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Agreement of Limited Partnership

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Sectors: Real Estate
Governing Law: Delaware, View Delaware State Laws
Effective Date: November 09, 2005
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AGREEMENT OF LIMITED PARTNERSHIP


OF


WELLS TIMBER OPERATING PARTNERSHIP, L.P.


.
.
.


TABLE OF CONTENTS


Page
---- ARTICLE I DEFINED TERMS............................................... 1


ARTICLE II PARTNERSHIP FORMATION AND IDENTIFICATION.................... 9
2.01 Formation.............................................. 9
2.02 Name, Office and Registered Agent...................... 9
2.03 Partners............................................... 9
2.04 Term and Dissolution................................... 9
2.05 Filing of Certificate and Perfection of Limited
Partnership................................................. 10
2.06 Certificates Describing Partnership Units and Special
Partnership Units........................................... 10


ARTICLE III BUSINESS OF THE PARTNERSHIP................................. 10


ARTICLE IV CAPITAL CONTRIBUTIONS AND ACCOUNTS.......................... 10
4.01 Capital Contributions.................................. 11
4.02 Additional Capital Contributions and Issuance of
Additional Partnership Interests............................ 11
4.03 Additional Funding..................................... 13
4.04 Capital Accounts....................................... 13
4.05 Percentage Interests................................... 13
4.06 No Interest on Contributions........................... 13
4.07 Return of Capital Contributions........................ 14
4.08 No Third Party Beneficiary............................. 14


ARTICLE V PROFITS AND LOSSES; DISTRIBUTIONS........................... 14
5.01 Allocation of Profit and Loss.......................... 14
5.02 Distribution of Cash................................... 16
5.03 REIT Distribution Requirements......................... 17
5.04 No Right to Distributions In Kind...................... 18
5.05 Limitations of Return of Capital Contributions......... 18
5.06 Distributions Upon Liquidation......................... 18
5.07 Substantial Economic Effect............................ 18


ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER....... 18
6.01 Management of the Partnership.......................... 18
6.02 Delegation of Authority................................ 20
6.03 Indemnification and Exculpation of Indemnitees......... 20
6.04 Liability of the General Partner....................... 22
6.05 Reimbursement of General Partner....................... 23
6.06 Outside Activities..................................... 23
6.07 Employment or Retention of Affiliates.................. 23
6.08 General Partner Participation.......................... 23
6.09 Title to Partnership Assets............................ 24
6.10 Miscellaneous.......................................... 24


ARTICLE VII CHANGES IN GENERAL PARTNER.................................. 24
7.01 Transfer of the General Partner's Partnership
Interest.................................................... 24
7.02 Admission of a Substitute or Additional General
Partner..................................................... 26
7.03 Effect of Bankruptcy, Withdrawal, Death or
Dissolution of a General Partner............................ 26
7.04 Removal of a General Partner........................... 27


ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS.............. 28
8.01 Management of the Partnership.......................... 28
8.02 Power of Attorney...................................... 28


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8.03 Limitation on Liability of Limited Partners............ 28
8.04 Ownership by Limited Partner of Corporate General
Partner or Affiliate........................................ 28
8.05 Redemption Right....................................... 28
8.06 Registration........................................... 30
8.07 Redemption of Special Partnership Units................ 31


ARTICLE IX TRANSFERS AND REDEMPTIONS OF LIMITED PARTNERSHIP INTERESTS.. 32
9.01 Purchase for Investment................................ 32
9.02 Restrictions on Transfer of Limited Partnership
Interests................................................... 32
9.03 Admission of Substitute Limited Partner................ 33
9.04 Rights of Assignees of Partnership Interests........... 34
9.05 Effect of Bankruptcy, Death, Incompetence or
Termination of a Limited Partner............................ 35
9.06 Joint Ownership of Interests........................... 35
9.07 Redemption of Partnership Units........................ 35


ARTICLE X BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS.................. 35
10.01 Books and Records..................................... 35
10.02 Custody of Partnership Funds; Bank Accounts........... 36
10.03 Fiscal and Taxable Year............................... 36
10.04 Annual Tax Information and Report..................... 36
10.05 Tax Matters Partner; Tax Elections; Special Basis
Adjustments................................................. 36
10.06 Reports to Limited Partners........................... 36


ARTICLE XI AMENDMENT OF AGREEMENT; MERGER.............................. 37


ARTICLE XII GENERAL PROVISIONS.......................................... 37
12.01 Notices............................................... 37
12.02 Survival of Rights.................................... 38
12.03 Additional Documents.................................. 38
12.04 Severability.......................................... 38
12.05 Entire Agreement...................................... 38
12.06 Pronouns and Plurals.................................. 38
12.07 Headings.............................................. 38
12.08 Counterparts.......................................... 38
12.09 Governing Law......................................... 38


EXHIBIT A ALLOCATION OF PARTNERSHIP UNITS


EXHIBIT B NOTICE OF EXERCISE OF REDEMPTION RIGHT


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AGREEMENT OF LIMITED PARTNERSHIP
OF
WELLS TIMBER OPERATING PARTNERSHIP, L.P.


RECITALS


Wells Timber Operating Partnership, L.P. (the "Partnership") was formed as a limited partnership 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 November 9, 2005. This Agreement of Limited Partnership is entered into this 9th day of November, 2005 between Wells Timber Real Estate Investment Trust, Inc., a Maryland corporation (the "General Partner") and the Limited Partner(s) set forth on Exhibit A hereto (the "Agreement").


AGREEMENT


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


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


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"Advisory Agreement" means the agreement between the Partner, the General Partner and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the General Partner.


"Affiliate" means, (i) any Person that, directly or indirectly, controls or is controlled by or is under common control with such Person, (ii) any other Person that owns, beneficially, directly or indirectly, 10% or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, employee, partner or trustee of such Person or any Person controlling, controlled by or under common control with such Person (excluding trustees and persons serving in similar capacities who are not otherwise an Affiliate of such Person). For the purposes of this definition, "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities or partnership interests or otherwise.


"Agreed Value" means 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. The names and addresses of the Partners, number of Partnership Units or Special Partnership Units issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of contribution is set forth on Exhibit A.


"Agreement" means this Agreement of Limited Partnership.


"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.


"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 per Partnership Unit equal to the Value of the REIT Shares Amount on the date of receipt by the General Partner of a Notice of Redemption.


"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 of 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.


"Commission" means the U.S. Securities and Exchange Commission.


"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


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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 a Notice of Redemption 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 Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.


"Event of Bankruptcy" as to any Person means 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); insolvency or bankruptcy of such Person as finally determined by a court proceeding; 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; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debtor 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.


"General Partner" means Wells Timber Real Estate Investment Trust, Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner.


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


"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.


"Independent Director" means a director of the General Partner who is not an officer or employee of the General Partner, any Affiliate of an officer or employee or any Affiliate of (i) any lessee of any property of the General Partner or any Subsidiary of the General Partner, (ii) any Subsidiary of the General Partner, or (iii) any partnership that is an Affiliate of the General Partner.


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"Issue Price" means the per share price at which the applicable REIT Shares were offered in the General Partner's public offering pursuant to which they were issued, not reduced by any discounted selling commissions or reduced fees that the General Partner may pay to its Dealer Manager which may have applied to the purchase of such REIT Shares.


"Joint Venture" means any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who becomes a Substitute Limited Partner, in such Person's capacity as a Limited Partner in the Partnership.


"Limited Partner" means 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.


"Listing" means the approval of the REIT Shares, issued by the General Partner pursuant to an effective Registration Statement, for trading on a national securities exchange or included for quotation on a national market system. Upon such Listing, the shares shall be deemed "Listed."


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


"Market Value" has the meaning provided in Section 8.07(b)


"Minimum Limited Partnership Interest" means the lesser of (i) 1% or (ii) if the total Capital Contributions to the Partnership exceed $50 million, 1% divided by the ratio of the total Capital Contributions to the Partnership to $50 million; provided, however, that the Minimum Limited Partnership Interest shall not be less than 0.2% at any time.


"Mortgages" means, in connection with any mortgage financing provided, invested in, participated in or purchased by the Partnership, all of the notes, deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations, which are secured by or, collateralized by, or applicable to any Property owned by the borrowers under such notes, deeds of trust, mortgages, security interests or other evidences of indebtedness or obligations.


"Net Sales Proceeds" means (i) in the case of a transaction described in clause (A)(i) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Partnership, including all real estate disposition fees, closings costs and legal fees and expenses; (A)(ii) in the case of a transaction described in clause (ii) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Partnership, including any legal fees and expenses and other selling expenses incurred in connection with such transaction; (iii) in the case of a transaction described in clause (A)(iii) of the definition of Sale, the proceeds of any such transaction actually distributed to the Partnership from the Joint Venture less the amount of any selling expenses incurred by or on behalf of the Partnership (other than those paid by the Joint Venture); (iv) in the case of a transaction described in clause (A)(iv) of the definition of Sale, the proceeds of any such transaction (including the aggregate of all payment under a Mortgage on or in satisfaction thereof other than regularly schedule interests payments) less the amount of selling expenses incurred by or on behalf of the Partnership, including all commissions, closing costs and legal fees and


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expenses; (v) in the case of a transaction described in clause (A)(v) of the definition of Sale, the proceeds of any such transaction less the amount of selling expenses incurred by or on behalf of the Partnership, including any legal fees and expenses and other selling expenses incurred in connection with such transaction; and (vi) in the case of a transaction described in clause (B) of the definition of Sale, the proceeds of such transaction or series of transactions less all amounts generated thereby which are reinvested in one or more assets as described in clause (B) of the definition of Sale within 180 days thereafter and less the amount of any real estate commissions, closing costs, and legal fees and expenses and other selling expenses incurred by or allocated to the Partnership in connection with such transaction or series of transactions. Net Sales Proceeds shall also include any amounts that the General Partner determines, in its discretion, to be economically equivalent to the proceeds of a Sale. Net Sales Proceeds shall not include any reserves established by the Partnership in its sole discretion.


"Notice of Redemption" means the Notice of Exercise of Redemption Right substantially in the form attached as Exhibit B hereto.


"Offer" has the meaning set forth in Section 7.01(c) hereof.


"Offering" means the initial offer and sale by the General Partner and the purchase by the Dealer Manager (as defined in the Prospectus) of REIT for sale to the public.


"OP Unitholders" means all holders of Partnership Interests other than the Special OP Unitholders.


"Original Limited Partner" means the Limited Partner designated as "Original Limited Partner" 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 Wells Timber Operating Partnership, L.P., 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(d). 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 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution.


"Partnership Unit" means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder excluding the Partnership Interests represented by Special Partnership


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Units. The allocation of Partnership Units among the Partners shall be as set forth on Exhibit A, as 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 Partnership Units owned by a Partner by the total number of Partnership Units then outstanding. The Percentage Interest of each Partner shall be as set forth on Exhibit A, as may be amended from time to time.


"Person" means any individual, partnership, corporation, joint venture, trust or other entity.


"Profit" has the meaning provided in Section 5.01(g) hereof.


"Property" means any timberland or related property or other investment in which the Partnership holds an ownership interest.


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


"Redemption 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.


"Redemption Note" has the meaning set forth in Section 8.07(b)(i)


"Redemption Right" has the meaning provided in Section 8.05(a) hereof.


"Redeeming Partner" has the meaning provided in Section 8.05(a) hereof.


"Regulations" means the Federal Income Tax 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 hereof 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 hereof, 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,
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