Document:

Exhibit 10.1

    

      

      

      

      

      EXHIBIT
        10.1

      

      

      

      

      

      

      

      DRILLING
        AND OPERATING AGREEMENT

      FOR

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P.

      

      

      

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      INDEX

      
        	
                Section

              	 	
                Page
                  #

              
	
                1.

              	
                Assignment
                  of Well Locations; Representations and Indemnification Associated
                  with the
                  

              	 
	 	
                Assignment
                  of the Lease; Designation of Additional Well Locations; Outside
                  Activities
                  are

              	 
	 	
                not
                  Restricted

              	
                1

              
	 	 	 
	
                2.

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

              	
                2

              
	 	 	 
	
                3.

              	
                Operator
                  - Responsibilities in General; Covenants; Term

              	
                3

              
	 	 	 
	
                4.

              	
                Operator’s
                  Charges for Drilling and Completing Wells, Payment, Completion
                  Determination,

              	 
	 	
                Dry
                  Hole Determination, Excess Funds and Cost Overruns-Intangible Drilling
                  Costs, Excess

              	 
	 	
                Funds
                  and Cost Overruns-Tangible Costs

              	
                4

              
	 	 	 
	
                5.

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

              	
                7

              
	 	 	 
	
                6.

              	
                Operations
                  Subsequent to Completion of the Wells, Fee Adjustments, Extraordinary
                  Costs,

              	 
	 	
                Pipelines,
                  Price Determinations, Plugging and Abandonment

              	
                7

              
	 	 	 
	
                7.

              	
                Billing
                  and Payment Procedure with Respect to Operation of Wells, Disbursements,
                  Separate

              	 
	 	
                Account
                  for Sale Proceeds, Records and Reports, Additional
                  Information

              	
                9

              
	 	 	 
	
                8.

              	
                Operator’s
                  Lien, Right to Collect from Oil or Gas Purchaser

              	
                10

              
	 	 	 
	
                9.

              	
                Successors
                  and Assigns, Transfers, Appointment of Agent

              	
                11

              
	 	 	 
	
                10.

              	
                Operator’s
                  Insurance, Subcontractors’’ Insurance, Operation’s
                  Liability

              	
                12

              
	 	 	 
	
                11.

              	
                Internal
                  Revenue Code Election; Relationship of Parties; Right to Take Production
                  in Kind

              	
                13

              
	 	 	 
	
                12.

              	
                Effect
                  of Force Majeure; Definition of Force Majeure; Limitation

              	
                14

              
	 	 	 
	
                13.

              	
                Term

              	
                14

              
	 	 	 
	
                14.

              	
                Governing
                  Law; Invalidity

              	
                14

              
	 	 	 
	
                15.

              	
                Integration,
                  Written Amendment

              	
                14

              
	 	 	 
	
                16.

              	
                Waiver
                  of Default or Breach

              	
                14

              
	 	 	 
	
                17.

              	
                Notices

              	
                14

              
	 	 	 
	
                18.

              	
                Interpretation

              	
                15

              
	 	 	 
	
                19.

              	
                Counterparts

              	
                15

              

      

      

      
        	 	
                Signature
                  Page

              	
                15

              
	 	 	 
	 	
                Exhibit
                  A  Description
                  of Leases and Initial Well Locations

              	 
	 	
                Exhibits
                  A 1 through A8  Maps
                  of initial Well Locations

              	 
	 	
                Exhibit
                  B  Forms
                  of Assignment

              	 
	 	
                Exhibit
                  C  Form
                  of Addendum

              	 
	 	 	 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      DRILLING
        AND OPERATING AGREEMENT

       

      THIS
        AGREEMENT made this 3rd
        day of
        December, 2005, by and between ATLAS RESOURCES, INC., a Pennsylvania corporation
        (hereinafter referred to as “Atlas” or “Operator”),

       

      and

       

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P., a Delaware limited partnership, (hereinafter
        referred to as the “Developer”).

       

      WITNESSETH
        THAT:

       

      WHEREAS,
        the Operator, by virtue of the Oil and Gas Leases (the “Leases”) described on
        Exhibit A attached to and made a part of this Agreement, has certain rights
        to
        develop the nine (9) initial well locations (the “Initial Well Locations”)
        identified on the maps attached to and made a part of this Agreement as Exhibits
        A-l through A-9;

       

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

       

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

       

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

       

      
        	
                1.

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

              

      

       

      	(a)
                	
              Assignment
                of Well Locations.
                The Operator shall execute an assignment of an undivided percentage
                of
                Working Interest in the Well Location acreage for each well to the
                Developer as shown on Exhibit A attached hereto, which assignment
                shall be
                limited to a depth from the surface to the deepest depth penetrated
                at the
                cessation of drilling operations.

            

       

      The
        assignment shall be substantially in the form of Exhibit B attached to and
        made
        a part of this Agreement. The amount of acreage included in each Initial
        Well
        Location and the configuration of the Initial Well Location are indicated
        on the
        maps attached as Exhibits A-l through A-9. The amount of acreage included
        in
        each Additional Well Location and the configuration of the Additional Well
        Location shall be indicated on the maps to be attached as exhibits to the
        applicable addendum to this Agreement as provided in sub-section (c)
        below.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

       

      
        	 	
                (b)

              	
                Representations
                  and Indemnification Associated with the Assignment of the
                  Lease.
                  The Operator represents and warrants to the Developer
                  that:

              

      

       

      	(i)
                	
              the
                Operator is the lawful owner of the Lease and rights and interest
                under
                the Lease and of the personal property on the Lease or used in connection
                with the Lease; 

            

       

      	(ii)
                	
              the
                Operator has good right and authority to sell and convey the rights,
                interest, and property;

            

       

      	(iii)
                	
              the
                rights, interest, and property are free and clear from all liens
                and
                encumbrances; and 

            

       

      	(iv)
                	
              all
                rentals and royalties due and payable under the Lease have been duly
                paid.
                

            

       

      These
        representations and warranties shall also be included in each recorded
        assignment of the acreage included in each Initial Well Location and Additional
        Well Location designated pursuant to sub-section (c) below, substantially
        in the
        manner set forth in Exhibit B. 

       

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

       

      
        	 	
                (c)

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

              

      

       

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

            

       

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

            

       

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

            

       

      
        	 	
                (d)

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

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

       

      
        	
                2.

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

              

      

       

      
        	 	
                (a)

              	
                Drilling
                  of Wells.
                  Operator, as Developer’s independent contractor, agrees to drill, complete
                  (or plug) and operate nine (9) oil and gas wells on the nine (9)
                  Initial
                  Well Locations in accordance with the terms and conditions of this
                  Agreement. Developer, as a minimum commitment, agrees to participate
                  in
                  and pay the Operator’s charges for drilling and completing the wells and
                  any extra costs pursuant to Section 4 in proportion to the share
                  of the
                  Working Interest owned by the Developer in the wells with respect
                  to all
                  initial wells. It is understood and agreed that, subject to sub-section
                  (e) below, Developer does not reserve the right to decline participation
                  in the drilling of any of the initial wells to be drilled under
                  this
                  Agreement.

              

      

       

      
        	 	
                (b)

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

              

      

       

      
        	 	
                (c)

              	
                Depth.
                  All of the wells to be drilled under this Agreement shall be:
                  

              

      

       

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

            

       

      	(ii)  	
              drilled
                to a depth sufficient to test thoroughly the objective formation
                or the
                deepest assigned depth, whichever is
                less.

            

       

      
        	 	
                (d)

              	
                Interest
                  of Developer.
                  Except as otherwise provided in this Agreement, all costs, expenses,
                  and
                  liabilities incurred in connection with the drilling and other
                  operations
                  and activities contemplated by this Agreement shall be borne and
                  paid, and
                  all wells, gathering lines of up to approximately 2,500 feet on
                  the Well
                  Location in connection with a natural gas well, equipment, materials,
                  and
                  facilities acquired, constructed or installed under this Agreement
                  shall
                  be owned, by the Developer in proportion to the share of the Working
                  Interest owned by the Developer in the wells. Subject to the payment
                  of
                  lessor’s royalties and other royalties and overriding royalties, if any,
                  production of oil and gas from the wells to be drilled under this
                  Agreement shall be owned by the Developer in proportion to the
                  share of
                  the Working Interest owned by the Developer in the
                  wells.

              

      

       

      
        	 	
                (e)

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

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

       

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

            

       

      	(ii)
                	
              newly
                discovered title defects; or 

            

       

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

            

       

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

       

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

       

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

       

      
        	 	
                (a)

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

              

      

       

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

            

       

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

            

       

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

            

       

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

            

       

      	(v)
                	
              perform
                the necessary administrative and accounting functions.
                

            

       

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

       

      
        	 	
                (b)

              	
                Covenants.
                  Operator covenants and agrees that under this
                  Agreement:

              

      

       

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

            

       

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

            

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

       

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

            

       

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

            

       

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

            

       

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

            

       

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

            

       

      
        	 	
                (c)

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

              

      

       

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

            

       

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

            

       

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

            

       

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

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

       

      
        	
                4.

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

              

      

       

      
        	 	
                (a)

              	
                Operator’s
                  Charges for Drilling and Completing Wells.
                  Each oil and gas well which is drilled and completed under this
                  Agreement
                  shall be drilled and completed on a Cost plus an unaccountable,
                  fixed
                  payment reimbursement of $15,000 per well for Developer’s Participants’
                  share of Operator’s general and administrative overhead plus 15% basis.
                  “Cost,” when used with respect to services, shall mean the reasonable,
                  necessary, and actual expenses incurred by Operator on behalf of
                  Developer
                  in providing the services under this Agreement, determined in accordance
                  with generally accepted accounting principles. As used elsewhere,
“Cost”
                  shall mean the price paid by Operator in an arm’s-length transaction.
                  

              

      

       

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

       

      
        	 	
                (b)

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

              

      

       

      	(i)
                	
              commence
                site preparation for the initial wells;

            

       

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

            

       

      	(iii)
                	
              insure
                the availability of equipment and materials.

            

       

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

       

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

            

       

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

            

       

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

            

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

       

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

       

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

            

       

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

            

       

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

            

       

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

       

      	(i)
                	
              commence
                site preparation;

            

       

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

            

       

      	(iii)
                	
              insure
                the availability of equipment and
                materials.

            

       

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

       

      
        	 	
                (c)

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

              

      

       

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

            

       

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

            

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

       

      	(i)  	
              the
                Intangible Drilling Costs for an additional well or wells to be drilled
                on
                the Additional Well Locations; or 

            

       

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

            

       

      Conversely,
        if Operator’s price specified in sub-section (a) above for the Intangible
        Drilling Costs of any well exceeds the estimated Intangible Drilling Costs
        (which are the Intangible Drilling Costs set forth on the AFE) prepaid by
        Developer for the well, then:

       

      	(i)  	
              Developer
                shall pay the additional price to Operator within five (5) business
                days
                after notice from Operator that the additional amount is due and
                owing;
                or

            

       

      	(ii)  	
              Developer
                and Operator may agree to delete or reduce Developer’s Working Interest in
                one or more wells to be drilled under this Agreement which have not
                yet
                been spudded to provide funds to pay the additional amounts owed
                by
                Developer to Operator. If doing so results in any excess prepaid
                Intangible Drilling Costs, then these funds shall be applied, in
                proportion to the share of the Working Interest owned by the Developer
                in
                the wells, to: 

            

       

      	(a)  	
              the
                Intangible Drilling Costs for an additional well or wells to be drilled
                on
                the Additional Well Locations; or 

            

       

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

            

       

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

       

      
        	 	
                (f)

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

              

      

       

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

            

       

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

            

       

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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

       

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

            

       

      	(ii)
                	
              Developer
                and Operator may agree to delete or reduce Developer’s Working Interest in
                one or more wells to be drilled under this Agreement which have not
                yet
                been spudded to provide funds to pay the additional amounts owed
                by
                Developer to Operator. If doing so results in any excess prepaid
                Tangible
                Costs, then these funds shall be applied, in proportion to the share
                of
                the Working Interest owed by the Developer in the wells, to:
                

            

       

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

            

       

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

            

       

      	(iii)
                	
              The
                Developer’s Participants’ share of the Tangible Costs of all of the wells
                drilled under this Agreement and any additional wells to be drilled
                on the
                Additional Well Locations under any Addendum to this Agreement is
                ten
                percent (10%) of the total price prepaid by Developer to Operator
                pursuant
                to Section 4(b) of this Agreement or any Addendum hereto. The Developer’s
                Participants’ share of the Tangible Costs of any one well drilled under
                this Agreement shall be determined subject to the preceding sentence,
                taking into account the Developer’s share of all of the Tangible Costs of
                all of the wells to be drilled under this Agreement and any Addendum
                hereto.

            

       

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

       

      
        	
                5.

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

              

      

       

      
        	 	
                (a)

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

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

       

      
        	 	
                (b)

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

              

      

       

      
        	
                6.

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

              

      

       

      
        	 	
                (a)

              	
                Operations
                  Subsequent to Completion of the Wells.
                  Beginning with the month in which a well drilled under this Agreement
                  begins to produce, Operator shall be entitled to an operating fee
                  of $285
                  per month for each well being operated under this Agreement,
                  proportionately reduced to the extent the Developer owns less than
                  100% of
                  the Working Interest in the wells. This fee shall be in lieu of
                  any direct
                  charges by Operator for its services or the provision by Operator
                  of its
                  equipment for normal superintendence and maintenance of the wells
                  and
                  related pipelines and facilities. 

              

      

       

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

       

      	(i)
                	
              well
                tending, routine maintenance and adjustment;

            

       

      	(ii)
                	
              reading
                meters, recording production, pumping, maintaining appropriate books
                and
                records; 

            

       

      	(iii)
                	
              preparing
                reports to the Developer and government agencies; and
                

            

       

      	(iv)
                	
              collecting
                and disbursing revenues. 

            

       

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

       

      	(i)
                	
              the
                production and sale of oil; 

            

       

      	(ii)
                	
              the
                collection and disposal of salt water or other liquids produced by
                the
                wells;

            

       

      	(iii)
                	
              the
                rebuilding of access roads; and 

            

       

      	(iv)
                	
              the
                purchase of equipment, materials or third party services;
                

            

       

      which,
        subject to the provisions of sub-section (c) of this Section 6, shall be
        paid by
        the Developer in proportion to the share of the Working Interest owned by
        the
        Developer in the wells. 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

       

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

       

      
        	 	
                (b)

              	
                Fee
                  Adjustments.
                  The monthly operating fee set forth in sub-section (a) above may
                  be
                  adjusted by Operator annually, as of the first day of January (the
                  “Adjustment Date”) of each year, beginning January l, 2007. Such
                  adjustment, if any, shall not exceed the percentage increase in
                  the
                  average weekly earnings of “Crude Petroleum, Natural Gas, and Natural Gas
                  Liquids” workers, as published by the U.S. Department of Labor, Bureau of
                  Labor Statistics, and shown in Employment and Earnings Publication,
                  Monthly Establishment Data, Hours and Earning Statistical Table
                  C-2, Index
                  Average Weekly Earnings of “Crude Petroleum, Natural Gas, and Natural Gas
                  Liquids” workers, SIC Code #131-2, or any successor index thereto, since
                  January 1, 2004, in the case of the first adjustment, and since
                  the
                  previous Adjustment Date, in the case of each subsequent
                  adjustment.

              

      

       

      
        	 	
                (c)

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

              

      

       

      	(i)
                	
              to
                safeguard persons or property; or 

            

       

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

            

       

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

       

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

       

      
        	 	
                (d)

              	
                Pipelines.
                  Developer shall have no interest in the pipeline gathering system,
                  which
                  gathering system shall remain the sole property of Operator or
                  its
                  Affiliates and shall be maintained at their sole cost and
                  expense.

              

      

       

      
        	 	
                (e)

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

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

       

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

              

      

       

      
        	 	
                (f)

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

              

      

       

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

       

      
        	
                7.

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

              

      

       

      
        	 	
                (a)

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

              

      

       

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

            

       

      	(ii)  	
              any
                third-party invoices rendered to Operator with respect to costs and
                expenses incurred in connection with the operation of the wells.
                

            

       

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

       

      Operator
        shall: 

       

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

            

       

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

            

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      

       

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

       

      
        	 	
                (b)

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

              

      

       

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

            

       

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

            

       

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

       

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

            

       

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

            

       

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

            

       

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

            

       

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

            

       

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

            

       

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

            

       

      	(i)
                	
              to
                allocate any extra costs incurred with respect to the well between
                Tangible Costs and Intangible Drilling Costs; and
                

            

       

      	(ii)
                	
              to
                determine the amount of investment tax credit or marginal well production
                tax credit, if applicable.

            

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      

       

      	(e)  	
              Additional
                Information. Operator
                shall promptly furnish the Developer with any additional information
                as it
                may reasonably request, including without limitation geological,
                technical, and financial information, in the form as may reasonably
                be
                requested, pertaining to any phase of the operations and activities
                governed by this Agreement. The Developer and its authorized employees,
                agents and consultants, including independent accountants shall,
                at
                Developer’s sole cost and expense:

            

       

      	(i)
                	
              on
                at least ten (10) days’ written notice have access during normal business
                hours to all of Operator’s records pertaining to operations, including
                without limitation, the right to audit the books of account of Operator
                relating to all receipts, costs, charges, expenses and disbursements
                under
                this Agreement, including information regarding the separate account
                required under sub-section (c); and 

            

       

      	(ii)
                	
              have
                access, at its sole risk, to any wells drilled by Operator under
                this
                Agreement at all times to inspect and observe any machinery, equipment
                and
                operations.

            

       

      8. Operator’s
        Lien; Right to Collect From Oil or Gas Purchaser.

       

      
        	 	
                (a)

              	
                Operator’s
                  Lien. To
                  secure the payment of all sums due from Developer to Operator under
                  the
                  provisions of this Agreement the Developer grants Operator a first
                  and
                  preferred lien on and security interest in the
                  following:

              

      

       

      	(i)
                	
              the
                Developer’s interest in the Leases covered by this Agreement;
                

            

       

      	(ii)
                	
              the
                Developer’s interest in oil and gas produced under this Agreement and its
                proceeds from the sale of the oil and gas; and

            

       

      	(iii)
                	
              the
                Developer’s interest in materials and equipment under this
                Agreement.

            

       

      
        	 	
                (b)

              	
                Right
                  to Collect From Oil or Gas Purchaser. If
                  the Developer fails to timely pay any amount owing under this Agreement
                  by
                  it to the Operator, then Operator, without prejudice to other existing
                  remedies, may collect and retain from any purchaser or purchasers
                  of oil
                  or gas the Developer’s share of the proceeds from the sale of the oil and
                  gas until the amount owed by the Developer, plus twelve percent
                  (12%)
                  interest on a per annum basis, and any additional costs (including
                  without
                  limitation actual attorneys’ fees and costs) resulting from the
                  delinquency, has been paid. Each purchaser of oil or gas shall
                  be entitled
                  to rely on Operator’s written statement concerning the amount of any
                  default.

              

      

       

      9. Successors
        and Assigns; Transfers; Appointment of Agent.

       

      
        	 	
                (a)

              	
                Successors
                  and Assigns.
                  This Agreement shall be binding on and inure to the benefit of
                  the
                  undersigned parties and their respective successors and permitted
                  assigns.
                  However, without the prior written consent of the Developer, the
                  Operator
                  may not assign, transfer, pledge, mortgage, hypothecate, sell or
                  otherwise
                  dispose of any of its interest in this Agreement, or any of the
                  rights or
                  obligations under this Agreement. Notwithstanding, this consent
                  shall not
                  be required in connection with:

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

       

      	(i)
                	
              the
                assignment of work to be performed for Operator by subcontractors,
                it
                being understood and agreed, however, that any assignment to Operator’s
                subcontractors shall not in any manner relieve or release Operator
                from
                any of its obligations and responsibilities under this Agreement;
                

            

       

      	(ii)
                	
              any
                lien, assignment, security interest, pledge or mortgage arising under
                Operator’s present or future financing arrangements; or
                

            

       

      	(iii)
                	
              the
                liquidation, merger, consolidation, or other corporate reorganization
                or
                sale of substantially all of the assets of
                Operator.

            

       

      Further,
        in order to maintain uniformity of ownership in the wells, production,
        equipment, and leasehold interests covered by this Agreement, and
        notwithstanding any other provisions to the contrary, the Developer shall
        not,
        without the prior written consent of Operator, sell, assign, transfer, encumber,
        mortgage or otherwise dispose of any of its interest in the wells, production,
        equipment or leasehold interests covered by this Agreement unless the
        disposition encompasses either:

       

      	(i)
                	
              the
                entire interest of the Developer in all wells, production, equipment
                and
                leasehold interests subject to this Agreement; or
                

            

       

      	(ii)
                	
              an
                equal undivided interest in all such wells, production, equipment,
                and
                leasehold interests.

            

       

      
        	 	
                (b)

              	
                Transfers.
                  Subject to the provisions of sub-section (a) above, any sale, encumbrance,
                  transfer or other disposition made by the Developer of its interests
                  in
                  the wells, production, equipment, and/or leasehold interests covered
                  by
                  this Agreement shall be made:

              

      

       

      	(i)
                	
              expressly
                subject to this Agreement;

            

       

      	(ii)
                	
              without
                prejudice to the rights of the Operator; and

            

       

      	(iii)
                	
              in
                accordance with and subject to the provisions of the
                Lease.

            

       

      
        	 	
                (c)

              	
                Appointment
                  of Agent. If
                  at any time the interest of the Developer is divided among or owned
                  by
                  co-owners, Operator may, at its discretion, require the co-owners
                  to
                  appoint a single trustee or agent with full authority to do the
                  following:

              

      

       

      	(i)
                	
              receive
                notices, reports and distributions of the proceeds from production;
                

            

       

      	(ii)
                	
              approve
                expenditures; 

            

       

      	(iii)
                	
              receive
                billings for and approve and pay all costs, expenses and liabilities
                incurred under this Agreement; 

            

       

      	(iv)
                	
              exercise
                any rights granted to the co-owners under this Agreement;
                

            

       

      	(v)
                	
              grant
                any approvals or authorizations required or contemplated by this
                Agreement; 

            

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      

       

      	(vi)
                	
              sign,
                execute, certify, acknowledge, file and/or record any agreements,
                contracts, instruments, reports, or documents whatsoever in connection
                with this Agreement or the activities contemplated by this Agreement;
                and
                

            

       

      	(vii)
                	
              deal
                generally with, and with power to bind, the co-owners with respect
                to all
                activities and operations contemplated by this
                Agreement.

            

       

      However,
        all the co-owners shall continue to have the right to enter into and execute
        all
        contracts or agreements for their respective shares of the oil and gas produced
        from the wells drilled under this Agreement in accordance with sub-section
        (c)
        of Section 11.

       

      10. Operator’s
        Insurance; Subcontractors’ Insurance; Operator’s
        Liability.

       

      
        	 	
                (a)

              	
                Operator’s
                  Insurance.
                  Operator shall obtain and maintain at its own expense so long as
                  it is
                  Operator under this Agreement all required Workmen’s Compensation
                  Insurance and comprehensive general public liability insurance
                  in amounts
                  and coverage not less than $1,000,000 per person per occurrence
                  for
                  personal injury or death and $1,000,000 for property damage per
                  occurrence, which shall include coverage for blow-outs and total
                  liability
                  coverage of not less than $10,000,000.

              

      

       

      Subject
        to the above limits, the Operator’s general public liability insurance shall be
        in all respects comparable to that generally maintained in the industry with
        respect to services of the type to be rendered and activities of the type
        to be
        conducted under this Agreement. Operator’s general public liability insurance
        shall, if permitted by Operator’s insurance carrier:

       

      	(i)
                	
              name
                the Developer as an additional insured party; and
                

            

       

      	(ii)
                	
              provide
                that at least thirty (30) days’ prior notice of cancellation and any other
                adverse material change in the policy shall be given to the
                Developer.

            

       

      However,
        the Developer shall reimburse Operator for the additional cost, if any, of
        including it as an additional insured party under the Operator’s insurance.

       

      Current
        copies of all policies or certificates of the Operator’s insurance coverage
        shall be delivered to the Developer on request. It is understood and agreed
        that
        Operator’s insurance coverage may not adequately protect the interests of the
        Developer and that the Developer shall carry at its expense the excess or
        additional general public liability, property damage, and other insurance,
        if
        any, as the Developer deems appropriate.

       

      
        	 	
                (b)

              	
                Subcontractors’
                  Insurance.
                  Operator shall require all of its subcontractors to carry all required
                  Workmen’s Compensation Insurance and to maintain such other insurance,
                  if
                  any, as Operator in its discretion may
                  require.

              

      

       

      
        	 	
                (c)

              	
                Operator’s
                  Liability.
                  Operator’s liability to the Developer as Operator under this Agreement
                  shall be limited to, and Operator shall indemnify the Developer
                  and hold
                  it harmless from, claims, penalties, liabilities, obligations,
                  charges,
                  losses, costs, damages, or expenses (including but not limited
                  to
                  reasonable attorneys’ fees) relating to, caused by or arising out
                  of:

              

      

       

      	(i)
                	
              the
                noncompliance with or violation by Operator, its employees, agents,
                or
                subcontractors of any local, state or federal law, statute, regulation,
                or
                ordinance; 

            

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      

       

      	(ii)
                	
              the
                negligence or misconduct of Operator, its employees, agents or
                subcontractors; or 

            

       

      	(iii)
                	
              the
                breach of or failure to comply with any provisions of this
                Agreement.

            

       

      11. Internal
        Revenue Code Election; Relationship of Parties; Right to Take Production
        in
        Kind.

       

      
        	 	
                (a)

              	
                Internal
                  Revenue Code Election.
                  With respect to this Agreement, each of the parties elects under
                  Section
                  761(a) of the Internal Revenue Code of 1986, as amended, to be
                  excluded
                  from the provisions of Subchapter K of Chapter 1 of Subtitle A
                  of the
                  Internal Revenue Code of 1986, as amended. If the income tax laws
                  of the
                  state or states in which the property covered by this Agreement
                  is located
                  contain, or may subsequently contain, a similar election, each
                  of the
                  parties agrees that the election shall be exercised.
                  

              

      

       

      Beginning
        with the first taxable year of operations under this Agreement, each party
        agrees that the deemed election provided by Section 1.761-2(b)(2)(ii) of
        the
        Regulations under the Internal Revenue Code of 1986, as amended, will apply;
        and
        no party will file an application under Section 1.761-2 (b)(3)(i) of the
        Regulations to revoke the election. Each party agrees to execute the documents
        and make the filings with the appropriate governmental authorities as may
        be
        necessary to effect the election.

       

      
        	 	
                (b)

              	
                Relationship
                  of Parties.
                  It
                  is not the intention of the parties to create, nor shall this Agreement
                  be
                  construed as creating, a mining or other partnership or association
                  or to
                  render the parties liable as partners or joint ventures’ for any purpose.
                  Operator shall be deemed to be an independent contractor and shall
                  perform
                  its obligations as set forth in this Agreement or as otherwise
                  directed by
                  the Developer.

              

      

       

      
        	 	
                (c)

              	
                Right
                  to Take Production in Kind.
                  Subject to the provisions of Section 8 above, the Developer shall
                  have the
                  exclusive right to sell or dispose of its proportionate share of
                  all oil
                  and gas produced from the wells to be drilled under this Agreement,
                  exclusive of production:

              

      

       

      	(i)
                	
              that
                may be used in development and producing operations;
                

            

       

      	(ii)
                	
              unavoidably
                lost; and 

            

       

      	(iii)
                	
              used
                to fulfill any free gas obligations under the terms of the applicable
                Lease or Leases.

            

       

      Operator
        shall not have any right to sell or otherwise dispose of the oil and gas.
        The
        Developer shall have the exclusive right to execute all contracts relating
        to
        the sale or disposition of its proportionate share of the production from
        the
        wells drilled under this Agreement. 

       

      Developer
        shall have no interest in any gas supply agreements of Operator, except the
        right to receive Developer’s share of the proceeds received from the sale of any
        gas or oil from wells developed under this Agreement. The Developer agrees
        to
        designate Operator or Operator’s designated bank agent as the Developer’s
        collection agent in any contracts. On request, Operator shall assist Developer
        in arranging the sale or disposition of Developer’s oil and gas under this
        Agreement and shall promptly provide the Developer with all relevant information
        which comes to Operator’s attention regarding opportunities for sale of
        production. 

       

      If
        Developer fails to take in kind or separately dispose of its proportionate
        share
        of the oil and gas produced under this Agreement, then Operator shall have
        the
        right, subject to the revocation at will by the Developer, but not the
        obligation, to purchase the oil and gas or sell it to others at any time
        and
        from time to time, for the account of the Developer at the best price obtainable
        in the area for the production. Notwithstanding, Operator shall have no
        liability to Developer should Operator fail to market the production.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      

       

      Any
        purchase or sale by Operator shall be subject always to the right of the
        Developer to exercise at any time its right to take in-kind, or separately
        dispose of, its share of oil and gas not previously delivered to a purchaser.
        Any purchase or sale by Operator of any other party’s share of oil and gas shall
        be only for reasonable periods of time as are consistent with the minimum
        needs
        of the oil and gas industry under the particular circumstances, but in no
        event
        for a period in excess of one (1) year.

       

      12. Effect
        of Force Majeure; Definition of Force Majeure; Limitation.

       

      	(a)  	
              Effect
                of Force Majeure. If
                Operator is rendered unable, wholly or in part, by force majeure
                (as
                defined below) to carry out any of its obligations
                under this Agreement, including
                but not limited to beginning the drilling of one or more wells by
                the
                applicable times set forth in Section 2(b), or any Addendum to this
                Agreement, the obligations of the Operator, so far as it is affected
                by
                the force majeure, shall be suspended during but no longer than,
                the
                continuance of the force majeure. The
                Operator shall give to the Developer prompt written notice of the
                force
                majeure with
                reasonably full particulars concerning it. Operator shall use all
                reasonable diligence to remove the force majeure as quickly as possible
                to
                the extent the same is within reasonable
                control.

            

       

      	(b)  	
              Definition
                of Force Majeure. The
                term “force majeure” shall mean an act of God, strike, lockout, or other
                industrial disturbance, act of the public enemy, war, blockade, public
                riot, lightning, fire, storm, flood, explosion, governmental restraint,
                unavailability of drilling rigs, equipment or materials, plant shut-downs,
                curtailments by purchasers and any other causes whether of the kind
                specifically enumerated above or otherwise, which directly preclude
                Operator’s performance under this Agreement and is not reasonably within
                the control of the Operator including, but not limited to, the inability
                of Operator to begin the drilling of the wells subject to this Agreement
                by the applicable times set forth in Section 2(b) or in any Addendum
                to
                this Agreement due to decisions of third-party operators to delay
                drilling
                the wells, poor weather conditions, inability to obtain drilling
                permits,
                access right to the drilling site or title
                problems.

            

       

      	(c)  	
              Limitation.
                The
                requirement that any force majeure shall be remedied with all reasonable
                dispatch shall not require the settlement of strikes, lockouts, or
                other
                labor difficulty affecting the Operator, contrary to its wishes.
                The
                method of handling these difficulties shall be entirely within the
                discretion of the Operator.

            

       

      13. Term.

       

      This
        Agreement shall become effective when executed by Operator and the Developer.
        Except as provided in sub-section (c) of Section 3, this Agreement shall
        continue and remain in full force and effect for the productive lives of
        the
        wells being operated under this Agreement.

       

      14. Governing
        Law; Invalidity.

       

      	(a)  	
              Governing
                Law. This
                Agreement shall be governed by, construed and interpreted in accordance
                with the laws of the Commonwealth of Pennsylvania.
                

            

       

      	(b)  	
              Invalidity.
                The
                invalidity or unenforceability of any particular provision of this
                Agreement shall not affect the other provisions of this Agreement,
                and
                this Agreement shall be construed in all respects as if the invalid
                or
                unenforceable provision were omitted.

            

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      

       

      15. Integration;
        Written Amendment.

       

      	(a)  	
              Integration.
                This
                Agreement, including the Exhibits to this Agreement, constitutes
                and
                represents the entire understanding and agreement of the parties
                with
                respect to the subject matter of this Agreement and supersedes all
                prior
                negotiations, understandings, agreements, and representations relating
                to
                the subject matter of this Agreement. 

            

       

      	(b)  	
              Written
                Amendment. No
                change, waiver, modification, or amendment of this Agreement shall
                be
                binding or of any
                effect unless in writing duly
                signed by the party against which the change, waiver, modification,
                or
                amendment is sought to be enforced.

            

       

      16. Waiver
        of Default or Breach.

       

      No
        waiver
        by any party to any default of or breach by any other party under this Agreement
        shall operate as a waiver of any future default or breach, whether of like
        or
        different character or nature.

       

      17. Notices.

       

      Unless
        otherwise provided in this Agreement, all notices, statements, requests,
        or
        demands which are required or contemplated by this Agreement shall be in
        writing
        and shall be hand-delivered or sent by registered or certified mail, postage
        prepaid, to the following addresses until changed by certified or registered
        letter so addressed to the other party:

       

      	(i)
                	
              If
                to the Operator, to:

            

      Atlas
        Resources, Inc.

      311
        Rouser Road

      Moon
        Township, Pennsylvania 15108

      Attention:
        President

       

      	(ii)
                	
              If
                to Developer, to:

            

      Atlas
        America Public #15-2005(A) L.P. 

      c/o
        Atlas
        Resources, Inc.

      311
        Rouser Road

      Moon
        Township, Pennsylvania 15108

       

      Notices
        which are served by registered or certified mail on the parties in the manner
        provided in this Section shall be deemed sufficiently served or given for
        all
        purposes under this Agreement at the time the notice is mailed in any post
        office or branch post office regularly maintained by the United States Postal
        Service or any successor. All payments shall be hand-delivered or sent by
        United
        States mail, postage prepaid to the addresses set forth above until changed
        by
        certified or registered letter so addressed to the other party.

       

      18. Interpretation.

       

      The
        titles of the Sections in this Agreement are for convenience of reference
        only
        and shall not control or affect the meaning or construction of any of the
        terms
        and provisions of this Agreement. As used in this Agreement, the plural shall
        include the singular and the singular shall include the plural whenever
        appropriate.

       

      19. Counterparts.

       

      The
        parties may execute this Agreement in any number of separate counterparts,
        each
        of which, when executed and delivered by the parties, shall have the force
        and
        effect of an original; but all such counterparts shall be deemed to constitute
        one and the same instrument.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      

       

      IN
        WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
        of the
        day and year first above written.

       

      ATLAS
        RESOURCES, INC.

       

       

      By:/s/
        Frank P. Carolas, 

      Frank
        P.
        Carolas, Executive Vice President

      
        	 	
                ATLAS
                  AMERICA PUBLIC #15-2005(A) L.P.

              

      

       

      By
        its
        Managing General Partner:

      ATLAS
        RESOURCES, INC.

       

      By: /s/
        Frank P. Carolas

      Frank
        P.
        Carolas, Executive Vice President

      Frank
        P.
        Carolas, Executive Vice President

      

      

      

      
        
          
            

          

          
          

        

        
          20

          
            

          

        

        
          
          

          
          

        

      

      DESCRIPTION
        OF LEASES AND INITIAL WELL LOCATIONS

      

      [To
        be
        completed as information becomes available]

      

      

      

      1. WELL
        LOCATION

      

      
        	 	
                (a)

              	
                Oil
                  and Gas Lease from ______________________________________ dated
                  _____________________ and recorded in Deed Book Volume __________,
                  Page
                  __________ in the Recorder’s Office of County, ____________, covering
                  approximately _________ acres in ____________________________ Township,
                  ___________________ County,
                  __________________________.

              

      

      

      
        	 	
                (b)

              	
                The
                  portion of the leasehold estate constituting the
                  ____________________________________________ No. __________ Well
                  Location
                  is described on the map attached hereto as Exhibit
                  A-l.

              

      

      

      
        	 	
                (c)

              	
                Title
                  Opinion of _________________________________,
                  ____________________________________,
                  ________________________________________,
                  ________________________________________, dated ___________________,
                  200___.

              

      

      

      
        	 	
                (d)

              	
                The
                  Developer’s interest in the leasehold estate constituting this Well
                  Location is an undivided  %
                  Working Interest to those oil and gas rights from the surface to
                  the
                  deepest depth penetrated at the cessation of drilling activities
                  (which is
                  ___________ feet), subject to the landowner’s royalty interest and
                  overriding royalty interests.

              

      

      

      
        
          
            Exhibit
              A

          

          
          

        

        
          21

          
            

          

        

        
          
          

          
          

        

      

      Well
        Name, Twp.

      County,
        State

      ASSIGNMENT
        OF OIL AND GAS LEASE

       

      STATE
        OF _______________________________

       

      COUNTY
        OF _____________________________

      KNOW
        ALL MEN BY THESE PRESENTS:

      THAT
        the
        undersigned            

      (hereinafter
        called “Assignor”), for and in consideration of One Dollar and other valuable
        consideration ($1.00 ovc), the receipt whereof is hereby acknowledged, does
        hereby sell, assign, transfer and set over unto            
        (hereinafter called “Assignee”), an undivided _____________________________ in,
        and to, the oil and gas lease described as follows:

      

      

      

      

      

      

      

      together
        with the rights incident thereto and the personal property thereto, appurtenant
        thereto, or used, or obtained, in connection therewith.

      And
        for
        the same consideration, the assignor covenants with the said assignee his
        or its
        heirs, successors, or assigns that assignor is the lawful owner of said lease
        and rights and interest thereunder and of the personal property thereon or
        used
        in connection therewith; that the undersigned has good right and authority
        to
        sell and convey the same, and that said rights, interest and property are
        free
        and clear from all liens and encumbrances, and that all rentals and royalties
        due and payable thereunder have been duly paid.

      In
        Witness Whereof, the undersigned owner ______ and assignor ______ ha___ signed
        and sealed this instrument the ______ day of _______________,
        200___.

      

      

      

      Signed
        and acknowledged in the presence of  

       

       

      
        
          Exhibit
            A

          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      ACKNOWLEDGMENT
        BY INDIVIDUAL

      STATE
        OF
 

      BEFORE
        ME, a Notary Public, in and for said

      COUNTY
        OF
 

      County
        and State, on this day personally appeared  
        who

      acknowledged
        to me that ____ he ____ did sign the foregoing instrument and that the same
        is
        _____________ free act and deed.

      In
        testimony whereof, I have hereunto set my hand and official seal, at
        _____________________________, this ______ day of _______________, A.D.,
        200___.

       

      Notary
        Public

      

      

      

      

      CORPORATION
        ACKNOWLEDGMENT

      STATE
        OF
 

      BEFORE
        ME, a Notary Public, in and for said

      COUNTY
        OF
 

      County
        and State, on this day personally appeared  
        known to
        me to be the person and officer whose name is subscribed to the foregoing
        instrument and acknowledged that the same was the act of the said
        ______________________________________________, a corporation, and that he
        executed the same as the act of such corporation for the purposes and
        consideration therein expressed, and in the capacity therein
        stated.

      In
        testimony whereof, I have hereunto set my hand and official seal, at
        _____________________________, this ______ day of _______________, A.D.,
        200___.

       

      Notary
        Public

      This
        instrument prepared by:

      Atlas
        Resources, Inc.

      311
        Rouser Road

      P.O.
        Box
        611

      Moon
        Township, PA 15108

      
        
          Exhibit
            A

          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      

       

      ADDENDUM
        NO. 1

      TO
        DRILLING AND OPERATING AGREEMENT

      DATED
        December 3 , 2005

      

      THIS
        ADDENDUM NO. 1 made and entered into this 3rd
        day of
        December, 2005, by and between ATLAS RESOURCES, INC., a Pennsylvania corporation
        (hereinafter referred to as “Operator”),

      

      and

      

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P., a Delaware limited partnership, (hereinafter
        referred to as the Developer).

      

      WITNESSETH
        THAT:

      

      WHEREAS,
        Operator and the Developer have entered into a Drilling and Operating Agreement
        dated December 3, 2005, (the “Agreement”), which relates to the drilling and
        operating of nine (9) wells on the nine (9) Initial Well Locations identified
        on
        the maps attached as Exhibits A-l through A-9 to the Agreement, and provides
        for
        the development on the terms and conditions set forth in the Agreement of
        Additional Well Locations as the parties may from time to time designate;
        and

      

      WHEREAS,
        pursuant to Section l(c) of the Agreement, Operator and Developer presently
        desire to designate 179 Additional Well Locations described below to be
        developed in accordance with the terms and conditions of the
        Agreement.

      

      NOW,
        THEREFORE, in consideration of the mutual covenants contained in this Addendum
        and intending to be legally bound, the parties agree as follows:

      

      1. Pursuant
        to Section l(c) of the Agreement, the Developer hereby authorizes Operator
        to
        drill, complete (or plug) and operate, on the terms and conditions set forth
        in
        the Agreement and this Addendum No. 1, 179 additional wells on the 179
        Additional Well Locations described on Exhibit A to this Addendum and on
        the
        maps attached to this Addendum as Exhibits A-______ through
        A-______.

      

      2. Operator,
        as Developer’s independent contractor, agrees to drill, complete (or plug) and
        operate the additional wells on the Additional Well Locations in accordance
        with
        the terms and conditions of the Agreement and further agrees to begin drilling
        the first additional well within thirty (30) days after the date of this
        Addendum and to begin drilling all of the additional wells before the close
        of
        the 90th
        day
        after the close of the calendar year in which the Agreement was entered into
        by
        Operator and the Developer, or, if this Addendum is dated thereafter, to
        begin
        drilling the first additional well within thirty (30) days after the date
        of
        this Addendum and to drill and complete (or plug) all of the remaining
        additional wells by the end of the calendar year in which this Addendum is
        dated.

      

      	1.  	
              Developer
                acknowledges that: 

            

      

      	(a)  	
              Operator
                has furnished Developer with the title opinions identified on Exhibit
                A to
                this Addendum; and 

            

      

      	(b)  	
              Such
                other documents and information which Developer or its counsel has
                requested in order to determine the adequacy of the title to the
                above
                Additional Well Locations. 

            

      

      The
        Developer accepts the title to the Additional Well Locations and leased premises
        in accordance with the provisions of Section 5 of the Agreement.

      

      	4.  	
              The
                drilling and operation of the additional wells on the Additional
                Well
                Locations shall be in accordance with and subject to the terms and
                conditions set forth in the Agreement as supplemented by this Addendum
                No.
                1 and except as previously supplemented, all terms and conditions
                of the
                Agreement shall remain in full force and effect as originally
                written.

            

      

      	5.  	
              This
                Addendum No. 1 shall be legally binding on, and shall inure to the
                benefit
                of, the parties and their respective successors and permitted
                assigns.

            

      
        
          Exhibit
            A

          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      

      

      

      WITNESS
        the due execution of this Addendum on the day and year first above
        written.

      

      ATLAS
        RESOURCES, INC.

       

      

      By
        /s/
        Frank P. Carolas

      

      

      

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P.

      

      By
        its
        Managing General Partner:

      

      ATLAS
        RESOURCES, INC.

      

      

      By
        /s/
        Frank P. Carolas

      

       

      
        
          Exhibit
            A

          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      

      

      

      
        	
                EXHIBIT
                  A

              
	
                DRILLING
                  AND OPERATING AGREEMENT DATED DECEMBER 3, 2005

              
	
                ATLAS
                  AMERICA PUBLIC #15-2005(A) L.P.

              
	 	 	 	 
	
                WELL

              	
                STATE

              	
                COUNTY

              	
                TOWNSHIP

              
	
                HUNTER
                  #10

              	
                PA

              	
                CRAWFORD

              	
                RANDOLPH

              
	
                CARPENTER
                  #10

              	
                PA

              	
                CRAWFORD

              	
                RANDOLPH

              
	
                KOVACH
                  #8

              	
                PA

              	
                FAYETTE
                  

              	
                GERMAN

              
	
                BLOWER
                  #5

              	
                PA

              	
                FAYETTE

              	
                JEFFERSON

              
	
                GENOVESE
                  #6

              	
                PA

              	
                FAYETTE

              	
                NICHOLSON

              
	
                L
                  & J EQUIPMENT #1

              	
                PA

              	
                FAYETTE

              	
                NICHOLSON

              
	
                L
                  & J EQUIPMENT #2

              	
                PA

              	
                FAYETTE

              	
                NICHOLSON

              
	
                DOTY
                  #4

              	
                PA

              	
                FAYETTE

              	
                SPRINGHILL

              
	
                KEFFER
                  #1

              	
                PA

              	
                FAYETTE

              	
                WASHINGTON

              

      

      

      
        
          Exhibit
            A

          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      

      Well
        Name, Twp.

      County,
        State

      

      ASSIGNMENT
        OF OIL AND GAS LEASE

      

      

       

      STATE
        OF _______________________________

       

      

      COUNTY
        OF _____________________________

      

      KNOW
        ALL MEN BY THESE PRESENTS:

      

      

      THAT
        the
        undersigned            

      (hereinafter
        called “Assignor”), for and in consideration of One Dollar and other valuable
        consideration ($1.00 ovc), the receipt whereof is hereby acknowledged, does
        hereby sell, assign, transfer and set over unto            
        (hereinafter called “Assignee”), an undivided _____________________________ in,
        and to, the oil and gas lease described as follows together with the rights
        incident thereto and the personal property thereto, appurtenant thereto,
        or
        used, or obtained, in connection therewith.

      

      And
        for
        the same consideration, the assignor covenants with the said assignee his
        or its
        heirs, successors, or assigns that assignor is the lawful owner of said lease
        and rights and interest thereunder and of the personal property thereon or
        used
        in connection therewith; that the undersigned has good right and authority
        to
        sell and convey the same, and that said rights, interest and property are
        free
        and clear from all liens and encumbrances, and that all rentals and royalties
        due and payable thereunder have been duly paid.

      

      In
        Witness Whereof, the undersigned owner ______ and assignor ______ ha___ signed
        and sealed this instrument the ______ day of _______________,
        200___.

      

      

      

      Signed
        and acknowledged in the presence of  

      

       

      

       

      

      

      

      

      Exhibit
        B

      (Page
        1)

      
        
          Exhibit
            A

          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      ACKNOWLEDGMENT
        BY INDIVIDUAL

      

      

      STATE
        OF
 

      BEFORE
        ME, a Notary Public, in and for said

      COUNTY
        OF
 

      

      

      County
        and State, on this day personally appeared  
        who

      acknowledged
        to me that ____ he ____ did sign the foregoing instrument and that the same
        is
        _____________ free act and deed.

      

      In
        testimony whereof, I have hereunto set my hand and official seal, at
        _____________________________, this ______ day of _______________, A.D.,
        200___.

      

      

       

      Notary
        Public

      

      

      

      

      CORPORATION
        ACKNOWLEDGMENT

      

      

      STATE
        OF
 

      BEFORE
        ME, a Notary Public, in and for said

      COUNTY
        OF
 

      

      

      County
        and State, on this day personally appeared known to me to be the person and
        officer whose name is subscribed to the foregoing instrument and acknowledged
        that the same was the act of the said
        ______________________________________________, a corporation, and that he
        executed the same as the act of such corporation for the purposes and
        consideration therein expressed, and in the capacity therein
        stated.

      

      In
        testimony whereof, I have hereunto set my hand and official seal, at
        _____________________________, this ______ day of _______________, A.D.,
        200___.

      

      

       

      Notary
        Public

      

      

      This
        instrument prepared by:

      

      Atlas
        Resources, Inc.

      311
        Rouser Road

      P.O.
        Box
        611

      Moon
        Township, PA 15108

      Exhibit
        B

      (Page
        2)

      
        
          Exhibit
            A

          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      

      ADDENDUM
        NO. 1

      TO
        DRILLING AND OPERATING AGREEMENT

      DATED
        December 3 , 2005

      

      THIS
        ADDENDUM NO. 1 made and entered into this 3rd
        day of
        December, 2005, by and between ATLAS RESOURCES, INC., a Pennsylvania corporation
        (hereinafter referred to as “Operator”),

      

      and

      

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P., a Delaware limited partnership, (hereinafter
        referred to as the Developer).

      

      WITNESSETH
        THAT:

      

      WHEREAS,
        Operator and the Developer have entered into a Drilling and Operating Agreement
        dated December 3, 2005, (the “Agreement”), which relates to the drilling and
        operating of nine (9) wells on the nine (9) Initial Well Locations identified
        on
        the maps attached as Exhibits A-l through A-9 to the Agreement, and provides
        for
        the development on the terms and conditions set forth in the Agreement of
        Additional Well Locations as the parties may from time to time designate;
        and

      

      WHEREAS,
        pursuant to Section l (c) of the Agreement, Operator and Developer presently
        desire to designate 179 Additional Well Locations described below to be
        developed in accordance with the terms and conditions of the
        Agreement.

      

      NOW,
        THEREFORE, in consideration of the mutual covenants contained in this Addendum
        and intending to be legally bound, the parties agree as follows:

      

      1. Pursuant
        to Section l(c) of the Agreement, the Developer hereby authorizes Operator
        to
        drill, complete (or plug) and operate, on the terms and conditions set forth
        in
        the Agreement and this Addendum No. 1, 179 additional wells on the 179
        Additional Well Locations described on Exhibit A to this Addendum and on
        the
        maps attached to this Addendum as Exhibits A-1 through A-9.

      

      2. Operator,
        as Developer’s independent contractor, agrees to drill, complete (or plug) and
        operate the additional wells on the Additional Well Locations in accordance
        with
        the terms and conditions of the Agreement and further agrees to begin drilling
        the first additional well within thirty (30) days after the date of this
        Addendum and to begin drilling all of the additional wells before the close
        of
        the 90th
        day
        after the close of the calendar year in which the Agreement was entered into
        by
        Operator and the Developer, or, if this Addendum is dated thereafter, to
        begin
        drilling the first additional well within thirty (30) days after the date
        of
        this Addendum and to drill and complete (or plug) all of the remaining
        additional wells by the end of the calendar year in which this Addendum is
        dated.

      

      	2.  	
              Developer
                acknowledges that: 

            

      

      	(c)  	
              Operator
                has furnished Developer with the title opinions identified on Exhibit
                A to
                this Addendum; and 

            

      

      	(d)  	
              Such
                other documents and information which Developer or its counsel has
                requested in order to determine the adequacy of the title to the
                above
                Additional Well Locations. 

            

      

      The
        Developer accepts the title to the Additional Well Locations and leased premises
        in accordance with the provisions of Section 5 of the Agreement.

      

      	6.  	
              The
                drilling and operation of the additional wells on the Additional
                Well
                Locations shall be in accordance with and subject to the terms and
                conditions set forth in the Agreement as supplemented by this Addendum
                No.
                1 and except as previously supplemented, all terms and conditions
                of the
                Agreement shall remain in full force and effect as originally
                written.

            

      

      	7.  	
              This
                Addendum No. 1 shall be legally binding on, and shall inure to the
                benefit
                of, the parties and their respective successors and permitted
                assigns.

            

      

      

      Exhibit
        C

      (Page
        1)

      

      
        
          Exhibit
            A

          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      

      

      

      WITNESS
        the due execution of this Addendum on the day and year first above
        written.

      

      ATLAS
        RESOURCES, INC.

       

      

      By
        /s/
        Frank P. Carolas

      

      

      

      ATLAS
        AMERICA PUBLIC #15-2005(A) L.P.

      

      By
        its
        Managing General Partner:

      

      ATLAS
        RESOURCES, INC.

      

      

      By
        /s/
        Frank P. Carolas

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      Exhibit
        C

      (Page
        2)

      

      

      
        
          Exhibit
            A

          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        C

      ATLAS
        AMERICA PUBLIC #15A-2006

      

      
        	
                WELLS

              	 	
                STATE

              	 	
                COUNTY

              	 	
                TOWNSHIP

              
	
                −−−−−−−−−−−−−−−−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−−−−−−−−−−

              
	
                Guthrie
                  #1 

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Kiskiminetas

              
	
                Ukish
                  #1

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Kiskiminetas

              
	
                J.
                  Filippini #1 

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Kiskiminetas

              
	
                M.
                  L. Filippini #1

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Kiskiminetas

              
	
                Fishel
                  #1

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Manor

              
	
                Sherry
                  #1 

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                Manor

              
	
                Crownover
                  #2

              	 	
                Pennsylvania

              	 	
                Armstrong

              	 	
                S.
                  Bend

              
	
                Carpenter
                  #11

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Mumford
                  #3

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Brooks
                  Unit #2

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Parker
                  #5

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Cook
                  #5

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Carpenter
                  #15

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Medley
                  #1

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Randolph

              
	
                Tatalovic
                  #1

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Tatalovic
                  #2

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Tatalovic
                  Farms #3

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Tatalovic
                  Unit #4

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Brooks/Tatalovic
                  Unit #1

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Alexander
                  #4

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Tatalovic
                  Farms #11

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Jones
                  #10

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Richmond

              
	
                Carr
                  #6

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                S.
                  Shenango

              
	
                Livingston
                  #2

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                S.
                  Shenango

              
	
                Griggs
                  #1

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                S.
                  Shenango

              
	
                Ferguson
                  #3

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Vernon

              
	
                Kightlinger
                  #1

              	 	
                Pennsylvania

              	 	
                Crawford

              	 	
                Vernon

              
	
                Work
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Franklin

              
	
                Hadenak
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                German

              
	
                Cochrane
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                German

              
	
                Bobbish
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                German

              
	
                Kino
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                German

              
	
                Kino
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                German

              
	
                Mood
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Keffer
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Kubitza
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Kubitza
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Kosanko
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Sveda
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Sveda
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Miller
                  #42

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Brown
                  #11

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Kosanko
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Miller
                  #43

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              

      

      

      
        
          Exhibit
            A

          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        C

      ATLAS
        AMERICA PUBLIC #15A-2006

      

      
        	
                WELLS

              	 	
                STATE

              	 	
                COUNTY

              	 	
                TOWNSHIP

              
	
                −−−−−−−−−−−−−−−−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−−−−−−−

              
	
                DeCario/Heffner
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Sveda
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Bertalan
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Captain
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                DeCario/Heffner
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Sveda
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Liston
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Liston
                  #7

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Liston
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Simmons
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Jefferson

              
	
                Beck/Harvey
                  Unit #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Luzerne

              
	
                Duda
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Luzerne

              
	
                Green
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Luzerne

              
	
                Venne
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Luzerne

              
	
                Bookshar
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Luzerne

              
	
                Genovese
                  Unit #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Kovalic
                  #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                L
                  & J Equipment #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Black
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Kovalic
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                L
                  & J Equipment #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Black
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                L
                  & J Equipment #7

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Triplett
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #12

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Betchy
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Triplett
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #7

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Reicholf
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #10

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Gilmore
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Filiaggi
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Dick
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Phillips
                  #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Hornsby/Dick
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Phillips
                  #9

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Kovalic
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Kovalic
                  #10

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Kovalic
                  #11

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #16

              	 	
                Pennsylvania

              	 	
                Fayette
                  

              	 	
                Nicholson

              
	
                Benninger
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Trump
                  Unit #5

              	 	
                Pennsylvania

              	 	
                Fayette
                  

              	 	
                Nicholson

              
	
                Filiaggi
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              

      

      
        
          Exhibit
            A

          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        C

      ATLAS
        AMERICA PUBLIC #15A-2006

      

      
        	
                WELLS

              	 	
                STATE

              	 	
                COUNTY

              	 	
                TOWNSHIP

              
	
                −−−−−−−−−−−−−−−−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−−−−−−−

              
	
                Vignali
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                L
                  & J Equipment #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Benninger
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Nicholson

              
	
                Koltash
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Perry

              
	
                Koltash
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Perry

              
	
                Koltash
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Perry

              
	
                Martin
                  #16

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Perry

              
	
                Angeline
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                Glumac
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                BASD
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                BASD
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                T.
                  J. Enterprises #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                Bookshar
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                T.
                  J. Enterprises #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Redstone

              
	
                J
                  & J Realty #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Atin
                  Inc. #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Lyons
                  #6

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                J
                  & J Realty #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                J
                  & J Realty #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Grimm
                  #12

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Leech
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Atin
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Darr
                  #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Brooks
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Robinson
                  #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Robinson
                  #11

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Robinson
                  #9

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Robinson
                  #12

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Sabatine
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Sabatine
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Sabatine
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Wolf
                  #21

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Sabatine
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Croftcheck
                  #12

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Croftcheck
                  #15

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Springhill

              
	
                Orr
                  #15

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Keffer
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #4

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Fisher
                  #6

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #24

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Cook/Smith
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Cannizzaro
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Olexa
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Cannizzaro
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Sager
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Kosanko
                  #5

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              

      

      

      
        
          Exhibit
            A

          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        C

      ATLAS
        AMERICA PUBLIC #15A-2006

      

      
        	
                WELLS

              	 	
                STATE

              	 	
                COUNTY

              	 	
                TOWNSHIP

              
	
                −−−−−−−−−−−−−−−−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−

              	 	
                −−−−−−−−−−−−−−−−−−−

              
	
                Mutich
                  #3

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Campbell
                  #9

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Mutich
                  #1

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #16

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Campbell
                  #10

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Patterson
                  #15

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #8

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #12

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #11

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Orr
                  #22

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Kezmarsky
                  #2

              	 	
                Pennsylvania

              	 	
                Fayette

              	 	
                Washington

              
	
                Phillips
                  #11

              	 	
                Pennsylvania

              	 	
                Greene

              	 	
                Cumberland

              
	
                Staun
                  #1

              	 	
                Pennsylvania

              	 	
                Greene

              	 	
                Cumberland

              
	
                Staun
                  #2

              	 	
                Pennsylvania

              	 	
                Greene

              	 	
                Cumberland

              
	
                Cartier/Luxner
                  #4

              	 	
                Pennsylvania

              	 	
                Greene

              	 	
                Cumberland

              
	
                McClay
                  #6

              	 	
                Pennsylvania

              	 	
                Indiana

              	 	
                Young

              
	
                Reiner
                  #3 

              	 	
                Pennsylvania

              	 	
                Jefferson

              	 	
                Ringgold

              
	
                Neal
                  #2 

              	 	
                Pennsylvania

              	 	
                Jefferson

              	 	
                Timblin

              
	
                Polonsky
                  Unit #2 

              	 	
                Pennsylvania

              	 	
                Mercer

              	 	
                Delaware

              
	
                Polonsky
                  #1 

              	 	
                Pennsylvania

              	 	
                Mercer

              	 	
                Delaware

              
	
                Craine
                  Unit #2 

              	 	
                Pennsylvania

              	 	
                Mercer

              	 	
                Perry

              
	
                Loughan
                  #2

              	 	
                Pennsylvania

              	 	
                Mercer

              	 	
                Sandy
                  Creek

              
	
                Manack
                  #1

              	 	
                Pennsylvania

              	 	
                Westmoreland

              	 	
                Rostraver

              
	
                Manack
                  #2

              	 	
                Pennsylvania

              	 	
                Westmoreland

              	 	
                Rostraver

              
	
                CC-1071

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Duncan
                  Flats Quad.

              
	
                CC-1055A

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Duncan
                  Flats Quad.

              
	
                AD-1009

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Duncan
                  Flats Quad.

              
	
                CC-1046

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                CC-1048

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                CC-1081

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                CC-1080

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                CC-1078

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                CC-1083

              	 	
                Tennessee

              	 	
                Anderson

              	 	
                Windrock
                  Quad.

              
	
                HW-1038

              	 	
                Tennessee

              	 	
                Morgan

              	 	
                Fork
                  Mountain Field

              
	
                CC-1049

              	 	
                Tennessee

              	 	
                Morgan

              	 	
                Petros
                  Quad.

              
	
                BR-1039

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1045

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1044

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1051

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1052

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1040

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1047

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1048

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              
	
                BR-1036

              	 	
                Tennessee

              	 	
                Scott

              	 	
                Fork
                  Mountain Field

              

      

    
                                                          
    34AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

COLE OPERATING PARTNERSHIP I, LP

 

April 6, 2004

 

 

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

COLE OPERATING PARTNERSHIP I, LP

 

April 6, 2004

This Agreement of Limited Partnership (this “Agreement”) is entered into effective as of the 6th day of April, 2004, by and among Cole Credit Property Trust, Inc., a Maryland corporation (the “General Partner”), Cole REIT Advisors, LLC, a Delaware limited liability company (the “Original Limited Partner”), and the Limited Partner(s) set forth or which may, in the future, be set forth on Exhibit A hereto, as amended from time to time, with respect to Cole Operating Partnership I, LP (the “Partnership”), a limited partnership formed under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware effective as of April 6, 2004.

RECITALS

WHEREAS, the parties desire to enter into this Agreement in order to set forth the terms and conditions under which the Partnership will be operated as well as the rights, obligations, and limitations of the General Partner and the Limited Partners with respect to each other and the Partnership as a whole;

NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants between the parties to this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties agree as follows: 

AGREEMENT

ARTICLE I

DEFINED TERMS

The following defined terms used in this Agreement shall have the meanings specified below:

“Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.

“Additional Funds” has the meaning set forth in Section 4.03 hereof.

“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 4.02 hereof and who is shown as such on the books and records of the Partnership.

“Additional Securities” means any additional REIT Shares (other than REIT Shares issued in connection with an exchange pursuant to Section 8.05 hereof) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares, as set forth in Section 4.02(a)(ii).

“Administrative Expenses” means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner, including any salaries or other payments to directors, officers or employees of the General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses of the Partnership and not the General Partner, and (iii) to the extent not included in clause (ii) above, REIT Expenses; provided, however, that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or partnership interests in a Subsidiary Partnership that are owned by the General Partner directly.

 

 

 

 

“Advisor” or “Advisors” means the Person or Persons, if any, appointed, employed or contracted with by the General Partner pursuant to its Articles of Incorporation and responsible for directing or performing the day-to-day business affairs of the General Partner, including any Person to whom the Advisor subcontracts all or substantially all of such functions.

“Affiliate” or “Affiliated” means, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.

“Agreed Value” means (i) the fair market value of a Partner’s non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner as of the date of contribution as set forth on Exhibit A hereto, as it may be amended from time to time, or (ii) in the case of any contribution or distribution of property other than cash not set forth on Exhibit A, the fair market value of such property as determined by the General Partner at the time such property is contributed or distributed, reduced by liabilities either assumed by the Partnership or Partner upon such contribution or distribution or to which such property is subject when the property is contributed or distributed.

“Agreement” means this Agreement of Limited Partnership, as it may be amended or restated from time to time.

“Articles of Incorporation” means the Articles of Incorporation of the General Partner filed with the Maryland State Department of Assessments and Taxation, as amended or restated from time to time.

“Call Notice” means a Call Notice, as defined in Section 8.06(a) hereof and substantially in the form of Exhibit C hereto.

“Call Right” has the meaning provided in Section 8.06(a) hereof.

“Capital Account” has the meaning provided in Section 4.04 hereof.

“Capital Contribution” means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of the Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.

“Cash Amount” means an amount of cash equal to the Value of the REIT Shares Amount on the date of receipt by the General Partner of an Exchange Notice.

“Certificate” means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.02 hereof) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner from or to the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

“Code” means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.

“Cole Credit Property Trust” means Cole Credit Property Trust, Inc., a Maryland corporation.

 

 

 

 

“Commission” means the U.S. Securities and Exchange Commission.

“Competent Independent Expert” shall mean a Person with no material current or prior business or personal relationship with the General Partner or the Partnership who is engaged to a substantial extent in the business of rendering opinions regarding the value of the assets of the type held by the Partnership and who is qualified to perform such work. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of such qualification.

“Conversion Factor” means 1.0, provided, that in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date, and provided
further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives an Exchange Notice after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the
Exchange Notice immediately prior to the record date for such dividend, distribution, subdivision or combination.

“Dissenting Limited Partner” has the meaning provided in Section 12.03(a) hereof.

“Event of Bankruptcy” as to any Person means (i) the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); (ii) the insolvency or bankruptcy of such Person as finally determined by a court proceeding; (iii) the filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; and (iv) the commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided, that if such proceeding is commenced
by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.

“Exchange Amount” means either the Cash Amount or the REIT Shares Amount, as selected by the General Partner in its sole and absolute discretion pursuant to Section 8.05(b) hereof.

“Exchange Notice” means a Notice of Exercise of Exchange Right, as defined in Section 8.05(a) hereof and substantially in the form of Exhibit B hereto.

“Exchange Right” has the meaning provided in Section 8.05(a) hereof.

“Exchanging Partner” has the meaning provided in Section 8.05(a) hereof.

“General Partner” means Cole Credit Property Trust, and any Person who becomes a substitute or additional General Partner as provided herein, and any successors thereto.

“General Partnership Interest” means a Partnership Interest held by the General Partner that is a general partnership interest.

 

 

 

 

“GP Capital” means the aggregate of Capital Contributions of cash made by the General Partner in accordance with Sections 4.01 and 4.02 hereof.

“GP Minimum Return” means such amount as may be necessary or required to allow the General Partner to meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and to avoid any federal income or excise tax liability imposed by the Code.

“Holding Period” means, with respect to Partnership Units acquired by Additional Limited Partners hereunder, the period commencing on the date of issuance of such Units through and including the fourth anniversary of such date of acquisition.

“Indemnitee” means (i) any Person made a party to a proceeding by reason of its status as the General Partner or a director, officer or employee of the General Partner or the Partnership, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.

“Joint Venture” means any joint venture or partnership arrangement in which the Partnership is a co-venturer or general partner established to acquire or hold Properties, Mortgages or other investments of the General Partner.

“Limited Partner” means the Original Limited Partner, any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who becomes a Substitute or Additional Limited Partner in such person’s capacity as a Limited Partner in the Partnership.

“Limited Partnership Interest” means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act.

“Liquidating Event” has the meaning set forth in Section 2.04 hereof.

“Loss” has the meaning provided in Section 5.01(f) hereof.

“LP Capital” means the aggregate of Capital Contributions in cash or cash equivalents and the Agreed Value of any non-cash contributions to the Partnership made by a Limited Partner in accordance with Sections 4.01 and 4.02.

“LP Return” means, with regard to any Limited Partner, an amount equal to the aggregate cash dividends that would have been payable to such Limited Partner with respect to the applicable fiscal period if such Limited Partner had owned REIT Shares equal in number to the number of Partnership Units owned by such Limited Partner during such fiscal period.

“Mortgage” means, in connection with mortgage financing provided, invested in or purchased by the Partnership, any note, deed of trust, security interest or other evidence of indebtedness or obligations, which is secured or collateralized by real property owned by the borrower under such note, deed of trust, security interest or other evidence of indebtedness or obligations.

“Net Capital Proceeds” means the net cash proceeds received by the Partnership in connection with (i) any Sale, (ii) any borrowing or refinancing of borrowing(s) by the Partnership, (iii) any condemnation or deeding in lieu of condemnation of all or a portion of any Property, (iv) any collection in respect of property, hazard, or casualty insurance (but not business interruption insurance) or any damage award; or (v) any other transaction the proceeds of which, in accordance with generally accepted accounting principles, are considered to be capital in nature, in each case, after deduction of (a) all costs and expenses incurred by the Partnership with regard to such transactions (including, without limitation, any repayment of any indebtedness required to be repaid as a result of such transaction or which the General Partner elects to pay out of the proceeds of such transaction, together with
accrued interest and premium, if any, thereon and any sales commissions or other costs or expenses due and payable to any Person in connection therewith, including to a Partner or its Affiliates), and (b) all amounts expended by the 

 

 

Partnership for the acquisition of additional Properties, Mortgages or other investments or for capital repairs or improvements to any Property with such cash proceeds.

“New Allocations” has the meaning set forth in Section 5.07.

“Offer” has the meaning set forth in Section 7.01(c)(ii).

“Offering” means the initial offer and sale by the General Partner of REIT Shares to the public.

“Original Limited Partner” means the Limited Partner designated as such on Exhibit A hereto.

“Partner” means any General Partner or Limited Partner.

“Partner Nonrecourse Debt Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(i). A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).

“Partnership” means Cole Operating Partnership I, LP, a Delaware limited partnership.

“Partnership Interest” means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.

“Partnership Minimum Gain” has the meaning set forth in Regulations Section 1.704-2(b)(2). In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partner’s share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).

“Partnership Record Date” means the record date established by the General Partner for the distribution of cash pursuant to Section 5.02, which record date shall be the same as the record date established by the General Partner for a distribution to its stockholders.

“Partnership Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder. The allocation of Partnership Units among the Partners shall be as set forth on Exhibit A, as it may be amended from time to time.

“Percentage Interest” means the percentage ownership interest in the Partnership of each Partner, as determined by dividing the number of Partnership Units owned by a Partner by the aggregate number of Partnership Units owned by all Partners.

“Person” means any individual, partnership, corporation, joint venture, limited liability company, trust or other entity.

“Profit” has the meaning provided in Section 5.01(f).

“Property” means any real property in which the Partnership holds an ownership interest, either directly or pursuant to the Partnership’s ownership of an interest in a subsidiary that owns an interest in any such real property.

“Prospectus” means the final prospectus delivered to purchasers of REIT Shares in the Offering.

“Regulations” means the Federal Income Tax Regulations, including temporary or proposed regulations, issued under the Code, as amended and as hereafter amended from time to time. Reference to any particular provision of 

 

 

the Regulations shall mean that provision of the Regulations on the date of this Agreement and any successor provision of the Regulations.

“REIT” means a real estate investment trust under Sections 856 through 860 of the Code.

“REIT Expenses” means (i) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes of this Agreement, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of the General Partner, (ii) costs and expenses relating to (A) any registration and public offering of securities by the General Partner, the net proceeds of which were used to make a contribution to the Partnership, and (B) all statements and reports incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such offering of securities, and any costs and expenses associated with any claims made by any holders of such securities
or any underwriters or placement agents thereof, (iii) costs and expenses associated with any repurchase of any securities by the General Partner, (iv) costs and expenses associated with the preparation and filing, of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the Commission, (v) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (vi) costs and expenses associated with any section 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (vii) costs and expenses incurred by the General Partner relating to any issuance or redemption of Partnership Interests or REIT Shares, and (viii) all other operating or administrative costs of the General Partner incurred in the ordinary course
of its business on behalf of or in connection with the Partnership.

“REIT Share” means a share of common stock in the General Partner (or Successor Entity, as the case may be).

“REIT Shares Amount” means a number of REIT Shares equal to the product of the number of Partnership Units offered for exchange by an Exchanging Partner, multiplied by the Conversion Factor as adjusted to and including the Specified Exchange Date; provided that in the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the stockholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “Rights”), and the rights have not expired at the Specified Exchange Date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares on the record date fixed for purposes of determining the holders of REIT Shares entitled to Rights.

“Sale” means any transaction or series of transactions whereby (i) the Partnership directly or indirectly (except as described in other subsections of this definitions) sells, grants, transfers, conveys or relinquishes its ownership of any Property or portion thereof, including the lease of any Property consisting of a building only, and including any event with respect to any Property which gives rise to a significant amount of insurance proceeds or condemnation awards; (ii) the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys or relinquishes its ownership of all or substantially all the interest of the Partnership in any Joint Venture in which it is a co-venturer or partner; (iii) any Joint Venture directly or indirectly (except as described in other subsections of this definition) in which the Partnership as a
co-venturer or partner sells, grants, transfers, conveys or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives rise to insurance claims or condemnation awards; (iv) the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, conveys or relinquishes its interest in any Mortgage or portion thereof (including with respect to any Mortgage, all payments thereunder or in satisfaction thereof other than regularly scheduled interest payments) of amounts owed pursuant to such Mortgage and any event with respect to a Mortgage which gives rise to a significant amount of insurance proceeds or similar awards, or (v) the Partnership directly or indirectly (except as described in other subsections of this definition) sells, grants, transfers, conveys or relinquishes its ownership of any other asset (other than investments in bank accounts, money market funds or other
current assets) not previously described in this definition or any portion thereof.

“Securities Act” means the Securities Act of 1933, as amended.

“Service” means the Internal Revenue Service.

 

 

 

 

“Specified Exchange Date” means the first business day of the month first occurring after the expiration of 60 business days from the date of receipt by the General Partner of the Exchange Notice.

“Sponsor” means any Person which (i) is directly or indirectly instrumental in organizing, wholly or in part, Cole Credit Property Trust, (ii) will manage or participate in the management of Cole Credit Property Trust, and any Affiliate of any such Person, other than a Person whose only relationship with Cole Credit Property Trust is that of an independent property manager and whose only compensation is as such, (iii) takes the initiative, directly or indirectly, in founding or organizing Cole Credit Property Trust, either alone or in conjunction with one or more other Persons, (iv) receives a material participation in Cole Credit Property Trust in connection with the founding or organizing of the business of Cole Credit Property Trust, in consideration of services or property, or both services and property, (v) has a substantial number of relationships and contacts with Cole Credit Property Trust,
(vi) possesses significant rights to control Properties, (vii) receives fees for providing services to Cole Credit Property Trust which are paid on a basis that is not customary in the industry, or (viii) provides goods or services to Cole Credit Property Trust on a basis which was not negotiated at arm’s-length with Cole Credit Property Trust.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

“Subsidiary Partnership” means any partnership, limited liability company or other entity taxed as a partnership for federal income tax purposes in which interests are owned by the General Partner or by a wholly-owned Subsidiary or Subsidiaries of the General Partner.

“Substitute Limited Partner” means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.03.

“Successor Entity” has the meaning provided in the definition of “Conversion Factor” contained herein.

“Survivor” has the meaning set forth in Section 7.01(d).

“Transaction” has the meaning set forth in Section 7.01(c).

“Transfer” has the meaning set forth in Section 9.02(a).

“Transfer Restriction Date” means the effective date upon which Cole REIT Advisors, LLC, a Delaware limited liability company, shall cease acting as the advisor to the General Partner under the terms of an advisory agreement entered into between Cole REIT Advisors LLC and the General Partner.

“Unpaid Return” means any accrued but unpaid LP Return or GP Minimum Return less all amounts distributed by the Partnership to a Limited Partner or the General Partner in reduction thereof.

“Value” means, with respect to any security, the average of the daily market price of such security for the ten consecutive trading days immediately preceding the date as of which such Value is to be determined. The market price for each such trading day shall be: (i) if the security is listed or admitted to trading on any securities exchange, the sale price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices, regular way, on such day; (ii) if the security is not listed or admitted to trading on any securities exchange, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner; or (iii) if the security is not listed or admitted to trading on any securities exchange and no
such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten days prior to the date in question) for which prices have been so reported; provided, that if there are no bid and asked prices reported during the ten days prior to the date in question, the value of the security shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it 

 

 

considers, in its reasonable judgment, appropriate. In the event the security includes any additional rights, then the value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

ARTICLE II

PARTNERSHIP FORMATION AND IDENTIFICATION

2.01         Formation.The Partnership is a limited partnership formed pursuant to the Act and upon the terms and conditions set forth in this Agreement.

2.02         Name, Office and Registered Agent.The name of the Partnership is “Cole Operating Partnership I, LP.”  The registered office and principal place of business of the Partnership shall be 2555 East Camelback Road, Suite 400, Phoenix, Arizona  85016. The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change. The name and address of the Partnership’s registered agent is Christopher H. Cole, 2555 East Camelback Road, Suite 400, Phoenix, Arizona 85016. The sole duty of the registered agent as such is to forward to the Partnership any notice that is served on it as registered agent.

	
             
  	
            2.03
 	
            Partners.
 

(a)           The General Partner of the Partnership is Cole Credit Property Trust, Inc., a Maryland corporation. Its principal place of business is the same as that of the Partnership.

(b)           The Limited Partners are those Persons identified as Limited Partners (including the Original Limited Partner) on Exhibit A hereto, as it may be amended from time to time.

	
             
  	
            2.04
 	
            Term and Dissolution.
 

(a)           The Partnership shall have perpetual duration, except that the Partnership shall be dissolved earlier upon the first to occur of any of the following events (“Liquidating Events”):

(i)            the occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to Section 7.03(b), provided, that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such partnership shall not be an event of dissolution of the Partnership if the business of such General Partner is continued by the remaining partner or partners thereof, either alone or with additional partners, and such General Partner and such partners comply with any other applicable requirements of this Agreement;

(ii)           the passage of 90 days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided, that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such obligation is paid in full);

(iii)          the exchange of all Limited Partnership Interests (other than any of such interests held by the General Partner or Affiliates of the General Partner); or

	
             
 	
            (iv)
 	
            the election by the General Partner that the Partnership should be dissolved.
 

(b)           Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.03(b)), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel the Certificate and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section 5.06. Notwithstanding the foregoing, the liquidating General Partner may either (i) defer 

 

 

liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the Partners in kind.

2.05         Filing of Certificate and Perfection of Limited Partnership.The General Partner shall execute, acknowledge, record and file, at the expense of the Partnership, the Certificate and any and all amendments thereto and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.

2.06         Certificates Describing Partnership Units.At the request of a Limited Partner, the General Partner may, at its option and in its discretion, issue a certificate summarizing the terms of such Limited Partner’s interest in the Partnership, including the number of Partnership Units owned as of the date of such certificate. If issued, any such certificates (a) shall be in form and substance as approved by the General Partner, (b) shall not be negotiable, and (c) shall bear a legend substantially similar to the following:

 

“This certificate is not negotiable. The Partnership Units represented by this certificate are governed by and transferable only in accordance with the provisions of the Agreement of Limited Partnership of Cole Operating Partnership I, LP, as amended from time to time.”

ARTICLE III

BUSINESS OF THE PARTNERSHIP

The purpose and nature of the business to be conducted by the Partnership is (a) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise ceases to qualify as a REIT, (b) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing, and (c) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to cease qualifying as a REIT, the Partners acknowledge that the General Partner’s current status as a
REIT and the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the General Partner. Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under its Articles of Incorporation. The General Partner shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code.

ARTICLE IV

CAPITAL CONTRIBUTIONS AND ACCOUNTS

4.01         Capital Contributions.The General Partner and the Original Limited Partner have made Capital Contributions to the Partnership in exchange for the Partnership Units set forth opposite their names on Exhibit A. At such time as Additional Limited Partners are admitted to the Partnership, each shall make Capital Contributions as set forth opposite their names on Exhibit A, as it may be amended from time to time.

4.02         Additional Capital Contributions and Issuances of Additional Partnership Interests.Except as provided in this Section 4.02 or in Section 4.03, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership. The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Units in respect thereof in the manner contemplated by this Section 4.02.

	
             
 	
            (a)
 	
            Issuances of Additional Partnership Interests.
 

 

 

 

 

(i)            General. The General Partner is hereby authorized to cause the Partnership to issue additional Partnership Interests in the form of Partnership Units for any Partnership purpose, at any time or from time to time, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners. Any additional Partnership Interests issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative participating, optional or other special rights, powers and duties, including rights, powers and duties
senior to Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Delaware law, including, without limitation, (A) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Interests; (B) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (C) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; provided, however, that no additional Partnership Interests shall be issued to the General Partner or the Original Limited Partner unless:

	
             
 	
            1.
 	
            the additional Partnership Interests are issued in connection with an issuance of REIT Shares or other interests in, the General Partner, which shares or interests have designations, preferences and other rights such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner by the Partnership in accordance with this Section 4.02, and the General Partner, on its own or with the Original Limited Partner, shall make a Capital Contribution to the Partnership in an amount equal to the aggregate proceeds raised in connection with the issuance of such shares of stock of or other interests in the General Partner;
 

	
             
 	
            2.
 	
            the additional Partnership Interests are issued in exchange for property or other assets owned by the General Partner or Original Limited Partner with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Interests; or
 

	
             
 	
            3.
 	
            the additional Partnership Interests are issued to all Partners in proportion to their respective Percentage Interests.
 

(ii)          Issuance of Additional Securities. The General Partner shall not issue any additional REIT Shares (other than REIT Shares issued in connection with an exchange made pursuant to Section 8.05) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares (collectively, “Additional Securities”) other than to all holders of REIT Shares, unless (A) the General Partner shall cause the Partnership to issue to the General Partner (or to the General Partner and the Original Limited Partner), as the General Partner may designate, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights such
that the economic interests are substantially similar to those of the Additional Securities, and (B) the General Partner (or the General Partner and the Original Limited Partner) contributes the proceeds from the issuance of such Additional Securities and from any exercise of rights contained in such Additional Securities, directly and through the General Partner (or the General Partner and the Original Limited Partner), to the Partnership; provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of a Property or other asset to be held directly by the General Partner. Without limiting the foregoing, the General Partner is expressly authorized to issue Additional Securities for less than fair market value, and to cause the Partnership to issue to the General Partner (or to the General Partner and the Original Limited Partner) corresponding Partnership Interests, so long as (1) the General Partner concludes in good faith
that such issuance is in the best interests of the General Partner and the Partnership, including without limitation, the issuance of REIT Shares and corresponding Partnership Units pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise, and (2) the General Partner contributes directly or directly and through the Original Limited Partnership all proceeds from such issuance to the Partnership.

 

 

 

 

(b)           Certain Deemed Contributions of Proceeds of Issuance of REIT Shares. In connection with any and all issuances of REIT Shares, the General Partner shall make directly or directly and through the Original Limited Partner Capital Contributions to the Partnership of the proceeds from such issuances, provided, that if the proceeds actually received and contributed by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other fees or expenses paid or incurred in connection with such issuance, then the General Partner (or the General Partner together with the Original Limited Partner, as applicable) shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the gross proceeds of
such issuance and the Partnership shall be deemed simultaneously to have paid such offering expenses in accordance with Section 6.05 and in connection with the required issuance of additional Partnership Units for such Capital Contributions pursuant to Section 4.02(a).

(c)           Original Limited Partner Deemed Contributions. In the event the Original Limited Partner elects to defer any distribution of cash hereunder to be made to it pursuant to Section 5.02(a), then such amount shall be deemed to be an additional contribution of capital to the Partnership by the Original Limited Partner, which shall be added to the Original Limited Partner’s Capital Contribution to the Partnership and the Original Limited Partner’s Capital Account as established and maintained under Section 4.04.

4.03         Additional Funding.If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose, the General Partner may (a) cause the Partnership to obtain such funds from outside borrowings, or (b) elect to have the General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise.

4.04         Capital Accounts.A separate capital account (a “Capital Account”) shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (a) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (b) the Partnership distributes to a Partner more than a de minimis amount of Partnership property as consideration for the redemption of a Partnership Interest, or (c) the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of
the Code) in accordance with Regulations Section 1.704- l(b)(2)(iv)(f). When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.01 if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.

4.05         Percentage Interests.If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the date of each such increase or decrease to a percentage equal to the number of Partnership Units held by such Partner divided by the aggregate number of Partnership Units outstanding after giving effect to such increase or decrease. In such event, the General Partner shall revalue the property of the Partnership and the Capital Account for each Partner shall be adjusted as set forth in Section 4.04. If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.05, the Profit and Loss for the taxable year in which the adjustment occurs shall be prorated
between the part of the year ending on the day when the Partnership’s property is revalued by the General Partner and the part of the year beginning on the following day and, as so divided, shall be allocated to the Partners based on their Percentage Interests before adjustment, and their adjusted Percentage Interests, respectively, either (a) as if the taxable year had ended on the date of the adjustment or (b) based on the number of days in each part. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate Profit and Loss for the taxable year in which an adjustment occurs, as may be required or permitted under Section 706 of the Code.

	
             
 	
            4.06
 	
            No Interest on Contributions.No Partner shall be entitled to interest on its Capital Contribution.
 

4.07         Return of Capital Contributions.No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any 

 

 

Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the Partnership continues in existence.

4.08         No Third-Party Beneficiary.No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or
pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership.

ARTICLE V

PROFIT AND LOSS; DISTRIBUTIONS

	
             
  	
            5.01
 	
            Allocation of Profit and Loss.
 

(a)           After giving effect to the special allocations set forth in Sections 5.01(b), (c) and (d), Profit for each fiscal year of the Partnership shall be allocated as follows: (i) first to the Partners, pro rata, in accordance with and in proportion to their respective Partnership Interests, in amounts equal to the amount of cash distributed to the Partners pursuant to Section 5.02(a) with respect to such fiscal year; (ii) second, to the extent the amount of Profit for such fiscal year exceeds the amount of cash distributed to the Partners pursuant to Section 5.02(a), such excess shall be allocated to the General Partner and the Limited Partners in amounts and in proportion to the cumulative Loss allocated to the General Partner pursuant to clause (y) of this Section 5.01(a) and the cumulative Loss allocated to the Limited
Partners pursuant to clause (x) of this Section 5.01(a), respectively; and (iii) finally, the balance, if any, of Profit shall be allocated to the Partners in accordance with and in proportion to their respective Percentage Interests. Notwithstanding the foregoing, however, it is the intent of the Partners that allocations of Profit to the Limited Partners be such that the amount of Profit allocated to each Limited Partner be equal to the amount of income that would have been allocated to such Limited Partner with respect to the applicable fiscal period if such Limited Partner had owned REIT Shares equal in number to the number of Partnership Units owned by such Limited Partner during such fiscal period, and if, for any reason, the foregoing allocations of Profit result in any material variation from this concept, Profit shall be allocated to each Limited Partner in an amount equal to the aggregate amount of income that would have been allocated to such Limited Partner with respect to
the applicable fiscal period if such Limited Partner had owned REIT Shares equal in number to the number of Partnership Units owned by such Limited Partner during such fiscal period. After giving effect to the special allocations set forth in Sections 5.01(b), (c) and (d), Loss for a fiscal year of the Partnership shall be allocated as follows: (w) first, to the Partners, pro rata, in accordance with and in proportion to their respective Partnership Interests, until the cumulative Loss allocated to each Partner under this clause (w) equals the cumulative Profit allocated to each Partner under clause (ii) of this Section 5.01(a); (x) second, to the Limited Partners in an amount equal to each such Limited Partner’s Capital Account balance prior to the allocation made under this clause (x); (y) third, to the General Partner in an amount equal to the General Partner’s Capital Account balance prior to the allocation made under this clause (y); and (z) fourth, to the General
Partner to the extent that any further allocation of Loss to Limited Partners would result in any such Limited Partners having a deficit balance in their Capital Accounts.

(b)           Notwithstanding any provision to the contrary herein, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that bears the “economic risk of loss” of such deduction in accordance with Regulations Section 1.704- 2(i)(1), (iii) if there is a net 

 

 

decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2), (3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner nonrecourse debt minimum gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(g), items of gain and income shall be allocated among the Partners, in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). A Partner’s “interest in partnership profits” for purposes of
determining its share of the nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752- 3(a)(3) shall be such Partner’s Percentage Interest.

(c)           If a Partner receives in any taxable year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner nonrecourse debt minimum gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a Partner in
accordance with this Section 5.01(c), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.01(c).

(d)           Loss shall not be allocated to a Limited Partner to the extent that such allocation would cause a deficit in such Partner’s Capital Account (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner nonrecourse debt minimum gain. Any Loss in excess of that limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss to the General Partner in accordance with this Section 5.01(d), to the extent permitted by Regulations Section 1.704-1(b), Profit shall be allocated to the General Partner in an amount necessary to offset the Loss previously allocated to the General Partner under this Section 5.01(d).

(e)           If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Partner.

(f)            “Profit” and “Loss” and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Sections 5.01(b), 5.01(c), or 5.01(d). All allocations of income, Profit, gain, Loss, and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.01, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have the authority, in its sole and absolute discretion and without the need for
consent from any Partner, to elect the method or methods to be used by the Partnership for allocating items of income, gain, expense and deductions as required by Section 704(c) of the Code, including election of a method that may result in one or more Partners receiving or being allocated a disproportionately larger share of items of Partnership income, gain, expense or deduction, and any such election shall be binding on all Partners.

	
             
  	
            5.02
 	
            Distributions of Cash.
 

(a)           The Partnership shall distribute cash on a quarterly (or, at the election of the General Partner, more frequent) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period) in the 

 

 

following manner: (i) first, to the General Partner in an amount equal to the GP Minimum Return with respect to the fiscal year of the General Partner; (ii) second, to the Limited Partners pro rata among them in proportion to the their respective Unpaid Return, if any, owing to each such Limited Partners with respect to prior fiscal years, in an amount equal to their respective Unpaid Return for such prior fiscal years owing to each such Limited Partner; (iii) third, after the establishment of reasonable cash reserves to meet REIT Expenses and other obligations of the Partnership, as determined in the sole and absolute discretion of the General Partner, to the General Partner and the Limited Partners in such aggregate amount as may be determined by the General Partner in its sole and absolute discretion to be allocated among the General Partner and the Limited Partners such that each Limited Partner will
receive an amount equal to its LP Return for such fiscal year; and (iv) finally, to the Partners in accordance with and in proportion to their respective Percentage Interests; provided, however, that if a new or existing Partner acquires an additional Partnership Interest in exchange for a Capital Contribution on any date other than a Partnership Record Date, the cash distribution attributable to such additional Partnership Interest relating to the Partnership Record Date next following the issuance of such additional Partnership Interest shall be reduced to the proportion thereof which equals (i) the number of days that such additional Partnership Interest is held by such Partner divided by (ii) the number of days between such Partnership Record Date and the immediately preceding Partnership Record Date. Notwithstanding the foregoing, however, the Original Limited Partner may, in its sole and absolute discretion, elect to defer any distribution to be made to it, in which case the
amount so deferred shall be deemed to be an additional Capital Contribution made on behalf of the Original Limited Partner under Section 4.02(c), to be distributed to the Original Limited Partner upon liquidation of the Partnership under Section 5.06, or at such time as the Original Limited Partner may otherwise be allowed to withdraw from the Partnership after the Transfer Restriction Date.

(b)           Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, the requirements of Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to a Partner or its assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Partner or assignee equals or exceeds the amount required to be withheld by the Partnership, the amount withheld shall be treated as a
distribution of cash in the amount of such withholding to such Partner or assignee, or (ii) if the actual amount to be distributed to the Partner or assignee is less than the amount required to be withheld by the Partnership, the amount required to be withheld shall be treated as a loan (a “Partnership Loan”) from the Partnership to the Partner or assignee on the day the Partnership pays over such amount to a taxing authority. A Partnership Loan shall be repaid through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee. In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay any amount owed to the Partnership with respect to the Partnership Loan within 15 days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to make the payment to the Partnership on behalf of such Defaulting
Limited Partner. In such event, on the date of payment, the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount. Without limitation, the General Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner. Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.02(b) shall bear interest at the lesser of (A) the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in The Wall Street Journal, or (B) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan is repaid in full.

(c)           To the extent not utilized for expenses of the Partnership or for investment in additional Properties, the General Partner may, in its discretion, cause the Partnership to distribute Net Capital Proceeds in such amount as shall be determined by the General Partner in its discretion in accordance with the provisions of Section 5.02(a).

(d)           In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash dividend as the holder of record of a REIT Share for which all or part of such 

 

 

Partnership Unit has been or will be exchanged, and the Unpaid Return with respect to such Partnership Unit shall be deemed to be reduced by the amount of any such cash dividend.

5.03         REIT Distribution Requirements.The General Partner shall use its reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to pay stockholder dividends that will allow the General Partner to (a) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (b) avoid any federal income or excise tax liability imposed by the Code.

5.04         No Right to Distributions in Kind.No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.

5.05         Limitations on Return of Capital Contributions.Notwithstanding any of the provisions of this Article V, no Partner shall have the right to receive and the General Partner shall not have the right to make a distribution that includes a return of all or part of a Partner’s Capital Contributions, unless after giving effect to the return of a Capital Contribution, the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of its Capital Contribution, does not exceed the fair market value of the Partnership’s assets.

5.06         Distributions Upon Liquidation.Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, any remaining assets of the Partnership shall be distributed to all Partners with positive Capital Accounts in accordance with their respective positive Capital Account balances. For purposes of the preceding sentence, the Capital Account of each Partner shall be determined after all adjustments made in accordance with Sections 5.01 and 5.02 resulting from Partnership operations and from all sales and dispositions of all or any part of the Partnership’s assets have been made. To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may
be made to assure that adequate funds are available to pay any contingent debts or obligations.

5.07         Substantial Economic Effect.It is the intent of the Partners that the allocations of Profit and Loss under this Agreement have substantial economic effect (or be consistent with the Partners’ interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto. Article V and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent. If, for any reason, the General Partner deems it necessary in order to comply with the Code, the General Partner may, and hereby is, authorized and directed to allocate income, gain, loss, deduction or credit (or items thereof) arising in any year differently than
as provided for in this Article if, and to the extent, (i) that allocating income, gain, loss, deduction or credit (or item thereof) would cause the determinations and allocations of each Partner’s distributive share of income, gain, loss, deduction or credit (or item thereof) not to be permitted by the Code and any Regulations promulgated thereunder, or (ii) such allocation would be inconsistent with a Partner’s interest in the Partnership taking into consideration all facts and circumstances. Any allocation made pursuant to this Section shall be deemed to be a complete substitute for any allocation otherwise provided for in this Agreement, and no further amendment of this Agreement or approval by any Partner shall be required to effectuate such allocation. In making any such allocations (“New Allocations”) under this Section, the General Partner is authorized to act in reliance upon advice of counsel to the Partnership or the Partnership’s regular certified
public accountants that, in their opinion, after examining the relevant provisions of the Code and any current or future proposed or final Regulations thereunder, the New Allocations are necessary in order to ensure that, in either the then-current year or in any preceding year, each Partner’s distributive share of income, gain, loss, deduction or credit (or items thereof) are determined and allocated in accordance with the Code and the Partner’s interests in the Partnership. New Allocations made by the General Partner in reliance upon the advice of counsel and accountants as described above shall be deemed to be made in the best interests of the Partnership and all of the Partners consistent with the duties of the General Partner hereunder and any such New Allocations shall not give rise to any claim or cause of action by any Partner against the Partnership or the General Partner.

 

 

 

 

ARTICLE VI

RIGHTS, OBLIGATIONS AND

POWERS OF THE GENERAL PARTNER

	
             
  	
            6.01
 	
            Management of the Partnership.
 

(a)           Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership. Subject to the restrictions specifically contained in this Agreement, the powers and obligations, as the context requires, of the General Partner shall include, without limitation, the authority to take the following actions on behalf of the Partnership:

(i)            to acquire, purchase, own, operate, lease and dispose of any real property and any other property or assets including, but not limited to notes, Mortgages, partnership or joint venture interests or securities, that the General Partner determines are necessary or appropriate or in the best interests of the business of the Partnership;

(ii)           to construct buildings and make other improvements on the Properties owned or leased by the Partnership;

(iii)          to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;

(iv)          to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or chance the terms of, or extend the time for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(v)           to pay, either directly or by reimbursement, for all operating costs and general administrative expenses of the Partnership to third parties or to the General Partner or its Affiliates as set forth in this Agreement;

(vi)          to guarantee or become a co-maker of indebtedness of the General Partner or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

(vii)         to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all operating costs and general administrative expenses of the General Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;

(viii)        to lease all or any portion of any of the Partnership’s assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine;

(ix)          to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably 

 

 

determine, and similarly, to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership’s assets; 

(x)           to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership business; 

(xi)          to make or revoke any election permitted or required of the Partnership by any taxing authority;

(xii)         to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;

(xiii)        to determine whether or not to apply any insurance proceeds for any Property to the restoration of such Property or to distribute the same;

(xiv)        to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate brokers, and such other persons, as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay such persons remuneration as the General Partner may deem reasonable and proper;

(xv)         to retain other services of any kind or nature in connection with Partnership business and to pay such remuneration as the General Partner may deem reasonable and proper for same;

(xvi)        to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;

(xvii)       to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;

(xviii)     to distribute Partnership cash or other Partnership assets in accordance with this Agreement;

(xix)        to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures, limited liability companies or other entities or relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time);

(xx)         to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose; 

	
             
 	
            (xxi)
 	
            to merge, consolidate or combine the Partnership with or into another Person;
 

(xxii)       to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code; and

(xxiii)     to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act.

 

 

 

 

(b)           Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to apply Partnership funds to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

(c)           Any actions taken by the General Partner pursuant to its authority under this Agreement on behalf of the Partnership regarding the approval of any transaction between the Partnership and the Sponsor, Advisor, a member of the Board of Directors of Cole Credit Property Trust or any Affiliate thereof, shall require approval by a majority of the members of the Board of Directors of Cole Credit Property Trust as being fair and reasonable to Cole Credit Property Trust and the Partnership on terms and conditions not less favorable to Cole Credit Property Trust or the Partnership, as applicable, than those available from unaffiliated third parties.

6.02         Delegation of Authority.The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person (including without limitation officers or other agents of the Partnership or the General Partner appointed by the General Partner) for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.

	
             
  	
            6.03
 	
            Indemnification and Exculpation of Indemnitees.
 

(a)           The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, as a result of acting on behalf of or performing services for the Partnership, only if it is determined that (i) the Indemnitee acted in good faith and (ii) that the Indemnitee reasonably believed that the act or omission was in the Partnership’s best interests, or if the act or omission
was outside the Indemnitee’s official capacity as a general partner of the Partnership, that the act or omission was at least not opposed to the Partnership’s best interests. Notwithstanding the foregoing, each Indemnitee shall be liable, responsible and accountable, and the Partnership shall not be liable to an Indemnitee, other than for reasonable expenses actually incurred by the Indemnitee with respect to a proceeding in which (i) the Indemnitee is found liable on the basis that the Indemnitee improperly received personal benefit, whether or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (ii) the Indemnitee is found liable to the Partnership or the Limited Partners. The Partnership shall not indemnify or hold harmless the Indemnitee if the loss or liability was the result of negligence or misconduct by the Indemnitee. The termination of any proceeding by judgment, order or settlement does not create a presumption that the
Indemnitee did not meet the requisite standard of conduct set forth in this Section 6.03(a). The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not alone determine that the Indemnitee acted in a manner contrary to that specified in this Section 6.03(a). Any indemnification pursuant to this Section 6.03 shall be made only out of the assets of the Partnership.

(b)           Notwithstanding anything to the contrary contained in the provisions of subsection (a) of this Section, the Partnership shall not provide indemnification for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by an Indemnitee unless one or more of the following conditions are met:  (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnitee, (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnitee, or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Partnership were offered or sold as to indemnification for violations of securities laws.

(c)           The Partnership shall pay or reimburse reasonable legal expenses and other costs incurred by an Indemnitee in advance of final disposition of a proceeding if all of the following are satisfied:  (i) the proceeding 

 

 

relates to acts or omissions with respect to the performance of duties for services on behalf of the Partnership, (ii) the Indemnitee provides the Partnership with written affirmation of the Indemnitee’s good faith belief that the Indemnitee has met the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.03, (iii) the legal proceeding was initiated by a third party who is not a stockholder of the General Partner or, if by a stockholder of the General Partner acting in his or her capacity as such, a court of competent jurisdiction approves such advancement, and (iv) the Indemnitee provides the Partnership with a written agreement to repay the amount paid or reimbursed by the Partnership, together with the applicable legal rate of interest thereon, if it is ultimately determined that the Indemnitee did not comply with the requisite standard of conduct and is
not entitled to indemnification.

(d)           The Indemnification provided by this Section 6.03 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

(e)           The Partnership may purchase and maintain insurance or establish other arrangements, including without limitation trust arrangements and letters of credit on behalf of or to secure indemnification obligations owed to the Indemnitees and such other Persons as the General Partner shall determine against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(f)            For purposes of this Section 6.03, (i) the Partnership shall be deemed to have requested an Indemnitee to serve as a fiduciary of an employee benefit plan whenever the performance by the Indemnitee of its duties to the Partnership also imposes duties on the Indemnitee, or otherwise involves services by the Indemnitee to the plan or participants or beneficiaries of the plan; (ii) excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.03; and (iii) actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.

(g)           In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

(h)           An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.03 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(i)            The provisions of this Section 6.03 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights in or be for the benefit of any other Persons.

	
             
  	
            6.04
 	
            Liability of the General Partner.
 

(a)           Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or any act or omission if the General Partner acted in good faith. The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity, provided, the General Partner, acting in good faith, abides by the terms of this Agreement. In addition, to the extent the General Partner or any officer, director, employee, agent or stockholder of the General Partner performs its duties in accordance with the standards provided by the Act, as it
may be amended from time to time, or under any successor statute thereto, such Person or Persons shall have no liability by reason of being or having been the General Partner, or by reason of being an officer, director, employee, agent or stockholder of the General Partner. To the maximum extent that the Act and the general laws of the State of Delaware, in effect from time to time, permit limitation of the liability of general partners of a limited partnership, the General Partner and its officers, directors, employees, agents and stockholders shall not be liable to the Partnership or to any Partner for money damages except to the extent that (i) the General Partner or its officers, directors, employees, agents or stockholders actually received an improper benefit 

 

 

or profit in money, property or services, in which case the liability shall not exceed the amount of the benefit or profit in money, property or services actually received; or (ii) a judgment or other final adjudication adverse to the General Partner or one or more of its officers, directors, employees, agents or stockholders is entered in a proceeding based on a finding in the proceeding that the action or failure to act of the General Partner or one or more of its officers, directors, employees, agents or stockholders was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. Neither the amendment nor repeal of this Section 6.04(a), nor the adoption or amendment of any other provision of this Agreement inconsistent with this Section 6.04(a), shall apply to or affect in any respect the applicability of the preceding sentence with respect to any
act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Delaware statute limiting the liability of the General Partner or its directors or officers for money damages in a suit by or on behalf of the Partnership or by any Partner, the General Partner and the officers, directors, employees, agents and stockholders of the General Partner shall not be liable to the Partnership or to any Partner for money damages except to the extent that (i) the General Partner or one or more of its officers, directors, employees, agents or stockholders actually received an improper benefit or profit in money, property or services, in which case the liability shall not exceed the amount of the benefit or profit in money, property or services actually received; or (ii) a judgment or other final adjudication adverse to the General Partner or one or more of its officers, directors, employees, agents or stockholders is entered in a proceeding based on a finding
in the proceeding that the action of the General Partner or one or more of its officers, directors, employees or stockholders action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

(b)           The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders on the one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns
a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partners shall be resolved in favor of its stockholders. The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.

(c)           Subject to its obligations and duties as General Partner set forth in Section 6.01, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

(d)           Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order to (i) protect the ability of the General Partner to continue to qualify as a REIT or (ii) prevent the General Partner from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

(e)           Any amendment, modification or repeal of this Section 6.04 or any provision shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.04 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

	
             
  	
            6.05
 	
            Reimbursement of General Partner.
 

(a)           Except as provided in this Section 6.05 and elsewhere in this Agreement (including the provisions of Articles V and VI regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

 

 

 

 

(b)           The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all REIT Expenses and Administrative Expenses.

6.06         Outside Activities.Subject to Section 6.08, the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or a Subsidiary, or any officer, director, employee, agent, trustee, Affiliate or stockholder of the General Partner, the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interests or activities. None of the Limited Partners or any other Person shall have any rights by virtue of
this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which. if presented to the Partnership or any Limited Partner, could be taken by such Person.

	
             
  	
            6.07
 	
            Employment or Retention of Affiliates.
 

(a)           Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as an advisor, buyer, lessor, lessee, manager, property management agent, asset manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.

(b)           The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

(c)           The Partnership may transfer assets to joint ventures, limited liability companies, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions as the General Partner deems to be consistent with this Agreement and applicable law.

(d)           Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are on terms that are fair and reasonable to the Partnership.

6.08         General Partner Participation.The General Partner agrees that all business activities of the General Partner, including activities pertaining to the acquisition, development or ownership of commercial real property or other property, including Mortgages, shall be conducted through the Partnership or one or more Subsidiary Partnerships; provided, however, that the General Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in connection with the issuance of Additional Securities, which direct acquisition and issuance have been approved and determined to be in the best interests of the General Partner and the Partnership by a majority of the its directors.

6.09         Title to Partnership Assets.Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof; provided, that title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by such Person for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided, that the General Partner shall use its best efforts to cause legal title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

 

 

 

 

6.10         Miscellaneous.In the event the General Partner redeems any REIT Shares, then the General Partner shall cause the Partnership to purchase from the General Partner or the Original Limited Partner a number of Partnership Units determined by, and based upon, the application of the Conversion Factor on the same terms upon which the General Partner redeemed such REIT Shares. Moreover, if the General Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner or the Original Limited Partner to acquire an equal number of Partnership Units held by the General Partner. In the event any REIT Shares are redeemed by the General Partner pursuant to such offer, the Partnership shall
redeem an equivalent number of the General Partner’s or the Original Limited Partner’s Partnership Units for an equivalent purchase price based on the application of the Conversion Factor.

ARTICLE VII

CHANGES IN GENERAL PARTNER

 

	
             
  	
            7.01
 	
            Transfer of the General Partner’s Partnership Interest.
 

(a)           The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in or in connection with a transaction contemplated by Sections 7.01(c), 7.01(d) or 7.01(e).

(b)           The General Partner agrees that the Percentage Interest for it will at all times, be in the aggregate, at least 0.1%.

(c)           Except as otherwise provided in Section 7.01(d) or (e), the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets (other than in connection with a change in the General Partner’s state of incorporation or organizational form), which, in any such case, results in a change of control of the General Partner (a “Transaction”), unless:

(i)            the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners is obtained; or

(ii)           as a result of such Transaction all Limited Partners are granted the right to receive for each Partnership Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one REIT Share in consideration of the transfer of one REIT Share; provided, that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of Partnership Units shall be given the option to exchange its Partnership Units for the greatest amount of cash, securities, or other property which a Limited Partner would have received had it (A) exercised its
Exchange Right and (B) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the Exchange Right immediately prior to the expiration of the Offer; or

(iii)          the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners (other than the General Partner or any Subsidiary) receive an amount of cash, securities, or other property (expressed as an amount per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount of cash, securities, or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares.

(d)           Notwithstanding Section 7.01(c), the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity (the “Survivor”), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder. Upon such contribution 

 

 

and assumption, the Survivor shall have the right and duty to amend this Agreement as set forth in this Section 7.01(d). The Survivor shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and the Conversion Factor for a Partnership Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares or options, warrants or other rights relating thereto, and which a holder of Partnership Units could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustments to such method of
calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for herein with respect to the Conversion Factor. The Survivor also shall in good faith modify the definition of REIT Shares and make such amendments to Section 8.05 so as to approximate the existing rights and obligations set forth in Section 8.05 as closely as reasonably possible. The above provisions of this Section 7.01(d) shall similarly apply to successive mergers or consolidations permitted hereunder.

In respect of any transaction described in the preceding paragraph, the General Partner is required to use its commercially reasonable efforts to structure such transaction to avoid causing the Limited Partners to recognize a gain for federal income tax purposes by virtue of the occurrence of or their participation in such transaction, provided, such efforts are consistent with the exercise of the Board of Directors’ fiduciary duties to the stockholders of the General Partner under applicable law.

	
             
 	
            (e)
 	
            Notwithstanding Section 7.01(c),
 

(i)            a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and

(ii)           the General Partner may engage in a transaction not required by law or by the rules of any national securities exchange on which the REIT Shares are listed to be submitted to the vote of the holders of the REIT Shares.

7.02         Admission of a Substitute or Additional General Partner.A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:

(a)           the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.05 in connection with such admission shall have been performed;

(b)           if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership, it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and

(c)           counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel in the state or any other jurisdiction as may be necessary) that the admission of the Person to be admitted as a substitute or additional General Partner is in conformity with the Act, and that none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as a partnership for federal income tax purposes, or (ii) the loss of any Limited Partner’s limited liability.

 

 

 

 

	
             
  	
            7.03
 	
            Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.
 

(a)           Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.04(a)) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is, on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners thereof), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.03(b). The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.02 shall not be deemed to be the
withdrawal, dissolution or removal of the General Partner.

(b)           Following the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.04(a)) or the death, withdrawal, removal or dissolution of a General Partner (except that, if a General Partner is, on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners thereof), the Limited Partners, within 90 days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.04 by selecting, subject to Section 7.02 and any other provisions of this Agreement, a substitute General Partner by
consent of a majority in interest of the Limited Partners. If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.

	
             
  	
            7.04
 	
            Removal of a General Partner.
 

(a)           Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners thereof. The Limited Partners may not remove the General Partner, with or without cause.

(b)           If a General Partner has been removed pursuant to this Section 7.04 and the Partnership is continued pursuant to Section 7.03, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership to the substitute General Partner approved by a majority in interest of the Limited Partners in accordance with Section 7.03(b) and otherwise admitted to the Partnership in accordance with Section 7.02. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner’s removal. Such fair market value shall be determined by an appraiser mutually agreed upon by the General
Partner and Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners within 10 days following the removal of the General Partner. In the event that the parties are unable to agree upon an appraiser, the removed General Partner and Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners shall each select an appraiser. Each such appraiser shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest within 30 days of the General Partner’s removal, and the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than 40 days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of
the fair market value of the removed General Partner’s General Partnership Interest no later than 60 days after the removal of the General Partner. In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.

(c)           The General Partnership Interest of a removed General Partner, during the time after removal until the date of transfer under Section 7.04(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, Profit, gain or Loss allocations or cash 

 

 

distributions allocable or payable, as the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and be entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.04(b).

(d)           All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary and sufficient to effect all the foregoing provisions of this Section 7.04.

ARTICLE VIII

RIGHTS AND OBLIGATIONS

OF THE LIMITED PARTNERS

8.01         Management of the Partnership.The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for or on behalf of the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.

8.02         Power of Attorney.Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest.

8.03         Limitation on Liability of Limited Partners.No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership. A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.

8.04         Ownership by Limited Partner of Corporate General Partner or Affiliate.No Limited Partner shall at any time, either directly or indirectly, own any stock or other interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in conjunction with other stock or other interests owned by other Limited Partners would, in the opinion of counsel for the Partnership, jeopardize the classification of the Partnership as a partnership for federal income tax purposes. The General Partner shall be entitled to make such reasonable inquiry of the Limited Partners as is required to establish compliance by the Limited Partners with the provisions of this Section 8.04.

	
             
  	
            8.05
 	
            Exchange Right.
 

(a)           Subject to Sections 8.05(b), 8.05(c), 8.05(d) and 8.05(e), and subject to the potential modification of any rights or obligations provided for herein by agreement(s) between the Partnership and any one or more Limited Partners with respect to Partnership Units held by them, each Limited Partner shall have the right (the “Exchange Right”) to require the Partnership to redeem on a Specified Exchange Date all or a portion of the Partnership Units held by such Limited Partner at an exchange price equal to and in the form of the Cash Amount to be paid by the Partnership; provided, that such Partnership Units shall have been outstanding for at least one year. The Exchange Right shall be exercised pursuant to the delivery of an Exchange Notice to the Partnership (with a copy to the General Partner) by the Limited
Partner who is exercising the Exchange Right (the “Exchanging Partner”); provided, however, that the Partnership shall not be obligated to satisfy such Exchange Right if the General Partner elects to purchase the Partnership Units subject to the Exchange Notice pursuant to Section 8.05(b); and provided further, that no Limited Partner may deliver more than two Exchange Notices during each calendar year. A Limited Partner may not exercise the Exchange Right for less than 1,000 Partnership Units or, if such 

 

 

Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner. The Exchanging Partner shall have no right, with respect to any Partnership Units so exchanged, to receive any distribution paid with respect to such Partnership Units if the record date for such distribution is on or after the Specified Exchange Date.

(b)           Notwithstanding the provisions of Section 8.05(a), a Limited Partner that exercises the Exchange Right shall be deemed to have also offered to sell the Partnership Units described in the Exchange Notice to the General Partner, and the General Partner may, in its sole and absolute discretion, elect to purchase directly and acquire such Partnership Units by paying to the Exchanging Partner either the Cash Amount or the REIT Shares Amount, as elected by the General Partner (in its sole and absolute discretion), on the Specified Exchange Date, whereupon the General Partner shall acquire the Partnership Units offered for exchange by the Exchanging Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Units. If the General Partner shall elect to exercise its right to purchase
Partnership Units under this Section 8.05(b) with respect to an Exchange Notice, it shall so notify the Exchanging Partner within five business days after the receipt by the General Partner of such Exchange Notice. Unless the General Partner (in its sole and absolute discretion) shall exercise its right to purchase Partnership Units from the Exchanging Partner pursuant to this Section 8.05(b), the General Partner shall have no obligation to the Exchanging Partner or the Partnership with respect to the Exchanging Partner’s exercise of an Exchange Right. In the event the General Partner shall exercise its right to purchase Partnership Units with respect to the exercise of an Exchange Right in the manner described in the first sentence of this Section 8.05(b), the Partnership shall have no obligation to pay any amount to the Exchanging Partner with respect to such Exchanging Partner’s exercise of such Exchange Right, and each of the Exchanging Partner and the General Partner
shall treat the transaction between the General Partner and the Exchanging Partner for federal income tax purposes as a sale of the Exchanging Partner’s Partnership Units to the General Partner. Each Exchanging Partner agrees to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Shares to such Exchanging Partner upon exercise of its Exchange Right.

(c)           Notwithstanding the provisions of Sections 8.05(a) and 8.05(b), a Limited Partner shall not be entitled to exercise the Exchange Right if the delivery of REIT Shares to such Partner on the Specified Exchange Date by the General Partner pursuant to Section 8.05(b) (regardless of whether or not the General Partner would in fact exercise its rights under Section 8.05(b)) would (i) result in such Partner or any other person owning, directly or indirectly, REIT Shares in excess of the ownership limitations described in the Articles of Incorporation and calculated in accordance therewith, (ii) result in REIT Shares being owned by fewer than 100 persons (determined without reference to any rules of attribution), except as provided in the Articles of Incorporation, (iii) result in the General Partner being “closely held”
within the meaning of Section 856(h) of the Code, (iv) cause the General Partner to own, directly or constructively, 10% or more of the ownership interests in a tenant of the General Partner’s, the Partnership’s, or a Subsidiary Partnership’s real property within the meaning of Section 856(d)(2)(B) of the Code, or (v) cause the acquisition of REIT Shares by such Partner to be “integrated” with any other distribution of REIT Shares for purposes of complying with the registration provisions of the Securities Act. The General Partner, in its sole and absolute discretion, may waive any of the restrictions on exchange set forth in this Section 8.05(c); provided, however, that in the event any such restriction is waived, the Exchanging Partner shall be paid the Cash Amount.

(d)           Any Cash Amount to be paid to an Exchanging Partner pursuant to this Section 8.05 shall be paid on the Specified Exchange Date; provided, however, that the General Partner may elect to cause the Specified Exchange Date to be delayed for up to 180 days to the extent required for the General Partner to cause additional REIT Shares to be issued to provide financing to be used to make such payment of the Cash Amount. Notwithstanding the foregoing, the General Partner agrees to use its best efforts to cause the closing of the acquisition of exchanged Partnership Units hereunder to occur as quickly as reasonably possible.

(e)           Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their Exchange Rights as and if deemed necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under Section 7704 of the Code. If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof (a “Restriction Notice”) to each of the Limited Partners, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which states that, in the opinion of such 

 

 

counsel, restrictions are necessary in order to avoid the Partnership being treated as a “publicly traded partnership” under Section 7704 of the Code.

	
             
  	
            8.06
 	
            Call Right.
 

(a)           Subject to Section 8.06(c) below, and subject to the modification of any rights or obligations provided for herein by agreement(s) between the General Partner and any one or more Limited Partners with respect to the Partnership Units held by them, at any time after the expiration of the Holding Period for the Partnership Units in question, the General Partner shall have the right (the “Call Right”) to purchase all of the Partnership Units held by a Limited Partner at a price equal to the Cash Amount; provided, however, that the General Partner may, in its sole and absolute discretion, elect to purchase such Partnership Units by paying to the Partner in question the REIT Shares Amount in lieu of the Cash Amount. The Call Right shall be exercised pursuant to a Call Notice delivered by the General Partner to any
such Limited Partner. The General Partner may not exercise the Call Right for less than the entire interest of a Limited Partner in the Partnership. A Limited Partner receiving the Call Notice described above shall have no rights with respect to any interest in the Partnership other than the right to receive payment for its interest in the Partnership in cash or REIT Shares in accordance with this Section 8.06. An assignee of a Limited Partner shall be bound by and subject to the Call Right of the General Partner pursuant to this Section 8.06. In connection with any exercise of such Call Right by the General Partner with respect to an assignee, the Cash Amount (or REIT Shares Amount) shall be paid by the General Partner directly to such assignee and not to the Limited Partner from which such assignee acquired its Partnership Units. The General Partner shall be unable to exercise the Call Right and the Call Right shall lapse upon the occurrence of a Liquidating Event unless and until
the Partners shall continue the business of the Partnership under Section 7.03.

(b)           (i)           Within 30 days after the delivery of the Call Notice by the General Partner to a Limited Partner under this Section 8.06, the General Partner (subject to the limitations set forth in Section 8.06(c)) shall transfer and deliver the Cash Amount (or the REIT Shares Amount) to such Limited Partner or, as applicable, its assignee, whereupon the General Partner (or its designee) shall acquire the Partnership Units of such Limited Partner or, as applicable, its assignee, and shall be treated for all purposes of this Agreement as the owner of such Partnership Units (and as a Limited Partner with respect to such Partnership Units).

(ii)           In the event that the General Partner elects to pay such Limited Partner in the form of the REIT Shares Amount and such REIT Shares Amount is not a whole number of REIT Shares, the Limited Partner shall be paid (A) the number of REIT Shares which equals the nearest whole number less than such amount plus (B) an amount of cash which the General Partner determines, in its reasonable discretion, to represent the fair value of the remaining fractional REIT Share which would otherwise be payable to the Limited Partner.

(iii)          Each Limited Partner agrees to deliver to the General Partner the Partnership Unit Certificate(s) representing its Limited Partnership Interest and to execute such documents as the General Partner may reasonably require in connection with the issuance of REIT Shares upon exercise of the Call Right (including without limitation an assignment of Partnership Units pursuant to the terms of which such Limited Partner (A) represents, warrants and certifies that it has marketable and unencumbered title to its Partnership Units, free and clear of the rights of or interest of any other person or entity, that it has the full right, power and authority to transfer and surrender its Partnership Units, and that it has obtained the consent or approval of all persons or entities, if any, having the right to consent to or
approve of such transfer and surrender, and (B) agrees to indemnify and hold the General Partner harmless from and against any and all liabilities, charges, costs and expenses relating to such Limited Partner’s Partnership Units which are subject to the Call Right or the exercise of the Call Right).

(c)           Notwithstanding the provisions of Sections 8.06(a) and 8.06(b) above, the General Partner shall not be entitled to exercise the Call Right if (i) a Liquidating Event has occurred with regard to the Partnership and the Partnership has not been continued under Section 7.03; or (ii) the delivery of REIT Shares to the Limited Partner (A) would be prohibited under the Articles of Incorporation, (B) would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (C) would be prohibited under applicable federal or state securities laws or regulations.

 

 

 

 

(d)           Each Limited Partner covenants and agrees with the General Partner that all Partnership Units delivered in connection with the Call Right shall be delivered to the General Partner free and clear of all liens and encumbrances and, notwithstanding anything contained herein to the contrary, the General Partner shall not be under any obligation to acquire a Limited Partner’s Partnership Units (i) to the extent that any such Partnership Units are subject to any such liens or encumbrances or (ii) in the event that the Limited Partner shall fail to give the General Partner adequate assurances that such Partnership Units are not subject to any such liens or encumbrances or shall fail to agree to fully indemnify the General Partner from any such liens or encumbrances as well as the liabilities, charges, costs and expenses
referenced in the last section of Section 8.06(b)(iii). Each Limited Partner further agrees that, in the event any state or local transfer tax is payable as a result of the transfer of its Partnership Units to the General Partner, such Limited Partner shall assume and pay such transfer tax.

8.07         Duties and Conflicts.The General Partner recognizes that the Limited Partners and their Affiliates have or may have other business interests, activities and investments, some of which may be in conflict or competition with the business of the Partnership, and that such Persons are entitled to carry on such other business interests, activities and investments. The Limited Partners and their Affiliates may engage in or possess an interest in any other business or venture of any kind, independently or with others, on their own behalf or on behalf of other entities with which they are affiliated or associated, and such Persons may engage in any activities, whether or not competitive with the Partnership, without any obligation to offer any interest in such activities to the Partnership or to
any Partner. Neither the Partnership nor any Partner shall have any right, by virtue of this Agreement, in or to such activities, or the income or profits derived therefrom, and the pursuit of such activities, even if competitive with the business of the Partnership, and such activities shall not be deemed wrongful or improper.

ARTICLE IX

TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

	
             
  	
            9.01
 	
            Purchase for Investment.
 

(a)           Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of its Partnership Interest is made as a principal for its account for investment purposes only and not with a view to the resale or distribution of such Partnership Interest.

(b)           Each Limited Partner agrees that it will not sell, assign or otherwise transfer its Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.01(a) above.

	
             
  	
            9.02
 	
            Restrictions on Transfer of Limited Partnership Interests.
 

(a)           Subject to the provisions of Sections 9.02(b), 9.02(c) and 9.02(d), no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of its Limited Partnership Interest, or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “Transfer”), without the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion. Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be given effect. The Original Limited Partner acknowledges that the General Partner has agreed not to grant its consent with respect to any Transfer by the Original Limited Partner prior
to the Transfer Restriction Date; provided, that the Original Limited Partner shall not be prohibited from a Transfer of its Partnership Interest pursuant to the exercise of its right to exchange its Partnership Interest for REIT Shares pursuant to Section 8.05 above, in which case the Original Limited Partner acknowledges that the General Partner has also agreed not to grant its consent with respect to any Transfer of said REIT Shares prior to the Transfer Restriction Date. The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.

(b)           No Limited Partner may withdraw from the Partnership other than as a result of: (i) a permitted Transfer (i.e., a Transfer consented to as contemplated by paragraph (a) above or paragraph (c) below or a Transfer made pursuant to Section 9.05 below) of all of its Partnership Units pursuant to this Article IX pursuant to an exchange of all of its Partnership Units pursuant to Section 8.05 above; or (iii) a Transfer made pursuant to the sale 

 

 

of all its Partnership Units pursuant to Section 8.06 above. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Units, such Limited Partner shall cease to be a Limited Partner.

(c)           Subject to Sections 9.02(d), 9.02(e) and 9.02(f), a Limited Partner may Transfer, with the consent of the General Partner, all or a portion of its Partnership Units to (i) a parent or parent’s spouse, natural or adopted descendants, a spouse of any such descendant, a brother or sister, or a trust created by such Limited Partner for the benefit of such Limited Partner and/or any such person(s), for which trust such Limited Partner or any such person(s) is a trustee, (ii) a corporation controlled by a Person or Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.

(d)           No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would require the registration of the Limited Partnership Interest under the Securities Act, or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).

(e)           No Transfer by a Limited Partner of its Partnership Units, in whole or in part, may be made to any Person if (i) in the opinion of legal counsel for the Partnership, the transfer would result in the Partnership’s being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, or (iii) such transfer is effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code.

(f)            No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion; provided, that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

(g)           Any Transfer in contravention of any of the provisions of this Article IX shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership.

(h)           Prior to the consummation of any Transfer under this Article IX, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General Partner shall request in connection with such Transfer.

	
             
  	
            9.03
 	
            Admission of Substitute Limited Partner.
 

(a)           Subject to the other provisions of this Article IX, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner and upon the satisfactory completion of the following:

(i)            the assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner;

(ii)           to the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act;

 

 

 

 

(iii)          the assignee shall have delivered a letter containing the representation set forth in Section 9.01(a) and the agreement set forth in Section 9.01(b);

(iv)          if the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a Limited Partner under the terms and provisions of this Agreement;

(v)           the assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.02;

(vi)          the assignee shall have paid all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner; and

(vii)         the assignee shall have obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner’s sole and absolute discretion.

(b)           For the purpose of allocating Profit and Loss and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Partner upon the filing of the Certificate described in Section 9.03(a)(ii) or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution.

(c)           The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section 9.03 and making all official filings and publications. The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article IX to the admission of such Person as a Limited Partner of the Partnership.

	
             
  	
            9.04
 	
            Rights of Assignees of Partnership Interests.
 

(a)           Subject to the provisions of Sections 9.01 and 9.02, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Interest until the Partnership has received notice thereof.

(b)           Any Person who is the assignee of all or any portion of a Limited Partner’s Limited Partnership Interest, but who does not become a Substitute Limited Partner and desires to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article IX to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership Interest.

9.05         Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, and any such Person shall have the rights of such Limited Partner for the purpose of settling or managing his
estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.

9.06         Joint Ownership of Interests.A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided, that such individuals either are married or are related and share the same personal residence. The written consent or vote of both owners of any such jointly-held Partnership Interest shall be required to constitute the action of the owners of such Partnership Interest; provided, however, that the 

 

 

written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one owner of a Partnership Interest held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the death of one of the owners of a jointly held Partnership Interest until it shall have received notice of such death. Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall thereafter be owned separately by each of the former joint owners.

ARTICLE X

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

10.01       Books and Records.At all times during the continuance of the Partnership, the Partners shall keep or cause to be kept at the Partnership’s specified office true and complete books of account maintained in accordance with generally accepted accounting principles, including (a) a current list of the full name and last-known business address of each Partner; (b) a copy of the Certificate of Limited Partnership and all certificates of amendment thereto; (c) copies of the Partnership’s federal, state and local income tax returns and reports; (d) copies of the Agreement and any financial statements of the Partnership for the three most recent years; and (e) all documents and information required under the Act. Any Partner or its duly authorized representative, and any stockholder of the General
Partner, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.

	
             
  	
            10.02
 	
            Custody of Partnership Funds; Bank Accounts.
 

(a)           All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.

(b)           All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio consists primarily thereof, government obligations, certificates of deposit, bankers’ acceptances and municipal notes and bonds. The funds of the Partnership shall not be commingled with the funds of any other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.02(b).

	
             
 	
            10.03
 	
            Fiscal and Taxable Year.The fiscal and taxable year of the Partnership shall be the calendar year.
 

10.04       Annual Tax Information and Report.The General Partner will use its best efforts to supply within 75 days after the end of each fiscal year of the Partnership to each person who was a Limited Partner at any time during such year the tax information necessary to file such Limited Partner’s individual tax returns as shall be reasonably required by law, and in all events the General Partner shall furnish such information within the time required by applicable law.

	
             
  	
            10.05
 	
            Tax Matters Partner; Tax Elections; Special Basis Adjustments.
 

(a)           The General Partner shall be the Tax Matters Partner of the Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner. The General Partner shall have the right to retain professional assistance in respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses. In the event the General Partner receives notice of a final Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for judicial review of such final adjustment within
the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a written notice to all 

 

 

Limited Partners, within such period, that describes the General Partner’s reasons for determining not to file such a petition.

(b)           All elections required or permitted to be made by the Partnership under the Code or any applicable state or local tax law shall be made by the General Partner in its sole and absolute discretion.

(c)           In the event of a transfer of all or any part of the Partnership Interest of any Partner, the Partnership, at the option and in the sole and absolute discretion of the General Partner, may elect pursuant to Section 754 of the Code to adjust the basis of the Properties. Notwithstanding anything contained in Article V of this Agreement, any adjustments made pursuant to Section 754 shall affect only the successor-in-interest to the transferring Partner and in no event shall be taken into account in establishing, maintaining or computing Capital Accounts for the other Partners for any purpose under this Agreement. Each Partner will furnish the Partnership with all information necessary to give effect to such election.

	
             
  	
            10.06
 	
            Reports to Limited Partners.
 

(a)           As soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a quarterly report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal quarter presented in accordance with generally accepted accounting principles. As soon as practicable after the close of each fiscal year, the General Partner shall cause to be mailed to each Limited Partner an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal year, presented in accordance with
generally accepted accounting principles. The annual financial statements shall be audited by accountants selected by the General Partner.

(b)           Any Partner shall further have the right to a private audit of the books and records of the Partnership, provided such audit is made for Partnership purposes and at the expense of the Partner desiring it, and it is made during normal business hours.

ARTICLE XI

AMENDMENT OF AGREEMENT; MEETINGS

11.01       Amendment.The General Partner’s consent shall be required for any amendment to this Agreement. The General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect; provided, however, that the following amendments shall require the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners:

(a)           any amendment affecting the operation of the Conversion Factor or the Exchange Right (except as provided in Sections 8.05(d) or 7.01(d)) in a manner adverse to the Limited Partners;

(b)           any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02;

(c)           any amendment that would alter the Partnership’s allocations of Profit and Loss to the Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.02; or 

(d)           any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership.

The foregoing notwithstanding, the approval of any amendment to this Agreement that shall be part of a plan of merger, plan of exchange or plan of conversion involving the Partnership or the Partnership Interests shall be governed by Article XII. 

 

 

 

 

	
             
  	
            11.02
 	
            Meetings of Partners.
 

(a)           The Partners may but shall not be required to hold any annual, periodic or other formal meetings. Meetings of the Partners may be called by the General Partner or by any Limited Partner or Limited Partners holding at least 10% of the Partnership Units in the Partnership.

(b)           The Partner or Partners calling the meeting may designate any place within the State of Delaware as the place of meeting for any meeting of the Partners; and Partners holding at least a majority of the Partnership Units in the Partnership may designate any place outside the State of Delaware as the place of meeting for any meeting of the Partners. If no designation is made, or if a special meeting is called, the place of meeting shall be the principal place of business of the Partnership.

(c)           Except as provided in Section 11.02(d), written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than ten (10) nor more than ninety (90) days before the date of the meeting, either personally or by mail, by or at the direction of the Partner or Partners calling the meeting, to each Partner entitled to vote at such meeting and to each Partner not entitled to vote who is entitled to notice of the meeting.

(d)           Anything in this Agreement to the contrary notwithstanding, with respect to any meeting of the Partners, any Partner who in person or by proxy shall have waived in writing notice of the meeting, either before or after such meeting, or who shall attend the meeting in person or by proxy, shall be deemed to have waived notice of such meeting unless such Partner attends for the express purpose of objecting, at the beginning of the meeting, and does so object to the transaction of any business because the meeting is not lawfully called or convened.

(e)           If all of the Partners shall meet at any time and place, either within or outside of the State of Delaware, in person or by proxy, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken.

(f)            For the purpose of determining Partners entitled to notice of or to vote at any meeting of Partners or any adjournment thereof, the date on which notice of the meeting is mailed shall be the record date. When a determination of Partners entitled to vote at any meeting of Partners has been made as provided in this Section, such determination shall apply to any adjournment thereof.

(g)           Partners holding at least a majority of the Partnership Units entitled to vote at a meeting, represented in person or by proxy, shall constitute a quorum at any meeting of Partners. In the absence of a quorum at any such meeting, Partners holding at least a majority of Partnership Units so represented may adjourn the meeting to another time and place. Any business that might have been transacted at the original meeting may be transacted at any adjourned meeting at which a quorum is present. No notice of an adjourned meeting need be given if the time and place are announced at the meeting at which the adjournment is taken unless the adjournment is for more than 120 days. The Partners present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of
that number Partnership Units whose absence would cause less than a quorum to be present.

(h)           If a quorum is present, the affirmative vote of Partners holding a majority of the Partnership Units entitled to vote, present in person or represented by proxy, shall be binding on all Partners, unless the vote of a greater or lesser proportion or number of Partnership Units or Partners is otherwise required by applicable law or by this Agreement. Unless otherwise expressly provided herein or required under applicable law, Partners who have an interest (economic or otherwise) in the outcome of any particular matter upon which the Partners’ vote or consent is required may vote or consent upon any such matter and their Partnership Units, vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter was approved by the Partners.

(i)            At all meetings of Partners, a Partner may vote in person or by proxy executed in writing by the Partner or by the Partner’s duly authorized attorney-in-fact. Such proxy shall be filed with the General Partner before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

 

 

 

 

(j)            Action required or permitted to be taken at a meeting of Partners may be taken without a meeting if the action is evidenced by one or more written consents or approvals describing the action taken and signed by sufficient Partners or Partners holding sufficient Partnership Units, as the case may be, to approve such action had such action been properly voted on at a duly called meeting of the Partners. Action taken under this Section 11.02(j) is effective when the requisite Partners or Partners with the requisite Partnership Units, as the case may be, have signed the consent or approval, unless the consent specifies a different effective date.

ARTICLE XII

MERGER, EXCHANGE OR CONVERSION

	
             
  	
            12.01
 	
            Merger, Exchange or Conversion of Partnership.
 

(a)           The Partnership may (i) adopt a plan of merger and may merge with or into one or more domestic or foreign limited partnerships or other entities with the resulting entity being one or more surviving entities, (ii) adopt a plan of exchange by which a domestic or foreign limited partnership or other entity is to acquire all of the outstanding Partnership Interests of the Partnership in exchange for cash, securities or other property of the acquiring domestic or foreign limited partnership or other entity or (iii) adopt a plan of conversion and convert to a foreign limited partnership or other entity. Any such plan of merger, plan of exchange, or plan of conversion shall otherwise comply with the requirements of this Agreement and the Act.

(b)           Any merger pursuant to a plan of merger described in Section 12.01(a)(i) shall be conditioned upon the merger being permitted by the laws under which each other entity that is a party to the merger is incorporated or organized or by the constituent documents of such other entity that are not inconsistent with such laws. Any exchange pursuant to a plan of exchange described in Section 12.01(a)(ii) shall be conditioned upon the issuance of shares or other interests of the acquiring foreign limited partnership or other entity being permitted by the laws under which such foreign limited partnership or other entity is incorporated or organized or is not inconsistent with such laws. Any conversion pursuant to a plan of conversion described in Section 12.01(a)(iii) shall be conditioned upon such conversion being permitted by, or
not inconsistent with, the laws of the jurisdiction in which the converted entity is to be incorporated, formed or organized and the incorporation, formation or organization of the converted entity is effected in compliance with such laws.

(c)           The Partnership may adopt a plan of merger, plan of exchange or plan of conversion if the General Partner acts upon and the Limited Partners (if required by Section 12.02 below) approve the plan of merger, plan of exchange or plan of conversion in the manner prescribed in Section 12.02 below.

	
             
  	
            12.02
 	
            Approval of Plan of Merger, Exchange or Conversion.
 

(a)           Except as provided by Section 12.02(g) below, after acting on a plan of merger, plan of exchange or plan of conversion in the manner prescribed by Section 12.02(b)(i), the General Partner shall submit the plan of merger, plan of exchange or plan of conversion for approval by the Limited Partners.

(b)           Except as provided by Section 12.02(f) below, for a plan of merger, plan of exchange or plan of conversion to be approved:

(i)            the General Partner shall adopt a resolution recommending that the plan of merger, plan of exchange or plan of conversion be approved by the Limited Partners, unless the General Partner determines that for any reason it should not make that recommendation, in which case the General Partner shall adopt a resolution directing that the plan of merger, plan of exchange or plan of conversion be submitted to the Limited Partners for approval without recommendation; and

(ii)           the Limited Partners entitled to vote on the plan of merger, plan of exchange or plan of conversion must approve the plan.

 

 

 

 

(c)           The General Partner may condition its submission to the Limited Partners of a plan of merger, plan of exchange or plan of conversion, and the effectiveness of such plan, on any basis, including without limitation that a specified percentage of the Percentage Interests of the Limited Partners in excess of a majority of the Percentage Interests of the Limited Partners be required for the approval of the plan of merger, plan of exchange or plan of conversion.

(d)           The General Partner shall notify each Limited Partner, whether or not entitled to vote, of the meeting of the Limited Partners at which the plan of merger, plan of exchange or plan of conversion is to be submitted for approval in accordance with this Section 12.02 and applicable law. The notice shall be given at least twenty (20) days before the meeting and shall state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger, plan of exchange or plan of conversion and shall contain or be accompanied by a copy or summary of the plan. Any such approval may be by written consent of the requisite Limited Partners as would be required to approve the plan at any meeting where all the Limited Partners are present.

(e)           Unless the General Partner (acting pursuant to Section 12.02(c)) requires a greater vote, the vote of the Limited Partners required for approval of a plan of merger, plan of exchange or plan of conversion shall be the affirmative vote of the holders of more than 50% of the Percentage Interests of the Limited Partners entitled to vote thereon.

(f)            Unless applicable law otherwise requires (in which case the approval of the Limited Partners shall continue to be required and the foregoing provisions of this Section 12.02 shall continue to apply), (1) approval by the Limited Partners on a plan of exchange shall not be required, and the foregoing provisions of this Section 12.02 do not apply, if the Partnership is the acquiring entity in the plan of exchange, and (2) approval by the Limited Partners on a plan of merger or a plan of conversion shall not be required and the foregoing provisions of this Section 12.02 do not apply, if:

	
             
 	
            (i)
 	
            a limited partnership is the sole surviving or resulting entity;
 

(ii)           the partnership agreement of the surviving or resulting limited partnership will not materially differ from this Agreement before the merger or conversion in any manner other than as to applicable law or other insignificant conforming differences;

(iii)          Limited Partners who held Limited Partnership Interests immediately before the effective date of the merger or conversion will hold interests in the surviving or resulting entity in the same proportions, immediately after the effective date of the merger or conversion; and

(iv)          the General Partner adopts a resolution approving the plan of merger or plan of conversion.

(g)           After a plan of merger, plan of exchange or plan of conversion is approved, and at any time before the merger, exchange or conversion has become effective, the plan of merger, plan of exchange or plan of conversion may be abandoned (subject to any contractual rights by any of the entities that are a party thereto), without action by the Limited Partners, in accordance with the procedures set forth in the plan of merger, plan of exchange or plan of conversion or, if no such procedures are set forth in the plan, in the manner determined by the General Partner.

	
             
  	
            12.03
 	
            Rights of Dissenting Limited Partners. 
 

(a)           In the absence of fraud in the transaction, the remedy provided by this Section 12.03 to a Limited Partner voting against any merger, exchange or conversion or objecting to a merger, exchange or conversion approved by the written consent of Limited Partners (a “Dissenting Limited Partner”) is the exclusive remedy for the recovery of the value of his Limited Partnership interests or money damages with respect to the transaction. If the existing, surviving, or new corporation or limited partnership (foreign or domestic) or other entity, as the case may be, complies with the requirements of this Section 12.03, any Dissenting Limited Partner who fails to comply with the requirements of this Section 12.03 shall not be entitled to bring suit for the recovery of the value of his Limited 

 

 

Partnership interests or money damages with respect to the transaction. A “Dissenting Limited Partner” in respect of any merger, exchange or conversion shall expressly exclude any Limited Partner who votes in favor of the related plan of merger, plan of exchange or plan of conversion or who abstains or fails to timely vote therefor. In the event of a plan of merger, plan of exchange or plan of conversion approved by written consent, a “Dissenting Limited Partner” in respect of any related merger, exchange or conversion shall expressly exclude Limited Partners who provide such written consent and Limited Partners who fail to object to the merger, exchange or conversion and demands payment for such Limited Partner’s Limited Partnership Interest in writing to the General Partner within twenty (20) days after notice to the Limited Partners of the receipt by the Partnership of written
consents sufficient to approve such merger, exchange or conversion. All such Limited Partners who are not included within the definition of Dissenting Limited Partner in respect of any merger, exchange or conversion shall participate in the merger, exchange or conversion according to the approved plan of merger, plan of exchange or plan of conversion.

(b)           Any Dissenting Limited Partner who has opted for payment for his Limited Partnership interests shall not thereafter be entitled to vote or exercise any other rights of a Limited Partner except the right to receive payment for his Limited Partnership interests and the right to maintain an appropriate action to obtain relief on the ground that the transaction would be or was fraudulent. Limited Partnership Interests of Dissenting Limited Partners for which payment has been made shall not thereafter be considered outstanding for the purposes of any subsequent vote of the Limited Partners.

(c)           Within twenty (20) days after a Dissenting Limited Partner votes against any plan of merger, plan of exchange or plan of conversion which is approved by a vote of the Limited Partners, or in connection with a Limited Partner’s objection to any plan of merger, plan of exchange or plan of conversion approved by the written consent of the Limited Partners, the Dissenting Limited Partner may demand by written notice to the General Partner that payment for his Limited Partnership Interest be made. Upon receipt of such a payment demand, the General Partner shall (i) make a notation on the records of the Partnership that such demand has been made and (ii) within a reasonable period of time after the later of the receipt of a payment demand or the consummation of the merger, exchange or conversion, cause the Partnership to
pay to the Dissenting Limited Partner the fair value of such Dissenting Limited Partner’s Partnership Interest without interest. The fair value of a Dissenting Limited Partner’s Partnership Interest shall be an amount equal to the Dissenting Limited Partner’s pro rata share (as would be determined under Section 5.06 if the Partnership were liquidating) of the appraised value of the net assets of the Partnership based on an appraisal of all assets of the Partnership from a Competent Independent Expert. The assets of the Partnership shall be appraised on a consistent basis. The appraisal shall be based on an evaluation of all relevant information and shall include the current value of the Partnership’s assets as of the date immediately prior to the proposed merger, exchange or conversion. The appraisal shall assume an orderly liquidation of the Partnership’s assets over a twelve (12) month period, shall consider other balance sheet items, and shall be net of the
assumed cost of sale. The terms of the engagement of the appraiser shall clearly state that the engagement is for the benefit of the Partnership and its Limited Partners. A summary of the independent appraisal, including all material assumptions underlying the appraisal, shall be provided to Dissenting Limited Partners in connection with the payment of the fair value of their Limited Partnership Interests.

(d)           If a Dissenting Limited Partner shall fail to make a payment demand within the period provided in Section 12.03(c) or, in respect of a plan of merger, plan of exchange or plan of conversion approved by written consent of the Limited Partners, shall fail to provide notice of dissent within the period set forth in Section 12.03(a), such Dissenting Limited Partner and all persons claiming under him shall be conclusively presumed to have approved and ratified the merger, conversion or exchange and shall be bound thereby, the right of such Dissenting Limited Partner to be paid the fair value of his Limited Partnership Interest shall cease, and his status as a Limited Partner shall be restored without prejudice to any proceedings which may have been taken during the interim, and such Dissenting Limited Partner shall be entitled
to receive any distributions made to Limited Partners in the interim.

ARTICLE XIII

GENERAL PROVISIONS

13.01       Notices.All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in the United States mail, registered, 

 

 

postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address. Notices to the Partnership shall be delivered at or mailed to its specified office.

13.02       Survival of Rights.Subject to the provisions limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.

13.03       Additional Documents.Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents that may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.

13.04       Severability.If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder.

13.05       Entire Agreement.This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof, except as otherwise set forth herein.

13.06       Pronouns and Plurals.When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require.

13.07       Headings.The Article and Section headings in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article or Section.

13.08       Counterparts.This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

13.09       Governing  Law.This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that any cause of action for violation of federal or state securities law shall not be governed by this Section 13.09.

13.10       Arbitration.Notwithstanding anything to the contrary contained in this Agreement, all claims, disputes and controversies between the parties hereto (including, without limitation, any claims, disputes and controversies between the Partnership and any one or more of the Partners and between or among any Partners) arising out of or in connection with this Agreement or the Partnership created hereby, or any act or failure to act by the General Partner or any other Partner hereunder, shall be resolved by binding arbitration in Phoenix, Arizona by the American Arbitration Association (the “AAA”), in accordance with this Section 13.10. Any arbitration called for by this Section 13.10 shall be conducted in accordance with the following procedures:

(a)           The Partnership or any Partner (the “Requesting Party”) may demand arbitration pursuant to this Section 13.10 at any time by giving written notice of such demand (the “Demand Notice”) to all other Partners and (if the Requesting Party is not the Partnership) to the Partnership which Demand Notice shall describe in reasonable detail the nature of the claim, dispute or controversy.

(b)           Within 15 days after the giving of a Demand Notice or such additional time as required by the AAA, the AAA shall select and designate in writing three reputable, disinterested individuals willing to act as an arbitrator of the claim, dispute or controversy in question.

(c)           The presentations of the parties hereto in the arbitration proceeding shall be commenced and completed within sixty (60) days after the selection of the arbitration panel pursuant to subsection B above, and the arbitration panel shall render its decision (and specify in reasonable detail its reasons therefor) in writing within 

 

 

thirty (30) days after the completion of such presentations. Any decision concurred in by any two (2) of the arbitrators shall constitute the decision of the arbitration panel, and unanimity shall not be required.

(d)           The arbitration panel shall include in its decision a direction that all of the attorneys’ fees and costs of any party or parties and the costs of such arbitration be paid by the losing party or parties in the arbitration. On the application of a party before or after the initial decision of the arbitration panel, and proof of its attorneys’ fees and costs, the arbitration panel shall order the other party to make any payments directed pursuant to the preceding sentence.

Any decision rendered by the arbitration panel in accordance herewith shall be final and binding on the parties hereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction. Arbitration shall be the exclusive method available for resolution of claims, disputes and controversies arising between and among the parties relating to this Agreement and the conduct of the parties hereto in relation to Partnership matters, and the Partnership and its Partners stipulate that the provisions of this Agreement shall be a complete defense to any suit, action or proceeding in any court or before any administrative or arbitration tribunal with respect to any such claim, controversy or dispute. The provisions of this Section 13.10 shall survive the dissolution of the Partnership.

Nothing contained herein shall be deemed to give the arbitrators any authority, power or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement.

13.11       Vote of Affiliated Limited Partners.Notwithstanding any provision to the contrary set forth in this Agreement, in each instance in which the consent, approval or vote of Limited Partners is required hereunder, any Partnership Interest held as a Limited Partner by any Affiliate of the Sponsor shall not be included for purposes of calculating whether the requisite approval of Partners is obtained unless, as of the date of determination, there are no Limited Partners entitled to vote or consent who are not Affiliates of the Sponsor.

13.12       Acknowledgement as to Exculpation and Indemnification.THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS EXCULPATION AND INDEMNIFICATION IN RESPECT OF THE ACTIONS OR OMISSIONS OF THE GENERAL PARTNER AND DIRECTORS, OFFICERS AND AFFILIATES OF THE GENERAL PARTNER BY THE PARTNERSHIP EVEN IF SUCH ACTIONS OR OMISSIONS CONSTITUTE NEGLIGENCE OF SUCH PERSONS.

IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Agreement of Limited Partnership this 6th day of April, 2004.

 

	
            GENERAL PARTNER:

 
 
	
            COLE CREDIT PROPERTY TRUST, INC.
 
	
             
 
	
             
 
	
            By:
 	
            /s/ Christopher H. Cole
 
	
            Title:
 	
            President and Chief Executive Officer
 

 

 

	
            ORIGINAL LIMITED PARTNER:

 
 
	
            COLE REIT ADVISORS, LLC
 
	
             
 
	
             
 
	
            By:
 	
            /s/ Blair D. Koblenz
 
	
            Title:
 	
            Executive Vice President
 

 

 

 

 

 

 

 

 

 

 

 

INDEX OF EXHIBITS

 

EXHIBIT A - Partners, Capital Contributions and Partnership Units 

 

EXHIBIT B - Notice of Exercise of Exchange Right 

 

EXHIBIT C - Call Notice 

 

 

 

 

 

EXHIBIT A

 

PARTNERS, CAPITAL CONTRIBUTIONS AND PARTNERSHIP UNITS

 

As of April 6, 2004

 

 

	
             

 

Partners
 	
             

Cash

Contribution
 	
            Agreed Value

of Property

Contribution
 	
             

Partnership

Units
 
	
             
 	
             
 	
             
 	
             
 	
             
 
	
            General Partner:

 
 	
             
 	
             
 	
             
 	
             
 
	
            Cole Credit Property Trust, Inc.
 	
             
 	
             
 	
             
 	
             
 
	
            2555 East Camelback Road, Suite 400
 	
             
 	
             
 	
             
 	
             
 
	
            Phoenix, Arizona  85016
 	
            $
 	
            900.00
 	
            N/A
 	
            9,000 Units
 
	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Original Limited Partner:

 
 	
             
 	
             
 	
             
 	
             
 
	
            Cole REIT Advisors, LLC
 	
             
 	
             
 	
             
 	
             
 
	
            2555 East Camelback Road, Suite 400
 	
             
 	
             
 	
             
 	
             
 
	
            Phoenix, Arizona  85016
 	
            $
 	
            0.90
 	
            N/A
 	
            9 Units
 

 

 

 

 

 

EXHIBIT B

 

NOTICE OF EXERCISE OF EXCHANGE RIGHT

In accordance with the Agreement of Limited Partnership of Cole Operating Partnership I, LP, as amended (the “Agreement”), the undersigned hereby irrevocably (i) presents for exchange ___________ Partnership Units in Cole Operating Partnership I, LP in accordance with the terms of the Agreement and the Exchange Right referred to therein; (ii) surrenders such Partnership Units and all right, title and interest therein; and (iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as determined by the General Partner deliverable upon exercise of the Exchange Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below. 

 

 

	
            Dated:___________________
 	
            _________________________________
 
	
             
 	
            (Signature of Limited Partner)
 	
             

 

 

	
             
 	
            _________________________________
 
	
             
 	
            (Printed Name of Limited Partner)
 	
             

 

	
             
 	
            Mailing Address and Phone No.:
 

 

	
             
 	
            _________________________________
 	
             

	
             
 	
            _________________________________
 	
             

	
             
 	
            _________________________________
 	
             

	
             
 	
            _________________________________
 	
             

	
             
 	
            (_____) _______-___________________
 

 

 

	
            Signature Guaranteed by:
 	
            ____________________________________
 

 

If REIT Shares are to be issued, issue to: 

 

Name: ____________________________

 

Mailing Address and Phone No.:

 

	
             
 	
            ____________________________
 	
             

	
             
 	
            ____________________________
 	
             

	
             
 	
            ____________________________
 	
             

	
             
 	
            ____________________________
 	
             

	
             
 	
            (_____) _______-______________
 

 

Social security or other tax identification number: ___________________________ 

 

 

 

 

EXHIBIT C

 

CALL NOTICE

In accordance with the Agreement of Limited Partnership of Cole Operating Partnership I, LP, as amended (the “Agreement”), the undersigned hereby irrevocably exercises its Call Right (as defined in the Agreement) with regard to all of the Partnership Units owned by _____________________ in Cole Operating Partnership I, LP. The undersigned shall pay the [Cash Amount/REIT Shares Amount] to _____________________ at the notice address of provided in the Agreement upon receipt of (i) the duly executed Partnership Unit Certificate of ___________________ transferring all right, title and interest in Partnership Units to the undersigned, (ii) if REIT Shares are to be delivered, instructions as to the name, address and taxpayer identification number of the person to whom such REIT Shares will be registered or placed, and (iii) the representation, warranty and certification of that
_____________________ (a) has marketable and unencumbered title to such Partnership Units, free and clear of the rights of or interests of any other person or entity; (b) has the full right, power and authority to transfer and surrender such Partnership Units as provided herein; and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent to or approve of such transfer and surrender.

 

 

	
            COLE CREDIT PROPERTY TRUST, INC.

 
 
	
            By:
 	
             
 
	
            Name:
 	
             
 
	
            Title:

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