LIBOR Loan from such Lender on the date for such borrowing, continuation or conversion
specified in the relevant notice given pursuant to Section 2.02(c).

Without limiting the effect of the preceding sentence, such compensation shall include an amount equal to the excess, if any, of (i) the amount
of interest which would have accrued on the principal amount so paid, prepaid or converted or not borrowed for the period from the date of
such payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for such Loan (or, in the case of a failure to
borrow, the Interest Period for such Loan which would have commenced on the date specified for such borrowing) at the applicable rate of
interest for such Loan provided for herein over (ii) the interest component of the amount such Lender would have bid in the London interbank
market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).

                                                                  ARTICLE VI
                                                               Conditions Precedent

Section 6.01 Initial Funding. The obligation of the Lenders to amend and restate the Prior Credit Agreement to make the Initial Funding and of
any Issuing Bank to issue any Letters of Credit hereunder is subject to the receipt by the Administrative Agent and the Lenders of all fees
payable pursuant to
Section 2.04 on or before the Closing Date and the receipt by the Administrative Agent of the following documents and satisfaction of the other
conditions provided in this Section 6.01, each of which shall be satisfactory to the Administrative Agent in form and substance:

(a) A certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i) resolutions of its board of directors with respect to
the authorization of the Borrower to execute and deliver the Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower (y) who are authorized to sign the Loan Documents to which Borrower is a
party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of the authorized officers, and
(iv) the articles or certificate of incorporation and bylaws of the Borrower, certified as being true and complete. The Administrative Agent and
the Lenders may conclusively rely on such certificate until the Administrative Agent receives notice in writing from the Borrower to the
contrary.

(b) A certificate of the Secretary or an Assistant Secretary of each Guarantor setting forth (i) resolutions of its board of directors with respect to
the authorization of such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions
contemplated in those

                                                                         31
documents, (ii) the officers of such Guarantor (y) who are authorized to sign the Loan Documents to which such Guarantor is a party and (z)
who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of the authorized officers, and
(iv) the articles or certificate of incorporation and bylaws (or equivalent constituent documents) of such Guarantor, certified as being true and
complete. The Administrative Agent and the Lenders may conclusively rely on such certificates until they receive notice in writing from any
Guarantor to the contrary.

(c) Certificates of the appropriate state agencies with respect to the existence, qualification and good standing of the Obligors.

(d) A compliance certificate which shall be substantially in the form of Exhibit C, duly and properly executed by a Responsible Officer and
dated as of the date of the Initial Funding.

(e) The Notes, duly completed and executed.

(f) The Security Instruments, including those described on Exhibit D, duly completed and executed by the respective parties thereto in
sufficient number of counterparts for recording, if necessary including delivery of all original stock certificates, blank stock powers, and
Intercompany Notes duly endorsed as required under such Security Instruments.

(g) Review of Obligors' financial condition satisfactory to Lenders.

(h) An opinion of The Ledgewood Law Firm, counsel to the Obligors and from other local counsel acceptable to the Administrative Agent with
respect to enforceability of the Security Instruments under the laws of the states wherein the Oil and Gas Properties are located, each in form
and substance satisfactory to the Administrative Agent, as to such matters incident to the transactions herein contemplated as the
Administrative Agent may reasonably request including, without limitation, opinions as to the continued priority and perfection of the Existing
Liens to secure the Obligations.

(i) A certificate of insurance coverage of the Borrower and each Guarantor evidencing that the Borrower and each Guarantor are carrying
insurance in accordance with Section 7.20 and Section 8.03(b).

(j) Title information as the Administrative Agent may require setting forth the status of title acceptable to the Administrative Agent to at least
80% of the value of the Oil and Gas Properties of the Obligors, including the Obligors' pro rata interest in the Partnerships' Oil and Gas
Properties included in the Initial Reserve Report.

(k) The Administrative Agent shall have been furnished with appropriate UCC search certificates and other evidence satisfactory to the
Administrative Agent with respect Obligors' and the Partnerships' Oil and Gas Properties reflecting no prior Liens other than Excepted Liens.

(l) Environmental assessments and other reports to the extent maintained by Obligors covering Obligors' and the Partnerships' Oil and Gas
Properties reporting on the current environmental condition of such Properties satisfactory to Lenders.

(m) The Assignment of Notes, Documents and Liens duly completed and executed.

                                                                         32
(n) All authorizations, approvals or consents as may be necessary for the execution, delivery and performance by any Obligor under this
Agreement.

(o) The Guaranty Agreements duly completed and executed by the Guarantors.

(p) Such other documents as the Administrative Agent or any Lender or special counsel to the Administrative Agent may reasonably request.

Section 6.02 Initial and Subsequent Loans and Letters of Credit. The obligation of the Lenders to make Loans to the Borrower upon the
occasion of each borrowing hereunder and to issue, renew, extend or reissue Letters of Credit (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans and after giving effect thereto:

(a) no Default shall have occurred and be continuing;

(b) no Material Adverse Effect shall have occurred; and

(c) the representations and warranties made by the Borrower in Article VII and in the Security Instruments shall be true on and as of the date of
the making of such Loans or issuance, renewal, extension or reissuance of a Letter of Credit with the same force and effect as if made on and as
of such date and following such new borrowing, except to the extent such representations and warranties are expressly limited to an earlier
date.

Each request for a borrowing or issuance, renewal, extension or reissuance of a Letter of Credit by the Borrower hereunder shall constitute a
certification by the Borrower to the effect set forth in Section 6.02(c) (both as of the date of such notice and, unless the Borrower otherwise
notifies the Administrative Agent prior to the date of and immediately following such borrowing or issuance, renewal, extension or reissuance
of a Letter of Credit as of the date thereof).

Section 6.03 Conditions Precedent for the Benefit of Lenders. All conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may require satisfaction of any such condition precedent or be
entitled to assume that the Lenders will refuse to make any Loan in the absence of strict compliance with such conditions precedent.

Section 6.04 No Waiver. No waiver of any condition precedent shall preclude the Administrative Agent or the Lenders from requiring such
condition to be met prior to making any subsequent Loan or preclude the Lenders from thereafter declaring that the failure of the Borrower to
satisfy such condition precedent constitutes a Default.

                                                                ARTICLE VII
                                                        Representations and Warranties

Each of the Obligors represents and warrants to the Administrative Agent and the Lenders that (each representation and warranty herein is
given as of the Closing Date and shall be deemed repeated and reaffirmed on the dates of each borrowing and issuance, renewal, extension or
reissuance of a Letter of Credit as provided in Section 6.02):

Section 7.01 Corporate Existence. Each of the Obligors: (i) is a corporation, or limited partnership or limited liability company duly organized,
formed, legally existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable; (ii) has all
requisite corporate power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as

                                                                       33
now being or as proposed to be conducted; and (iii) is qualified to do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect.

Section 7.02 Financial Condition. The audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries at September 30,
2003, and the related consolidated statement of income, stockholders' equity and cash flow of the Borrower and its Consolidated Subsidiaries
for the fiscal year ended on said date, heretofore furnished to each of the Lenders and the unaudited consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries at December 31, 2003, and their related consolidated statements of income, stockholders' equity and cash
flow of the Borrower and its Consolidated Subsidiaries for the three month period ended on such date heretofore furnished to the
Administrative Agent, are/is complete and correct and fairly present the consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as at said dates and the results of its operations for the fiscal year and the three month period on said dates, all in accordance with
GAAP, as applied on a consistent basis (subject, in the case of the interim financial statements, to normal year-end adjustments). Neither the
Borrower nor any Subsidiary has on the Closing Date any material Debt, contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable commitments. Since September 30, 2003, there has been no
change or event having a Material Adverse Effect. Since the date of the Financial Statements, neither the business nor the Properties of the
Borrower or any Subsidiary have been materially and adversely affected.

Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule 7.03 hereto, there is no litigation, legal, administrative or arbitral
proceeding, investigation or other action of any nature pending or, to the knowledge of the Obligors threatened against or affecting the Obligors
or any Subsidiary which involves the possibility of any judgment or liability against any Obligor or any Subsidiary not fully covered by
insurance (except for normal deductibles), and which would have a Material Adverse Effect. Schedule 7.03 attached hereto is a list of all
litigation in which any Obligor or its Subsidiary is a party under which the amount in controversy including all expenses, fees and costs is
greater than $250,000.

Section 7.04 No Breach. Neither the execution and delivery of the Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not been obtained as of the Closing Date under, the respective charter or
by-laws of the Obligors or any Subsidiary, or any Governmental Requirement, or any agreement or instrument to which any Obligor or any
Subsidiary is a party or by which it is bound or to which it or its Properties are subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of the Obligor or any Subsidiary pursuant to
the terms of any such agreement or instrument other than the Liens created by the Loan Documents.

Section 7.05 Authority. Each Obligor has all necessary corporate power and authority to execute, deliver and perform its obligations under the
Loan Documents to which it is a party; and the execution, delivery and performance by each Obligor of the Loan Documents to which it is a
party, have been duly authorized by all necessary corporate action on its part; and the Loan Documents constitute the legal, valid and binding
obligations of each Obligor, enforceable in accordance with their terms.

Section 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any
other Person are necessary for the execution, delivery or performance by any Obligor of the Loan Documents to which it is a party or for the
validity or enforceability thereof, except for the recording and filing of the Security Instruments as required by this Agreement.

                                                                         34
Section 7.07 Use of Loans. The proceeds of the Loans shall be used (i) to refinance the Prior Debt, (ii) for the development of the Obligors' Oil
and Gas Properties and the acquisition of Oil and Gas Properties and related assets by the Obligors, (iii) to fund Obligors' capital contributions
under the Partnerships and APL provided such capital contributions may not be used for the purpose of funding partnership distributions, (iv)
as working capital, (v) for Letters of Credit to support the obligations of the Borrower and its Subsidiaries, and (vi) for general company
purposes of the Borrower and its Subsidiaries. Neither the Borrower nor any other Obligor is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any
Loan hereunder will be used to buy or carry any margin stock.

Section 7.08 ERISA.

(a) Each Obligor, each Subsidiary and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.

(b) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code.

(c) No act, omission or transaction has occurred which could result in imposition on any Obligor, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

(d) No contingent obligations remain due to the termination of any Plan (other than a defined contribution plan) or any trust created under any
such Plan since September 2, 1974. The only Plan that has been terminated was for The Atlas Group, Inc. No liability to the PBGC (other than
for the payment of current premiums which are not past due) by any Obligor, any Subsidiary or any ERISA Affiliate has been or is expected by
any Obligor, any Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has
occurred.

(e) Full payment when due has been made of all amounts which any Obligor, any Subsidiary or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such Plan, and no accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

(f) The actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of each
Obligor's most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title
IV of ERISA) of such Plan allocable to such benefit liabilities. The term "actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA.

(g) None of the Obligors, any Subsidiary or any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(l) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by an Obligor, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material
liability.

                                                                         35
(h) None of the Obligors, any Subsidiary or any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the preceding six
calendar years, sponsored, maintained or contributed to, any Multiemployer Plan.

(i) None of the Obligors, any Subsidiary or any ERISA Affiliate is required to provide security under section 401 (a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the Plan.

Section 7.09 Taxes. Each Obligor and its Subsidiaries has filed all United States federal income tax returns and all other tax returns which are
required to be filed by them, or otherwise obtained appropriate extensions to file, and have paid all material taxes due pursuant to such returns
or pursuant to any assessment received by any Obligor or any Subsidiary except such taxes that are being contested in good faith by appropriate
proceedings and for which such Obligor, as applicable, has set aside on its books adequate reserves in accordance with GAAP. The charges,
accruals and reserves on the books of each Obligor and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of
the Borrower, adequate. No tax lien has been filed and, to the knowledge of the Obligors, no claim is being asserted with respect to any such
tax, fee or other charge.

Section 7.10 Titles, etc.

(a) Each of the Borrower and its Subsidiaries has good and marketable title to its Oil and Gas Properties, free and clear of all Liens, except
Excepted Liens. After giving full effect to the Excepted Liens, each Obligor owns either directly in its own name, or indirectly through its
percentage ownership interest in the Partnerships, the net interests in production attributable to its Hydrocarbon Interests reflected in the most
recently delivered Ownership Report and the ownership of such Oil and Gas Properties shall not in any material respect obligate such Obligor
to bear the costs and expenses relating to the maintenance, development and operations of each such Oil and Gas Property in an amount in
excess of the working interest of each Oil and Gas Property set forth in the most recently delivered Reserve Report; provided that to the extent
an Obligor is a general partner of a Partnership, such Obligor is liable for all of the costs and expenses attributable to such Partnership's
interest, but only entitled to such Obligor's percentage interest in such Partnership's net revenues. In the event an Obligor, as a general partner,
pays more than its partnership share of such Partnership's costs and expenses, such Obligor is entitled to reimbursement of such excess amount
out of the future income of such Partnership. All information contained in the most recently delivered Ownership Report and Reserve Report is
true and correct in all material respects as of the date thereof.

(b) All leases and agreements necessary for the conduct of the business of Borrower and its Subsidiaries are valid and subsisting, in full force
and effect and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to
a default under any such lease or leases, which would affect in any material respect the conduct of the business of any Obligor and its
Subsidiaries.

(c) The rights, Properties and other assets presently owned, leased or licensed by Borrower and its Subsidiaries including, without limitation, all
easements and rights of way, include all rights, Properties and other assets necessary to permit each Obligor and its Subsidiaries to conduct its
business in all material respects in the same manner as its business has been conducted prior to the Closing Date.

(d) All of the assets and Properties of Borrower and its Subsidiaries which are reasonably necessary for the operation of its business are in good
working condition and are maintained in accordance with prudent business standards.

                                                                         36
Section 7.11 No Material Misstatements. No written information, statement, exhibit, certificate, document or report furnished to the
Administrative Agent and the Lenders (or any of them) by any Obligor or any Subsidiary in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made. There is no fact peculiar to any Obligor or any Subsidiary which has a
Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this
Agreement or the other documents, certificates and statements furnished to the Administrative Agent by or on behalf of the Obligors or any
Subsidiary prior to, or on, the Closing Date in connection with the transactions contemplated hereby.

Section 7.12 Investment Company Act. None of the Obligors nor any Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940, as amended.

Section 7.13 Public Utility Holding Company Act. None of the Obligors nor any Subsidiary is a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as amended.

Section 7.14 Partnership Interests. Obligors own the percentage general partner and limited partner interests in the Partnerships set forth on
Schedule
7.14. None of the Borrower nor any of its Subsidiaries own any interest in any partnership or other Special Entity other than the Partnerships,
APL and Atlas Pipeline . The principal place of business and chief executive office of each Partnership is located at the addresses stated on
Schedule 7.14. The Obligors' ownership interests in the Partnerships are free and clear of any and all liens, claims and encumbrances including
any preferential rights to purchase and consents to assignments.

Section 7.15 Capitalization and Subsidiaries.

(a) The authorized securities of Borrower consist of Forty-Nine Million (49,000,000) shares of common stock and One Million (1,000,000)
shares of preferred stock and all issued and outstanding shares of such stock have been validly issued and are fully paid and nonassessable and
are owned by and issued to Atlas Holdings.

(b) The authorized securities of Resource Energy consist of One Hundred
(100) shares of common stock and all issued and outstanding shares of such stock have been validly issued and are fully paid and nonassessable
and are owned by and issued to Borrower.

(c) The authorized securities of Viking consist of One Thousand (1,000) shares of common stock and all issued and outstanding shares of such
stock have been validly issued and are fully paid and nonassessable and are owned by and issued to Borrower.

(d) The authorized securities of AEC consist of 488 shares of common stock and all issued and outstanding shares of such stock have been
validly issued and are fully paid and nonassessable and are owned by and issued to AIC.

(e) The authorized securities of AIC consist of 1000 shares of common stock and all issued and outstanding shares of such stock have been
validly issued and are fully paid and nonassessable and are owned by and issued to Borrower.

                                                                       37
(f) The authorized securities of Atlas Energy consist of 1,000 shares of common stock and all issued and outstanding shares of such stock have
been validly issued and are fully paid and nonassessable and are owned by and issued to AIC.

(g) The authorized securities of Atlas Holdings consist of 1000 shares of common stock and all issued and outstanding shares of such stock
have been validly issued and are fully paid and nonassessable and are owned by and issued to Parent.

(h) The authorized securities of Atlas Noble consist of 1000 shares of common stock and all issued and outstanding shares of such stock have
been validly issued and are fully paid and nonassessable and are owned by and issued to Borrower.

(i) The authorized securities of Atlas PA consist of 1000 shares of common stock and all issued and outstanding shares of such stock have been
validly issued and are fully paid and nonassessable and are owned by and issued to Borrower.

(j) All issued and outstanding membership interests in Atlas Pipeline have been validly issued and are fully paid and nonassessable and are
owned by and issued to Resource Energy, Viking, Atlas Energy, Atlas Resources, AIC and REI.

(k) The authorized securities of Atlas Resources consist of 500 shares of common stock and all issued and outstanding shares of such stock
have been validly issued and are fully paid and nonassessable and are owned by and issued to AIC.

(l) The authorized securities of REI-NY, Inc. consist of 1,000 shares of common stock and all issued and outstanding shares of such stock have
been validly issued and are fully paid and nonassessable and are owned by and issued to Resource Energy.

(m) Except for Atlas Pipeline and the Wholly Owned Subsidiaries set forth on Schedule 7.15, neither Borrower nor any Wholly Owned
Subsidiary of Borrower owns directly or indirectly any capital stock of any other Person other than the Partnerships. Borrower and each Wholly
Owned Subsidiary of Borrower, has good and marketable title to all the securities of the Subsidiaries issued to it, free and clear of all liens and
encumbrances, and all such securities have been duly and validly issued and are fully paid and nonassessable. The authorized securities of the
Wholly Owned Subsidiaries and the ownership thereof are as shown on Schedule 7.15 attached hereto and made a part hereof.

Section 7.16 Location of Business and Offices Each Obligor's principal place of business and chief executive offices are located at the address
stated on the signature page of this Agreement.

Section 7.17 Defaults. None of the Obligors nor any Subsidiary is in default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both, would constitute a default under any Material Agreement or
instrument to which any Obligor or any Subsidiary is a party or by which any Obligor or any Subsidiary is bound. No Default hereunder has
occurred and is continuing.

Section 7.18 Environmental Matters. Except as would not have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the
failure to take such actions would not have a Material Adverse Effect):

(a) Neither any Property of Borrower or any Subsidiary nor the operations conducted thereon violate any order or requirement of any court or
Governmental Authority or any Environmental Laws;

                                                                        38
(b) Without limitation of clause (a) above, no Property of Borrower or any Subsidiary nor the operations currently conducted thereon or, to the
best knowledge of the Obligors, by any prior owner or operator of such Property or operation, are in violation of or Subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;

(c) All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any
and all Property of Borrower and each Subsidiary, including without limitation past or present treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, have been duly obtained or filed, and Borrower and each Subsidiary are in
compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations;

(d) All hazardous substances, solid waste, and oil and gas exploration and production wastes, if any, generated at any and all Property of
Borrower or any Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the best knowledge of the Obligors, all
such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not
to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws;

(e) Borrower has taken all steps reasonably necessary to determine and have determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise released and there has been no threatened release of any hazardous
substances on or to any Property of Borrower or any Subsidiary except in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the environment;

(f) To the extent applicable, all Property of Borrower and each Subsidiary currently satisfies all design, operation, and equipment requirements
imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA during the term of this Agreement, and Borrower does not
have any reason to believe that such Property, to the extent subject to OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and

(g) Neither Borrower nor any Subsidiary has any known contingent liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.

Section 7.19 Compliance with the Law. None of the Obligors nor any Subsidiary has violated any Governmental Requirement or failed to
obtain any license, permit, franchise or other governmental authorization necessary for the ownership of any of its Properties or the conduct of
its business, which violation or failure would have (in the event such violation or failure were asserted by any Person through appropriate
action) a Material Adverse Effect. Except for such acts or failures to act as would not have a Material Adverse Effect, the Oil and Gas
Properties of the Obligors and their Subsidiaries (and properties unitized therewith) have been maintained, operated and developed in a good
and workmanlike manner and in conformity with all applicable laws and all rules, regulations and orders of all duly constituted authorities
having jurisdiction and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of such Oil and Gas Properties; specifically in this connection, (i) after the Closing
Date, no Oil and Gas Property of any Obligor or any of their respective Subsidiaries is subject to having allowable production reduced below
the full and regular allowable (including the maximum permissible tolerance) because of any overproduction

                                                                         39
(whether or not the same was permissible at the time) prior to the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas
Properties of any Obligor (or properties unitized therewith) are deviated from the vertical more than the maximum permitted by applicable
laws, regulations, rules and orders, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within,
such Oil and Gas Properties (or in the case of wells located on properties unitized therewith, such unitized properties).

Section 7.20 Insurance. Schedule 7.20 attached hereto contains an accurate and complete description of all material policies of fire, liability,
workers' compensation and other forms of insurance owned or held by the Obligors. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date of the closing have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and of all
agreements to which any Obligor is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least
such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area
by companies engaged in the same or a similar business for the assets and operations of the Obligors; will remain in full force and effect
through the respective dates set forth in Schedule 7.20 without the payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Agreement. Schedule 7.20 identifies all material risks, if any, which each
Obligor and their respective Board of Directors or officers have designated as being self insured. None of the Obligors has been refused any
insurance with respect to its assets or operations, nor has its coverage been limited below usual and customary policy limits, by an insurance
carrier to which it has applied for any such insurance or with which it has carried insurance during the last three years.

Section 7.21 Hedging Agreements. Schedule 7.21 sets forth, as of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or
delivery of oil, gas or other commodities) of the Obligors and each Wholly Owned Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the counter party to each such agreement.

Section 7.22 Restriction on Liens. Other than the Prior Credit Agreement and Existing Liens, neither the Borrower nor any of its Subsidiaries is
a party to any agreement or arrangement (other than this Agreement and the Security Instruments), or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its ability to grant Liens to other Persons on or in respect of their respective assets or
Properties.

Section 7.23 Material Agreements. Set forth on Schedule 7.23 is a complete list of all agreements, indentures, purchase agreements, obligations
in respect of letters of credit, guarantees, partnership agreements, exploration and development agreements, joint venture agreements, and other
instruments which are material to Borrower's and its Subsidiaries' business, activities, and operation or ownership of such Obligors' Property
(the "Material Agreements") in effect or to be in effect as of the Closing Date (other than the Partnership Agreements set forth on Schedule
7.14 and Hedging Agreements set forth on Schedule 7.21) providing for, evidencing, securing or otherwise relating to any Debt of any such
Obligor or any of its Subsidiaries, and all obligations of Borrower or any of its Subsidiaries to issuers of surety or appeal bonds issued for
account of any such Obligor or Subsidiary. The Borrower shall also make available to Administrative Agent and Lenders all Material
Agreements and other agreements and instruments (excluding any such agreements and other instruments that are cancelable upon 60 or less
days notice) of Borrower and each of its Subsidiaries relating to the purchase, transportation by pipeline, gas

                                                                        40
processing, marketing, sale and supply of natural gas and other Hydrocarbons, but in any event, any such agreement or other instrument that
will account for more than 10% of the sales of any such Obligor's or its Subsidiaries during the Borrower's current fiscal year. Upon request by
Administrative Agent, the Borrower shall deliver, or caused to be delivered, to the Administrative Agent and the Lenders a complete and
correct copy of all such Material Agreements.

Section 7.24 Gas Imbalances. As of the Closing Date, except as set forth on Schedule 7.24 or on the most recent certificate delivered pursuant
to
Section 8.07(c), on a net basis there are no gas imbalances, take or pay or other prepayments with respect to any of the Obligors' Oil and Gas
Properties which would require any such Obligors to deliver, in the aggregate, five percent (5%) or more of the monthly production of
Hydrocarbons produced from their Oil and Gas Properties at some future time without then or thereafter receiving fall payment therefor.

Section 7.25 Relationship of Obligors. The Obligors are engaged in related businesses and each Obligor is directly and indirectly dependent
upon each other Obligor for and in connection with their business activities and their financial resources; and each Obligor has determined,
reasonably and in good faith, that such Obligor will receive substantial direct and indirect economic and financial benefits from the extensions
of credit made under this Agreement, and such extensions of credit are in the best interests of such Obligor, having regard to all relevant facts
and circumstances.

                                                                ARTICLE VIII
                                                             Affirmative Covenants

Each of the Obligors (including Parent for so long as it is a Guarantor hereunder) covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable by the Obligors hereunder:

Section 8.01 Reporting Requirements. The Obligors shall deliver, or shall cause to be delivered, to the Administrative Agent with sufficient
copies of each for the Lenders:

(a) Annual Financial Statements. As soon as available and in any event within one hundred (100) days after the end of each of its fiscal year,
the audited consolidated and unaudited consolidating statements of income, stockholders' equity, changes in financial position and cash flow
for each of the Borrower and Parent and their respective Consolidated Subsidiaries for such fiscal year, and the related consolidated and
consolidating balance sheets of such Person and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, and accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to the Administrative Agent which opinion shall state that said financial statements
fairly present the consolidated and consolidating financial condition and results of operations of such Person and its Consolidated Subsidiaries
as at the end of, and for, such fiscal year and that such financial statements have been prepared in accordance with GAAP, except for such
changes in such principles with which the independent public accountants shall have concurred and such opinion shall not contain a "going
concern" or like qualification or exception, and a certificate of such accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of any Default.

(b) Quarterly Financial Statements. As soon as available and in any event within fifty-five (55) days after the end of each of the first three fiscal
quarterly periods of each of its fiscal year for each of the Borrower and Parent, consolidated and consolidating statements of income,
stockholders' equity, changes in financial position and cash flow of such Person and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such period, and the related consolidated and consolidating balance sheets
as at the end of such period, and

                                                                         41
setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, accompanied
by the certificate of a Responsible Officer, which certificate shall state that said financial statements fairly present the consolidated and
consolidating financial condition and results of operations of such Person and its Consolidated Subsidiaries in accordance with GAAP, as at the
end of, and for, such period (subject to normal year-end audit adjustments).

(c) Notice of Default, Etc. Promptly after any Obligor knows that any Default, Event of Default, labor dispute, or any Material Adverse Effect
has occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable detail and the action the Borrower or any
Guarantor proposes to take with respect thereto.

(d) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other report or letter submitted to the Obligor or any Subsidiary
by independent accountants in connection with any annual, interim or special audit made by them of the books of the Obligor and its
Subsidiaries, and a copy of any response by the Obligor or any Subsidiary, or the Board of Directors of the Obligor or such Subsidiary, to such
letter or report.

(e) SEC Filings, Etc. Promptly upon its becoming available, each financial statement, report, notice or proxy statement sent by Parent and its
Subsidiaries, and as applicable, Borrower, and its Subsidiaries to stockholders generally and each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by Parent and its Subsidiaries, and as
applicable, Borrower, and its Subsidiaries with or received by Parent and its Subsidiaries, and as applicable, Borrower, and its Subsidiaries in
connection therewith from any securities exchange or the SEC or any successor agency.

(f) Notices Under Other Loan Agreements. Promptly after the furnishing thereof, copies of any statement, report or notice furnished by the
Parent or by the Borrower or any of its Subsidiaries to any Person pursuant to the terms of any indenture, loan or credit or other similar
agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section
8.01.

(g) Other Matters. From time to time such other information regarding the business, affairs or financial condition of any Obligor or any
Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under
ERISA) as any Lender or the Administrative Agent may reasonably request.

(h) Hedging Agreements. As soon as available and in any event within fifteen Business Days after the last day of each fiscal quarter, a report,
in form and substance satisfactory to the Administrative Agent, setting forth as of the last Business Day of such fiscal quarter a true and
complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide
for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Obligors and each Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value therefor, any
new credit support agreements relating thereto not listed on Schedule 7.21, any margin required or supplied under any credit support document,
and the counter party to each such agreement.

The Borrower will furnish to the Administrative Agent, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate substantially in the form of Exhibit C executed by a Responsible Officer (i) certifying as to the matters set forth therein and
stating that no Default has occurred and is continuing (or, if any Default has occurred and is

                                                                         42
continuing, describing the same in reasonable detail), and (ii) setting forth in reasonable detail the computations necessary to determine
whether the Borrower is in compliance with Sections 9.13, 9.14, and 9.15, and whether the Parent is in compliance with Section 9.16 as of the
end of the respective fiscal quarter or fiscal year.

Section 8.02 Litigation. Borrower and its Subsidiaries shall promptly give to the Administrative Agent notice of any litigation or proceeding
against or adversely affecting Borrower or any Subsidiary in which the amount claimed exceeds $250,000 or an aggregate of claims in excess
of $1,000,000 and is not otherwise covered in full by insurance (subject to normal and customary deductibles and for which the insurer has not
assumed the defense), or in which injunctive or similar relief is sought. Parent shall promptly give notice to the Administrative Agent of any
litigation or proceeding against or adversely affecting Parent in which the amount claimed exceeds $1,000,000 or an aggregate of claims in
excess of $10,000,000 and is not otherwise covered in full by insurance (subject to normal and customary deductibles and for which the insurer
has not assumed the defense), or in which injunctive or similar relief is sought. Borrower will, and will cause each of its Subsidiaries to,
promptly notify the Administrative Agent and each of the Lenders of any claim, judgment, Lien or other encumbrance affecting any Property
of Borrower or any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $250,000
or an aggregate of such claims in excess of $1,000,000 and Parent will promptly notify the Administrative Agent and each of the Lenders of
any claim, judgment, Lien or other encumbrance affecting any Property of Parent if the value of the claim, judgment, Lien, or other
encumbrance affecting such Property shall exceed $1,000,000 or an aggregate of such claims in excess of $10,000,000.

Section 8.03 Maintenance, Etc.

(a) Generally. Except as permitted under Section 9.09, each Obligor shall and shall cause each of its Subsidiaries to: preserve and maintain its
organization, existence and all of its material rights, privileges and franchises; keep books of record and account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business and activities; comply with all Governmental Requirements if
failure to comply with such requirements will have a Material Adverse Effect; pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; upon reasonable notice, permit representatives of the Administrative Agent or any Lender,
during normal business hours, to examine, copy and make extracts from its books and records, to inspect its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be);
and keep, or cause to be kept, insured by financially sound and reputable insurers all Property of a character usually insured by Persons
engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against
by such Persons and carry such other insurance as is usually carried by such Persons including, without limitation, environmental risk insurance
to the extent reasonably available.

(b) Proof of Insurance. Contemporaneously with the delivery of the financial statements required by Section 8.01(a) to be delivered for each
year, the Borrower will furnish or cause to be furnished to the Administrative Agent and the Lenders a certificate of insurance coverage from
the insurer in form and substance satisfactory to the Administrative Agent listing Administrative Agent as "loss payee" and, if requested, will
furnish the Administrative Agent and the Lenders copies of the applicable policies.

(c) Oil and Gas Properties. Borrower will and will cause each of its Subsidiaries to, do or cause to be done all things reasonably necessary to
preserve and keep in good repair, working order and efficiency all of its Oil

                                                                        43
and Gas Properties and other material Properties including, without limitation, all equipment, machinery and facilities, and from time to time
will make all the reasonably necessary repairs, renewals and replacements so that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and maintained, except to the extent a portion of such Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts. Borrower will and will cause each of its Subsidiaries to promptly: (i)
pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties, (ii) perform or make
reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of
the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material
Properties, (iii) will and will cause each Subsidiary to do all other things necessary to keep unimpaired, except for Liens described in Section
9.03, its rights with respect to its Oil and Gas Properties and other material Properties and prevent any forfeiture thereof or a default thereunder,
except to the extent a portion of such Properties is no longer capable of producing Hydrocarbons in economically reasonable amounts and
except for Transfers permitted by Section 9.18. Borrower will and will cause each of its Subsidiaries to operate its Oil and Gas Properties and
other material Properties or cause or make reasonable and customary efforts to cause such Oil and Gas Properties and other material Properties
to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts
and agreements and in compliance in all material respects with all Governmental Requirements.

Section 8.04 Environmental Matters.

(a) Establishment of Procedures. The Obligors will and will cause each of their Subsidiaries to establish and implement such procedures as may
be reasonably necessary to continuously determine and assure that any failure of the following does not have a Material Adverse Effect: (i) all
Property of the Obligors and their Subsidiaries and the operations conducted thereon and other activities of the Obligors and their Subsidiaries
are in compliance with and do not violate the requirements of any Environmental Laws, (ii) no oil, hazardous substances or solid wastes are
disposed of or otherwise released on or to any Property owned by any such party except in compliance with Environmental Laws,
(iii) no hazardous substance will be released on or to any such Property in a quantity equal to or exceeding that quantity which requires
reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or hazardous substance is
released on or to any such Property so as to pose an imminent and substantial endangerment to public health or welfare or the environment.

(b) Notice of Action. The Obligors will promptly notify the Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which any Obligor has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.

(c) Future Acquisitions. The Obligors will and will cause each of their Subsidiaries to provide environmental audits and tests in accordance
with American Society for Testing and Materials standards as reasonably requested by the Administrative Agent and the Lenders (or as
otherwise required to be obtained by the Administrative Agent or the Lenders by any Governmental Authority) in connection with any future
acquisitions of Oil and Gas Properties or other material Properties.

Section 8.05 Further Assurances. The Obligors will and will cause each of their Subsidiaries to cure promptly any defects in the creation and
issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement. The Obligors at their expense will and
will cause each Subsidiary to promptly execute and deliver to the Administrative Agent upon request all such

                                                                         44
other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Obligors or any Subsidiary,
as the case may be, in any Loan Document, or to further evidence and more fully describe the collateral intended as security for the Notes, or to
correct any omissions in any Loan Document, or to state more fully the security obligations set out herein or in any Loan Document, or to
perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or
obtain any consents, all as may be necessary or appropriate in connection therewith.

Section 8.06 Performance of Obligations. The Borrower will pay the Notes according to the reading, tenor and effect thereof; the Guarantors
will pay under the Guarantees according to the terms thereof, and the Obligors will and will cause each of their Subsidiaries to do and perform
every act and discharge all of the obligations to be performed and discharged by them under this Agreement and any other Loan Document, at
the time or times and in the manner specified.

Section 8.07 Engineering Reports.

(a) Not less than 30 days prior to each Scheduled Borrowing Base Redetermination Date, commencing with the Scheduled Borrowing Base
Redetermination to occur on or around August 1, 2004, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve
Report. The Reserve Report of each year delivered in connection with the February 1 Scheduled Borrowing Base Redetermination shall be
prepared by certified independent petroleum engineers or other independent petroleum consultant(s) acceptable to the Administrative Agent
and the Reserve Report of each year delivered in connection with the August 1 Scheduled Borrowing Base Redetermination shall be prepared
by or under the supervision of the chief engineer of the Obligors and for which a Responsible Officer shall certify such Reserve Report to be
true and accurate and to have been prepared in accordance with the procedures used in the immediately proceeding February 1 Scheduled
Borrowing Base Redetermination Reserve Report.

(b) In the event of an unscheduled redetermination, the Borrower shall furnish to the Administrative Agent and the Lenders a Reserve Report
prepared by or under the supervision of the chief engineer of the Obligors together with the certificate of a Responsible Officer who shall
certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately
preceding Reserve Report. For any unscheduled redetermination requested by the Lenders or the Borrower pursuant to Section 2.08(d)), the
Borrower shall provide such Reserve Report with an "as of" date as required by the Lenders as soon as possible, but in any event no later than
30 days following the receipt of the request by the Administrative Agent.

(c) With the delivery of each Reserve Report, the Borrower shall provide, or cause to be provided, to the Administrative Agent and the
Lenders, a certificate from a Responsible Officer certifying that, to the best of his knowledge and in all material respects: (i) the information
contained in the Reserve Report and any other information delivered in connection therewith is true and correct, (ii) the Obligors and the
Partnerships own good and marketable title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all
Liens except for Liens permitted by Section 9.03,
(iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments with respect
to its Oil and Gas Properties evaluated in such Reserve Report which would require any Obligor to deliver Hydrocarbons produced from such
Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor,
(iv) none of Obligor's or and the Partnerships' Oil and Gas Properties have been sold since the date of the last Borrowing Base determination
except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the certificate is a list of its Oil and Gas Properties added to and deleted from
the immediately prior Reserve Report

                                                                         45
and a list showing any change in working interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change,
(vi) attached to the certificate is a list of all Persons disbursing proceeds to the Obligors from their Oil and Gas Properties, and (vii) all of the
Oil and Gas Properties evaluated by such Reserve Report are Mortgaged Property except as set forth on a schedule attached to the certificate.

Section 8.08 Title Curative. Borrower shall cure, and shall cause its Subsidiaries to cure or cause to be cured, any title defects or exceptions
which are not Excepted Liens raised by such information, or substitute acceptable Mortgaged Properties with no title defects or exceptions
except for Excepted Liens covering Mortgaged Properties of an equivalent value, within 30 days after a request by the Administrative Agent to
cure such defects or exceptions.

Section 8.09 Additional Collateral.

(a) Lien in Oil and Gas Properties. At all times hereunder that the Obligations remain unpaid, including whenever any Obligor acquires any
additional Oil and Gas Properties or additional interests in existing Oil and Gas Properties, Obligors shall grant to the Administrative Agent for
the benefit of the Lenders as security for the Indebtedness a first-priority Lien interest (subject only to Excepted Liens) covering at least 80% of
the total value (based upon the most recent Reserve Report plus the value of Oil and Gas Properties acquired after the date of such Reserve
Report determined on a basis consistent with the Reserve Report) of the Obligors' Oil and Gas Properties either directly under the Mortgages or
indirectly under the pledge of their interests in the Partnerships. Such Lien will be created and perfected by and in accordance with the
provisions of mortgages, deeds of trust, security agreements and financing statements, or other Security Instruments, all in form and substance
satisfactory to the Administrative Agent in its sole discretion and in sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.

(b) Title Information. Concurrently with the granting of the Lien or other action referred to in Section 8.09(a) above, the Borrower or its
Subsidiaries will provide to the Administrative Agent title information in form and substance satisfactory to the Administrative Agent in its
sole discretion with respect to such Obligor's interests in such Oil and Gas Properties.

(c) Legal Opinions. Promptly after the filing of any new Security Instrument in any state, upon the request of the Administrative Agent,
Borrower will provide, or cause to be provided, to the Administrative Agent an opinion addressed to the Administrative Agent for the benefit of
the Lenders in form and substance satisfactory to the Administrative Agent in its sole discretion from counsel acceptable to Administrative
Agent, stating that the Security Instrument is valid, binding and enforceable in accordance with its terms and in legally sufficient form for such
jurisdiction.

(d) Letters in Lieu.

(i) Upon request by Administrative Agent and Required Lenders, Borrower shall, and shall cause its Subsidiaries to, provide to Administrative
Agent undated letters, in form of Exhibit F attached hereto, from Borrower or such Subsidiary to each purchaser of production and disburser of
proceeds of production from or attributable to the Mortgaged Properties, along with sufficient copies of additional executed letters with the
addressees left blank, authorizing and directing the addressees to make future payments attributable to production from the Mortgaged
Properties directly to Administrative Agent for the ratable benefit of the Lenders.

(ii) Borrower and each of its Subsidiaries hereby designates Administrative Agent as its agent and attorney-in-fact, to act in their name, place,
and stead for the purpose of completing and delivering any

                                                                         46
and all of the letters in lieu of division orders delivered by Borrower and such Subsidiaries to Administrative Agent, including, without
limitation, completing any blanks contained in such letter and attaching exhibits thereto describing the relevant Collateral. The Borrower and
each of its Subsidiaries hereby ratifies and confirms all that Administrative Agent shall lawfully do or cause to be done by virtue of this power
of attorney and the rights granted with respect to such power of attorney. This power of attorney is coupled with the interest of Administrative
Agent in the Collateral, shall commence and be in full force and effect as of the Closing Date and shall remain in full force and effect and shall
be irrevocable so long as any Obligation remains outstanding or unpaid or any Commitment exists. The powers conferred on Administrative
Agent by this appointment are solely to protect the interests of Administrative Agent and each of the Lenders under the Loan Documents and
shall not impose any duty upon Administrative Agent to exercise any such powers. Administrative Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and shall not be responsible to Borrower, its Subsidiaries, or any other Person
for any act or failure to act with respect to such powers, except for gross negligence or willful misconduct.

(iii) Until such time as Administrative Agent shall notify Borrower and its Subsidiaries to the contrary, Borrower and its Subsidiaries shall be
entitled to receive from the purchasers or disbursers of production all such proceeds of runs, subject however to the liens created under the
Security Instruments. Upon the occurrence and during the continuance of a Default or such other time as Administrative Agent shall in its
discretion so elect, Administrative Agent may deliver to the addressees the letters-in-lieu described in Subsection 8.09(d)(i) abo