AMENDMENT TO
                       AGREEMENT OF LIMITED PARTNERSHIP OF
                              FAC PROPERTIES, L.P.



     As of this 18th day of December, 1997, the Agreement of Limited Partnership
of FAC  Properties,  L.P. dated December 12, 1997 (the  "Agreement"),  is hereby
amended as follows:

     Section 1. Definitions.

     Article I is hereby amended to add the following new definitions:

          "Common  Partnership  Unit"  means a  Partnership  Unit  that is not a
     Preferred Partnership Unit.

          "Preferred  Partnership  Unit" means any Partnership  Unit issued from
     time to time  pursuant  to Section  4.2 hereof  that is  designated  by the
     General  Partner at the time of its  issuance  as a  Preferred  Partnership
     Unit.  Each  Preferred  Partnership  Unit  shall  have  such  designations,
     preferences and relative, participating,  optional or other special rights,
     powers and duties,  including  rights,  powers and duties senior to Limited
     Partner Interests and Common  Partnership Units, all as shall be determined
     by the General Partner subject to the requirements of Section 4.2 hereof.

          "Series A Preferred  Partnership Unit" means a Partnership Unit issued
     by the  Partnership to FAC Properties  Holding Corp. The Series A Preferred
     Partnership Units shall constitute Preferred  Partnership Units. Holders of
     the Series A Preferred Partnership Units shall have the same voting powers,
     designations,  preferences and relative,  participating,  optional or other
     special rights and qualifications, limitations or restrictions with respect
     to the  Series A  Preferred  Partnership  Units as  holders of the Series A
     Preferred  Stock have with respect to such Series A Preferred  Stock. It is
     the  intention  of the  General  Partner,  in  establishing  the  Series  A
     Preferred  Partnership Units, that each Series A Preferred Partnership Unit
     shall be  substantially  the  economic  equivalent  of a share of  Series A
     Preferred Stock.

          "Series A Preferred  Stock" means the Series A  Convertible  Preferred
     Stock,  par  value  $25.00  per  share,  having  a  liquidation  preference
     equivalent to $25.00 per share, issued by the General Partner.

In addition,  the definitions of "Partnership Unit," "Partnership  Interest" and
"REIT Shares Amount" appearing in Article I are hereby deleted in their entirety
and the following definitions are inserted in their place:

          "Partnership Unit" means a fractional, undivided share of the
     Partnership Interests of all Partners issued pursuant to Sections 4.1 and
     4.2. The number of Partnership Units


<PAGE>


     outstanding and the Percentage Interests in the Partnership  represented by
     such Units are set forth in Exhibit A attached hereto,  as such Exhibit may
     be amended from time to time. The ownership of  Partnership  Units shall be
     evidenced  by such form of  certificate  for units as the  General  Partner
     adopts  from time to time unless the General  Partner  determines  that the
     Partnership Units shall be uncertificated securities.  Fractional Units may
     be held  and  counted  by the  General  Partner  as  necessary  to meet the
     requirements  of Section 4.1.  Without  limitation  on the authority of the
     General Partner as set forth in Section 4.2 hereof, the General Partner may
     designate any Partnership  Units, when issued, as Common  Partnership Units
     or as  Preferred  Partnership  Units,  may  establish  any  other  class of
     Partnership  Units,  and may  designate  one or more series of any class of
     Partnership Units.

          "Percentage  Interest"  means,  as to a Partner,  with  respect to any
     class of Partnership Units held by such Partner, its interest in such class
     of  Partnership  Units as determined by dividing the number of  Partnership
     Units  in  such  class  owned  by  such  Partner  by the  total  number  of
     Partnership Units in such class then outstanding.

          "REIT Shares  Amount"  shall mean a number of REIT Shares equal to the
     product of the number of Common Partnership Units offered for redemption by
     a Redeeming Partner,  multiplied by the Conversion Factor; 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
     shareholders  to  subscribe  for or  purchase  REIT  Shares,  or any  other
     securities or property  (collectively,  the "rights")  then the REIT Shares
     Amount  shall also include such rights that a holder of that number of REIT
     Shares would be entitled to receive.

     Section 2. Requirement and Characterization of Distributions.

     Section 5.1 of the  Agreement  is hereby  deleted in its  entirety  and the
following new Section 5.1 is inserted in its place:

     "Section 5.1 Requirement and Characterization of Distributions

          The General Partner shall cause the Partnership to distribute at least
     annually all, or such portion as the General  Partner may in its discretion
     determine,  of Available Cash generated by the Partnership during such year
     to the  Partners  who are  Partners  on the  Partnership  Record  Date with
     respect to such year, (1) first, with respect to any Partnership  Interests
     that are entitled to any preference in distribution, in accordance with the
     rights of such class of Partnership  Interests (and within such class,  pro
     rata  in  proportion  to  the  respective   Percentage  Interests  on  such
     Partnership  Record  Date),  and, (2) second,  with respect to  Partnership
     Interests that are not entitled to any preference in distribution, pro rata
     to each such class in  accordance  with the terms of such class (and within
     each such class,  pro rata in  proportion  with the  respective  Percentage
     Interests on such  Partnership  Record Date).  Unless  otherwise  expressly
     provided  for  herein,  no  Partnership  Interest  shall be  entitled  to a
     distribution in preference to any other 


<PAGE>


     Partnership Interest.

     Section 3. Tax Provisions.

     Section 6.1 of the  Agreement  is hereby  deleted in its  entirety  and the
following new Section 6.1 is inserted in its place:

     "Section 6.1 Allocations For Capital Account Purposes

          For purposes of  maintaining  the Capital  Accounts and in determining
     the rights of the Partners among  themselves,  the  Partnership's  items of
     income,  gain,  loss and deduction  (computed in accordance  with Exhibit B
     hereof)  shall be  allocated  among the  Partners in each  taxable year (or
     portion thereof) as provided herein below.

          A. Net Income.  After  giving  effect to the special  allocations  set
     forth in  Section 1 of  Exhibit C  attached  hereto,  Net  Income  shall be
     allocated (i) first,  to the General  Partner to the extent that Net Losses
     previously  allocated to the General Partner  pursuant to the last sentence
     of Section  6.1.B  exceed Net Income  previously  allocated  to the General
     Partner  pursuant to this clause (i) of Section 6.1.A, and (ii) thereafter,
     Net Income shall be  allocated to the Partners who hold Common  Partnership
     Units in proportion to their respective  Percentage Interests as holders of
     Common Partnership Units.

          B. Net Losses.  After  giving  effect to the special  allocations  set
     forth in  Section 1 of  Exhibit C  attached  hereto,  Net  Losses  shall be
     allocated to the Partners who hold Common  Partnership  Units in accordance
     with their respective Percentage Interests as holders of Common Partnership
     Units;  provided,  however,  that Net Losses  shall not be allocated to any
     Limited  Partner  pursuant  to this  Section  6.1.B to the extent that such
     allocation  would cause such  Limited  Partner to have an Adjusted  Capital
     Account  Deficit at the end of such  taxable year (or increase any existing
     Adjusted  Capital  Account  Deficit).  All  Net  Losses  in  excess  of the
     limitations  set forth in this  Section  6.1.B  shall be  allocated  to the
     General Partner."

In addition,  Exhibit C to the Agreement is hereby  amended to add the following
new Section 1.G.:

          "G. Priority  Allocation With Respect To Preferred  Partnership Units.
     All or a portion of the remaining items of Partnership gross income or gain
     for the  Partnership  Year,  if any,  shall be  specially  allocated to FAC
     Properties  Holding Corp. in an amount equal to the excess,  if any, of the
     cumulative  distributions received by FAC Properties Holding Corp. pursuant
     to Section  5.1(i)  hereof for the current  Partnership  Year and all prior
     Partnership Years (other than any  distributions  that are treated as being
     in  satisfaction  of the  Liquidation  Preference  Amount for any Preferred
     Partnership  Units) over the cumulative  allocations  of Partnership  gross
     income and gain to FAC Properties  Holding Corp. under this Section 1.G for
     all prior Partnership Years."



<PAGE>



     Section 4. Redemption Right.

     The Agreement is hereby  amended by adding the following new Sections 8.6.D
and 8.6.E to the Agreement, immediately following Section 8.6.C:

          "D.  Notwithstanding  anything  contained in Sections 8.6.A, 8.6.B and
     8.6.C,  no Partner  shall be  entitled  to exercise  the  Redemption  Right
     pursuant to Section  8.6.A with respect to any Preferred  Partnership  Unit
     unless (i) such Preferred  Partnership  Unit has been issued to and is held
     by a Partner other than the General  Partner or a Subsidiary,  and (ii) the
     General  Partner has expressly  granted to such Partner the right to redeem
     such Preferred Partnership Units pursuant to Section 8.6.A.

          E. Preferred  Partnership Units shall be redeemed,  if at all, only in
     accordance  with such  redemption  rights or  options as are set forth with
     respect to such Preferred Partnership Units (or class or series thereof) in
     the instruments  designating such Preferred  Partnership Units (or class or
     series thereof)."

     Section 5. Exhibits to Agreement.

     The General  Partner shall maintain the  information set forth in Exhibit A
to the Agreement,  as such  information  shall change from time to time, in such
form as the General Partner deems appropriate for the conduct of the Partnership
affairs,  and Exhibit A shall be deemed amended from time to time to reflect the
information  so  maintained  by the  General  Partner,  whether  or not a formal
amendment  to the  Agreement  has been  executed  amending  such Exhibit A. Such
information  shall  reflect (and Exhibit A shall be deemed  amended from time to
time to reflect) the issuance of any additional Partnership Units to the General
Partner  or any  other  Person,  the  transfer  of  Partnership  Units  and  the
redemption of any Partnership Units, all as contemplated in the Agreement.



<PAGE>


     IN WITNESS  WHEREOF,  the undersigned has executed this Amendment as of the
date first written above.


                                   FAC REALTY TRUST, INC.,


                                   By: 
                                       ----------------------------------------
                                       C. Cammack Morton
                                       President and Chief Executive Officer



                                   FAC PROPERTIES HOLDING CORP.


                                   By: 
                                       ----------------------------------------
                                       C. Cammack Morton
                                       President and Chief Executive Officer





<PAGE>








                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                              FAC PROPERTIES, L.P.














<PAGE>


                                                                         
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                               <C>   
ARTICLE 1 DEFINED TERMS............................................................................................1

ARTICLE 2 ORGANIZATIONAL MATTERS..................................................................................10
          Section 2.1  Organization and Continuation..............................................................10
          Section 2.2  Name ......................................................................................10
          Section 2.3  Registered Office and Agent; Principal Office..............................................11
          Section 2.4  Power of Attorney..........................................................................11
          Section 2.5  Term ......................................................................................12
         
ARTICLE 3 PURPOSE.................................................................................................12
          Section 3.1  Purpose and Business.......................................................................12
          Section 3.2  Powers ....................................................................................13

ARTICLE 4 CAPITAL CONTRIBUTIONS...................................................................................13
          Section 4.1  Capital Contributions of the Partners......................................................13
          Section 4.2  Issuances of Additional Partnership Interests..............................................14
          
ARTICLE 5 DISTRIBUTIONS...........................................................................................14
          Section 5.1  Requirement and Characterization of Distributions..........................................14
          Section 5.2  Amounts Withheld...........................................................................14
          Section 5.3  Distributions Upon Liquidation.............................................................14
          
ARTICLE 6 ALLOCATIONS.............................................................................................15
          Section 6.1  Allocations For Capital Account Purposes...................................................15
          Section 6.2  Other Allocation Rules.....................................................................15
          
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS...................................................................15
          Section 7.1  Management.................................................................................15
          Section 7.2  Certificate of Limited Partnership.........................................................19
          Section 7.3  Restrictions on General Partner Authority..................................................20
          Section 7.4  Reimbursement of the General Partner.......................................................20
          Section 7.5  Outside Activities of the General Partner..................................................20
          Section 7.6  Contracts with Affiliates..................................................................21
          Section 7.7  Indemnification............................................................................21
          Section 7.8  Liability of the General Partner...........................................................23
          Section 7.9  Other Matters Concerning the General Partner...............................................24
          Section 7.10 Title to Partnership Assets................................................................25
          Section 7.11 Reliance by Third Parties..................................................................25
          
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNER...............................................................26
          Section 8.1  Limitation of Liability....................................................................26
</TABLE>


<PAGE>

<TABLE>
<S>                    <C>                                                                                  
           Section 8.2  Management of Business....................................................................26
           Section 8.3  Outside Activities of Limited Partners....................................................26
           Section 8.4  Return of Capital.........................................................................26
           Section 8.5  Rights of Limited Partners Relating to the Partnership....................................27
           Section 8.6  Redemption Right..........................................................................28
           
ARTICLE 9  BOOKS, RECORDS, ACCOUNTING AND REPORTS.................................................................29
           Section 9.1  Records and Accounting....................................................................29
           Section 9.2  Partnership Year..........................................................................29
           Section 9.3  Reports ..................................................................................29
          
ARTICLE 10 TAX MATTERS............................................................................................30
           Section 10.1 Preparation of Tax Returns................................................................30
           Section 10.2 Tax Elections.............................................................................30
           Section 10.3 Tax Matters Partner.......................................................................30
           Section 10.4 Organizational Expenses...................................................................31
           Section 10.5 Withholding...............................................................................32
          
ARTICLE 11 TRANSFERS AND WITHDRAWALS..............................................................................32
           Section 11.1 Transfer .................................................................................32
           Section 11.2 Transfer of General Partner's Partnership Interests.......................................33
           Section 11.3 Limited Partners' Rights to Transfer......................................................33
           Section 11.4 Substituted Limited Partners..............................................................34
           Section 11.5 Assignees.................................................................................35
           Section 11.6 General Provisions........................................................................35
           
ARTICLE 12 ADMISSION OF PARTNERS..................................................................................36
           Section 12.1 Admission of Successor General Partner....................................................36
           Section 12.2 Admission of Additional Limited Partners..................................................36
           Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.............................37
          
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION...............................................................37
           Section 13.1 Dissolution...............................................................................37
           Section 13.2 Winding Up................................................................................38
           Section 13.3 Negative Capital Accounts.................................................................39
           Section 13.4 Deemed Distribution and Recontribution....................................................39
           Section 13.5 Rights of Limited Partners................................................................39
           Section 13.6 Notice of Dissolution.....................................................................40
           Section 13.7 Termination of Partnership and Cancellation of Certificate
                                      of Limited Partnership......................................................40
           Section 13.8 Reasonable Time for Winding-Up............................................................40
           Section 13.9 Waiver of Partition.......................................................................40
          
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS...........................................................40
           Section 14.1 Amendments................................................................................40
</TABLE>



<PAGE>

<TABLE>
<S>                                                                                                               <C>
ARTICLE 15 GENERAL PROVISIONS.....................................................................................41
           Section 15.1 Addresses and Notice......................................................................41
           Section 15.2 Titles and Captions.......................................................................41
           Section 15.3 Pronouns and Plurals......................................................................41
           Section 15.4 Further Action............................................................................41
           Section 15.5 Binding Effect............................................................................41
           Section 15.6 Creditors.................................................................................41
           Section 15.7 Waiver ...................................................................................42
           Section 15.8 Counterparts..............................................................................42
           Section 15.9 Applicable Law............................................................................42
           Section 15.10 Invalidity of Provisions.................................................................42
           Section 15.11 Entire Agreement.........................................................................42
</TABLE>
           
EXHIBIT A PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS

EXHIBIT B CAPITAL ACCOUNT MAINTENANCE

EXHIBIT C SPECIAL ALLOCATION RULES

EXHIBIT D VALUE OF CONTRIBUTED PROPERTY

EXHIBIT E NOTICE OF REDEMPTION

EXHIBIT F INDEMNIFICATION UNDER SECTION 7.7(I)



<PAGE>




                                                    
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                              FAC PROPERTIES, L.P.



     THIS  AGREEMENT  OF  LIMITED  PARTNERSHIP  OF  FAC  PROPERTIES,  L.P.  (the
"Agreement"),  dated as of December 12,  1997,  is entered into by and among FAC
Realty Trust,  Inc., a Maryland  corporation,  as the General  Partner,  and FAC
Properties  Holding  Corp.,  as a Limited  Partner  (as such  terms are  defined
hereinafter).

     WHEREAS,  the  Partnership  was organized on December 4, 1997 by FAC Realty
Trust,  Inc., as general partner,  and FAC Outparcels,  Inc., as  Organizational
Limited Partner;

     WHEREAS,  FAC  Properties  Holding  Corp. is making a  contribution  to the
capital of the  Partnership  and the  Organizational  Limited  Partner is hereby
withdrawing from the Partnership;

     NOW THEREFORE,  in consideration of the mutual covenants herein  contained,
and other valuable  consideration,  the receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:

                                    ARTICLE 1
                                  DEFINED TERMS

     The  following  definitions  shall be for all  purposes,  unless  otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.

     "Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.

     "Additional  Limited Partner" means a Person admitted to the Partnership as
a Limited  Partner  pursuant to Section  12.2 hereof and who is shown as such on
the books and records of the Partnership.

     "Adjusted  Capital  Account" means the Capital Account  maintained for each
Partner as of the end of each  Partnership  Year (i)  increased  by any  amounts
which such  Partner is obligated  to restore  pursuant to any  provision of this
Agreement or is deemed to be obligated  to restore  pursuant to the  penultimate
sentences of Regulations  Sections  1.704-2(g)(1)  and  1.704-2(i)(5),  and (ii)
decreased    by    the    items     described    in     Regulations     Sections
1.704-1(b)(2)(ii)(d)(4),  (5), and (6).  The  foregoing  definition  of Adjusted
Capital Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.



<PAGE>



     "Adjusted Capital Account Deficit" means, with respect to any Partner,  the
deficit  balance,  if any, in such Partner's  Adjusted Capital Account as of the
end of the relevant Partnership Year.

     "Adjusted Property" means any property the Carrying Value of which has been
adjusted  pursuant  to Exhibit B hereof.  Once an  Adjusted  Property  is deemed
distributed  by, and  recontributed  to, the  Partnership for federal income tax
purposes upon a termination  thereof  pursuant to Section 708 of the Code,  such
property shall thereafter  constitute a Contributed  Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.

     "Affiliate"  means, with respect to any Person,  (i) any Person directly or
indirectly controlling,  controlled by or under common control with such Person,
(ii)  any  Person  owning  or  controlling  ten  percent  (10%)  or  more of the
outstanding  voting  interests  of such  Person,  (iii) any Person of which such
Person owns or controls ten percent  (10%) or more of the voting  interests,  or
(iv) any officer,  director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), (iii) above.

     "Agreed Value" means (i) in the case of any Contributed  Property set forth
in  Exhibit D and as of the time of its  contribution  to the  Partnership,  the
Agreed  Value of such  property  as set forth in Exhibit D or if no value is set
forth  in  Exhibit  D,  the  fair  market  value  of  such   property  or  other
consideration  at the time of  contribution as determined by the General Partner
using such method of valuation  as it may adopt,  which value in any event shall
reflect any liabilities either assumed by the Partnership upon such contribution
or to which such property is subject when  contributed,  (ii) in the case of any
Contributed  Property  not set  forth  in  Exhibit  D and as of the  time of its
contribution to the Partnership,  the 704(c) Value of such property,  reduced by
any liabilities  either assumed by the Partnership upon such  contribution or to
which such  property is subject when  contributed,  and (iii) in the case of any
property distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property at the time such property is distributed,  reduced by any
indebtedness  either assumed by such Partner upon such  distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.

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

     "Articles  of  Incorporation"  means the Amended and  Restated  Articles of
Incorporation  of the General Partner filed in the State of Maryland on December
12, 1997 and amended or restated from time to time.

     "Assignee" means a Person to whom one or more  Partnership  Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.

     "Available  Cash"  means,  with  respect  to  any  period  for  which  such
calculation is being


                                       2
<PAGE>

made, (i) the sum of:

          (a) the  Partnership's Net Income or Net Loss (as the case may be) for
     such period;  

          (b) Depreciation and all other noncash charges deducted in determining
     Net Income or Net Loss for such period;

          (c) the amount of any  reduction  in the  reserves of the  Partnership
     referred  to  in  clause  (ii)(f)  below  (including,  without  limitation,
     reductions  resulting  because the General Partner  determines such amounts
     are no longer necessary);

          (d) the excess of proceeds from the sale,  exchange,  disposition,  or
     refinancing of Partnership  property for such period over the gain, if any,
     recognized from such sale,  exchange,  disposition,  or refinancing  during
     such period (excluding Terminating Capital Transactions); and

          (e) all other cash  received by the  Partnership  for such period that
     was not included in determining Net Income or Net Loss for such period;

     (ii) less the sum of:

          (a) all principal  debt payments made by the  Partnership  during such
     period;

          (b) capital expenditures made by the Partnership during such period;

          (c)  investments in any entity  (including  loans made thereto) to the
     extent that such investments are not otherwise  described in clause (ii)(a)
     or (ii)(b);

          (d) all other  expenditures  and payments not deducted in  determining
     Net Income or Net Loss for such period;

          (e) any amount included in determining Net Income or Net Loss for such
     period that was not received by the Partnership during such period;

          (f) the amount of any  increase in reserves  during such period  which
     the General  Partner  determines to be necessary or appropriate in its sole
     and absolute discretion;

          (g) the  amount of any  working  capital  accounts  and other  cash or
     similar  balances which the General  Partner  determines to be necessary or
     appropriate, in its sole and absolute discretion; and

          (h)  the  amount  which  is  not  available  for  distribution  due to
     regulatory, legal or other restrictions.



                                       3
<PAGE>

     Notwithstanding  the  foregoing,  Available Cash shall not include any cash
received or reductions in reserves,  or take into account any disbursements made
or reserves  established,  after commencement of the dissolution and liquidation
of the Partnership.

     "Book-Tax  Disparities"  means,  with  respect  to any item of  Contributed
Property  or  Adjusted  Property,  as of  the  date  of any  determination,  the
difference  between the Carrying Value of such Contributed  Property or Adjusted
Property and the adjusted  basis  thereof for federal  income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its  Contributed  Property  and  Adjusted  Property  will  be  reflected  by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the  hypothetical  balance of such  Partner's  Capital  Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.

     "Business  Day"  means any day  except a  Saturday,  Sunday or other day on
which  commercial  banks in New York, New York are authorized or required by law
to close.

     "Capital  Account"  means  the  Capital  Account  maintained  for a Partner
pursuant to Exhibit B hereof.

     "Capital  Contribution"  means, with respect to any Partner, any cash, cash
equivalents  or the Agreed  Value of  Contributed  Property  which such  Partner
contributes or is deemed to contribute to the  Partnership  pursuant to Sections
4.1, 4.2, or 4.3 hereof.

     "Carrying  Value"  means (i) with  respect  to a  Contributed  Property  or
Adjusted  Property,  the 704(c) Value of such  property,  reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Partners'
Capital  Accounts  following the  contribution  of or adjustment with respect to
such  Property,  and (ii) with respect to any other  Partnership  property,  the
adjusted basis of such property for federal  income tax purposes,  all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in  accordance  with  Exhibit B  hereof,  and to  reflect  changes,
additions  or other  adjustments  to the  Carrying  Value for  dispositions  and
acquisitions  of Partnership  properties,  as deemed  appropriate by the General
Partner.

     "Cash  Amount"  means an amount of cash per  Partnership  Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.

     "Certificate" means the Certificate of Limited Partnership  relating to the
Partnership  filed in the office of the Delaware  Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.

     "Code"  means the Internal  Revenue Code of 1986,  as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder.  Any
reference  herein to a specific  section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.



                                       4
<PAGE>

     "Contributed  Property" means each property or other asset, in such form as
may be  permitted  by  the  Act,  but  excluding  cash,  contributed  or  deemed
contributed  to  the  Partnership   (including   deemed   contributions  to  the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the  Code).  Once the  Carrying  Value of a  Contributed  Property  is  adjusted
pursuant  to  Exhibit B hereof,  such  property  shall no  longer  constitute  a
Contributed  Property for  purposes of Exhibit B hereof,  but shall be deemed an
Adjusted Property for such purposes.

     "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  purpose  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 the  record  date for such  dividend,  distribution,
subdivision 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.

     "Depreciation"  means,  for each  Partnership  Year an amount  equal to the
federal income tax depreciation,  amortization, or other cost recovery deduction
allowable  with  respect to an asset for such year,  except that if the Carrying
Value of an asset  differs  from its  adjusted  basis  for  federal  income  tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount  which  bears  the same  ratio to such  beginning  Carrying  Value as the
federal income tax depreciation,  amortization, or other cost recovery deduction
for such year bears to such  beginning  adjusted tax basis;  provided,  however,
that if the  federal  income  tax  depreciation,  amortization,  or  other  cost
recovery deduction for such year is zero,  Depreciation shall be determined with
reference to such beginning  Carrying Value using any reasonable method selected
by the General Partner.

     "Dissolution Event" has the meaning set forth in Section 13.1.

     "General  Partner"  means FAC Realty  Trust,  Inc.,  in its capacity as the
general partner of the Partnership,  or its successors as general partner of the
Partnership.

     "General Partner Interest" means a Partnership Interest held by the General
Partner that is a general partnership  interest.  A General Partner Interest may
be expressed as a number of Partnership Units.

     "IRS" means the Internal  Revenue Service,  which  administers the internal
revenue laws of the United States.



                                       5
<PAGE>

     "Immediate Family" means, with respect to any natural Person,  such natural
Person's  spouse  and  such  natural  Person's  natural  or  adoptive   parents,
descendants, nephews, nieces, brothers, and sisters.

     "Incapacity" or  "Incapacitated"  means, (i) as to any individual  Partner,
death, total physical  disability or entry by a court of competent  jurisdiction
adjudicating him incompetent to manage his Person or his estate;  (ii) as to any
corporation which is a Partner,  the filing of a certificate of dissolution,  or
its equivalent,  for the corporation or the revocation of its charter;  (iii) as
to any  partnership  which is a Partner,  the  dissolution  and  commencement of
winding up of the  partnership;  (iv) as to any estate  which is a Partner,  the
distribution   by  the  fiduciary  of  the  estate's   entire  interest  in  the
Partnership;  (v)  as  to  any  trustee  of a  trust  which  is a  Partner,  the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy  of a Partner  shall be deemed to have  occurred when (a) the Partner
commences a voluntary  proceeding seeking  liquidation,  reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect,  (b) the Partner is adjudged  as bankrupt or  insolvent,  or a final and
nonappealable  order for relief under any bankruptcy,  insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes  and  delivers a general  assignment  for the benefit of the  Partner's
creditors,  (d) the  Partner  files an answer  or other  pleading  admitting  or
failing to contest the  material  allegations  of a petition  filed  against the
Partner in any proceeding of the nature  described in clause (b) above,  (e) the
Partner  seeks,  consents  to or  acquiesces  in the  appointment  of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation,  reorganization or
other relief of or against  such Partner  under any  bankruptcy,  insolvency  or
other similar law now or hereafter in effect has not been  dismissed  within one
hundred twenty (120) days after the  commencement  thereof,  (g) the appointment
without  the  Partner's  consent  or  acquiescence  of a  trustee,  receiver  or
liquidator  has not been  vacated  or  stayed  within  ninety  (90) days of such
appointment,  or (h) an  appointment  referred  to in clause  (g) which has been
stayed is not vacated  within ninety (90) days after the  expiration of any such
stay.

     "Indemnitee" means (i) any Person made a party to a proceeding by reason of
(A)  his  status  as the  General  Partner,  or a  director  or  officer  of the
Partnership or the General Partner, or (B) his or its liabilities, pursuant to a
loan  guarantee or otherwise,  for any  indebtedness  of the  Partnership or any
Subsidiary of the Partnership (including,  without limitation,  any indebtedness
which the  Partnership or any Subsidiary of the Partnership has assumed or taken
assets  subject to), and (ii) such other  Persons  (including  Affiliates of the
General  Partner or the  Partnership)  as the General Partner may designate from
time to time  (whether  before  or after  the  event  giving  rise to  potential
liability), in its sole and absolute discretion.

     "Limited  Partner" means any Person named as a Limited Partner in Exhibit A
attached  hereto,  as such  Exhibit  may be  amended  from time to time,  or any
Substituted  Limited  Partner or Additional  Limited  Partner,  in such Person's
capacity as a Limited Partner in the Partnership.

     "Limited  Partner  Interest"  means a  Partnership  Interest  of a  Limited
Partner in the  Partnership  representing a fractional  part of the  Partnership
Interests  of all Partners and includes


                                       6
<PAGE>

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.  A Limited
Partner Interest may be expressed as a number of Partnership Units.

     "Liquidator" has the meaning set forth in Section 13.2.

     "Net  Income"  means,  for  any  Partnership  Year  or  any  portion  of  a
Partnership Year, the excess,  if any, of the Partnership's  items of income and
gain  for  such  Partnership  Year  over  the  Partnership's  items  of loss and
deduction for such  Partnership  Year. The items included in the  calculation of
Net Income shall be  determined  in  accordance  with Exhibit B. Once an item of
income,  gain,  loss  or  deduction  that  has  been  included  in  the  initial
computation  of Net  Income is  subjected  to the  special  allocation  rules in
Exhibit  C, Net Income or the  resulting  Net Loss,  whichever  the case may be,
shall be recomputed without regard to such item.

     "Net Loss" means,  for any  Partnership  Year,  the excess,  if any, of the
Partnership's  items of loss and  deduction for such  Partnership  Year over the
Partnership's  items of income  and gain for such  Partnership  Year.  The items
included  in the  calculation  of Net Loss  shall be  determined  in  accordance
Exhibit  B.  Once an item of  income,  gain,  loss or  deduction  that  has been
included  in the initial  computation  of Net Loss is  subjected  to the special
allocation  rules in Exhibit C, Net Loss or the resulting Net Income,  whichever
the case may be, shall be recomputed without regard to such item.

     "New Securities" has the meaning set forth in Section 4.2.B.

     "Nonrecourse   Built-in  Gain"  means,  with  respect  to  any  Contributed
Properties  or  Adjusted  Properties  that are subject to a mortgage or negative
pledge  securing a  Nonrecourse  Liability,  the amount of any taxable gain that
would be allocated to the Partners  pursuant to Section 2.B of Exhibit C if such
properties  were disposed of in a taxable  transaction in full  satisfaction  of
such liabilities and for no other consideration.

     "Nonrecourse  Deductions" has the meaning set forth in Regulations  Section
1.704-2(b)(1),  and the amount of Nonrecourse  Deductions for a Partnership Year
shall be  determined  in  accordance  with  the  rules  of  Regulations  Section
1.704-2(c).

     "Nonrecourse  Liability" has the meaning set forth in  Regulations  Section
1.752-l(a)(2).

     "Notice of Redemption" means the Notice of Redemption  substantially in the
form of Exhibit E to this Agreement.

     "Organizational Limited Partner" means FAC Outparcels, Inc.

     "Partner"  means a General  Partner or a Limited  Partner,  and  "Partners"
means the General Partner and the Limited Partners collectively.

                                       7
<PAGE>

     "Partner  Minimum  Gain"  means an amount,  with  respect  to each  Partner
Nonrecourse  Debt,  equal to the  Partnership  Minimum Gain that would result if
such  Partner  Nonrecourse  Debt  were  treated  as  a  Nonrecourse   Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).

     "Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).

     "Partner  Nonrecourse  Deductions" has the meaning set forth in Regulations
Section  1.704-2(i)(2),  and the amount of Partner  Nonrecourse  Deductions with
respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined
in accordance with the rules of Regulations Section 1.704-2(i)(2).

     "Partnership"  means  the  limited  partnership  formed  under  the Act and
pursuant to this Agreement and any successor thereto.

     "Partnership  Interest"  means an  ownership  interest  in the  Partnership
representing a Capital  Contribution  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.  A  Partnership  Interest  may  be  expressed  as a  number  of
Partnership Units.

     "Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2),  and the amount of  Partnership  Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).

     "Partnership  Record Date" means the record date established by the General
Partner for the  distribution  of Available Cash pursuant to Section 5.1 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  pursuant to Sections  4.1, 4.2 and 4.3. The
number of  Partnership  Units  outstanding  and the  Percentage  Interest in the
Partnership  represented  by such  Units  are set forth in  Exhibit  A  attached
hereto,  as such  Exhibit may be amended  from time to time.  The  ownership  of
Partnership  Units shall be evidenced by such form of  certificate  for Units as
the  General  Partner  adopts  from  time to time  unless  the  General  Partner
determines  that  the  Partnership  Units  shall be  uncertificated  securities.
Fractional  Units may be held and counted by the General Partner as necessary to
meet the requirements of Section 4.1.

     "Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.

     "Percentage  Interest"  means,  as  to  a  Partner,  its  interest  in  the
Partnership  as  determined 


                                       8
<PAGE>

by dividing the  Partnership  Units owned by such Partner by the total number of
Partnership  Units  then  outstanding  and as  specified  in  Exhibit A attached
hereto, as such Exhibit may be amended from time to time.

     "Person"  means  an  individual  or  a  corporation,  partnership,  limited
liability  company,  trust,  unincorporated  organization,  association or other
entity.

     "Recapture  Income" means any gain recognized by the  Partnership  upon the
disposition  of  any  property  or  asset  of the  Partnership,  which  gain  is
characterized  for federal  income tax  purposes as ordinary  income  because it
represents  the  recapture of deductions  previously  taken with respect to such
property or asset.  

     "Redeeming Partner" has the meaning set forth in Section 8.6 hereof.

     "Redemption Right" shall have the meaning set forth in Section 8.6 hereof.

     "Regulations" means the Income Tax Regulations  promulgated under the Code,
as such  regulations may be amended from time to time  (including  corresponding
provisions of succeeding regulations).

     "REIT" means a real estate investment trust under Section 856 of the Code.

     "REIT Share" shall mean a share of common stock of the General Partner.

     "REIT  Shares  Amount"  shall  mean a number  of REIT  Shares  equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner,  multiplied by the  Conversion  Factor,  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  shareholders  to
subscribe  for or purchase  REIT  Shares,  or any other  securities  or property
(collectively,  the  "rights"),  then the REIT Shares  Amount shall also include
such rights  that a holder of that  number of REIT  Shares  would be entitled to
receive.

     "Residual  Gain" or "Residual  Loss" means any item of gain or loss, as the
case may be, of the  Partnership  recognized  for  federal  income tax  purposes
resulting from a sale, exchange or other disposition of Contributed  Property or
Adjusted  Property,  to the  extent  such item of gain or loss is not  allocated
pursuant to Section  2.B.l(a) or  2.B.2(a)  of Exhibit C to  eliminate  Book-Tax
Disparities.

     "704(c) Value" of any Contributed Property means the value of such property
as set forth in  Exhibit D or if no value is set  forth in  Exhibit  D, the fair
market value of such property or other consideration at the time of contribution
as determined by the General Partner using such  reasonable  method of valuation
as it may adopt; provided, however, that the 704(c) Value of any property deemed
contributed to the Partnership for federal income tax purposes upon  termination
and  reconstitution  thereof  pursuant  to  Section  708 of the  Code  shall  be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute  discretion,  use such method as
it deems  reasonable  and  appropriate  to allocate the  


                                       9
<PAGE>

aggregate  of the  704(c)  Values  of  Contributed  Properties  in a  single  or
integrated  transaction among the separate properties on a basis proportional to
their respective fair market values.

     "Specified  Redemption  Date"  means the tenth  (10th)  Business  Day after
receipt by the General Partner of a Notice of Redemption.

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

     "Substituted  Limited  Partner" means a Person who is admitted as a Limited
Partner to the  Partnership  pursuant  to  Section  11.4. 

     "Terminating  Capital  Transaction"  means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions  that, taken together,  result in the sale or other  disposition of
all or substantially all of the assets of the Partnership.

     "Unrealized Gain"  attributable to any item of Partnership  property means,
as of any date of  determination,  the  excess,  if any,  of (i) the fair market
value of such property (as  determined  under Exhibit B hereof) as of such date,
over (ii) the Carrying  Value of such  property  (prior to any  adjustment to be
made pursuant to Exhibit B hereof) as of such date.

     "Unrealized Loss"  attributable to any item of Partnership  property means,
as of any date of  determination,  the excess, if any, of (i) the Carrying Value
of such  property  (prior to any  adjustment  to be made  pursuant  to Exhibit B
hereof) as of such date,  over (ii) the fair market  value of such  property (as
determined under Exhibit B hereof) as of such date.

     "Valuation  Date"  means the date of  receipt by the  General  Partner of a
Notice of Redemption  or, if such date is not a Business Day, the first Business
Day thereafter.

     "Value"  means,  with  respect to a REIT  Share,  the market  price for the
trading day immediately  preceding the Valuation Date. The market price for each
such trading day shall be the closing 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 on such day.

                                    ARTICLE 2
                             ORGANIZATIONAL MATTERS

     Section 2.1 Organization and Continuation

     The  Partnership  is  a  limited  partnership  organized  pursuant  to  the
provisions of the Act and upon the terms and conditions set forth herein. Except
as expressly provided herein to the contrary,  the rights and obligations of the
Partners and the  administration  and  termination of the  Partnership  shall be
governed by the Act. The Partnership  Interest of each Partner shall be personal
property for all purposes.



                                       10
<PAGE>

     Section 2.2 Name

     The name of the Partnership shall be FAC Properties, L.P. The Partnership's
business may be conducted under any other name or names deemed  advisable by the
General  Partner,  including  the name of the General  Partner or any  Affiliate
thereof.  The words  "Limited  Partnership,"  "L.P.," "Ltd." or similar words or
letters  shall be included in the  Partnership's  name where  necessary  for the
purposes of complying with the laws of any  jurisdiction  that so requires.  The
General  Partner in its sole and absolute  discretion may change the name of the
Partnership  at any time and from  time to time and  shall  notify  the  Limited
Partners  of such  change  in the  next  regular  communication  to the  Limited
Partners.

     Section 2.3 Registered Office and Agent; Principal Office

     The name and address of the registered  agent for service of process on the
Partnership  in the State of Delaware is Corporation  Trust Center,  1209 Orange
Street,  Wilmington,   County  of  New  Castle.  The  principal  office  of  the
Partnership  shall be located at 11000 Regency  Parkway,  Cary,  North  Carolina
27511,  or such  other  place  as the  General  Partner  may  from  time to time
designate  by notice to the  Limited  Partners.  The  address of the  registered
office of the  Partnership  in the State of North Carolina is the address of the
principal  office.  The Partnership may maintain  offices at such other place or
places  within or outside the State of Delaware  as the  General  Partner  deems
advisable.

     Section 2.4 Power of Attorney

     A. Each Limited Partner and each Assignee  hereby  constitutes and appoints
the   General   Partner,   any   Liquidator,   and   authorized   officers   and
attorneys-in-fact  of each, and each of those acting  singly,  in each case with
full power of substitution,  as its true and lawful agent and  attorney-in-fact,
with full power and authority in its name, place and stead to:

     (1)  execute,  swear  to,  acknowledge,  deliver,  file and  record  in the
          appropriate  public offices (a) all certificates,  documents and other
          instruments  (including,  without  limitation,  this Agreement and the
          Certificate  and all  amendments  or  restatements  thereof)  that the
          General  Partner or the Liquidator  deems  appropriate or necessary to
          form,  qualify or  continue  the  existence  or  qualification  of the
          Partnership  as a limited  partnership  (or a partnership in which the
          limited partners have limited  liability) in the State of Delaware and
          in all other  jurisdictions  in which the  Partnership may or plans to
          conduct business or own property; (b) all instruments that the General
          Partner  deems  appropriate  or  necessary  to reflect any  amendment,
          change,  modification  or  restatement of this Agreement in accordance
          with its terms; (c) all conveyances and other instruments or documents
          that the  General  Partner  or the  Liquidator  deems  appropriate  or
          necessary  to  reflect  the   dissolution  


                                       11
<PAGE>

          and  liquidation  of the  Partnership  pursuant  to the  terms of this
          Agreement,   including,   without   limitation,   a   certificate   of
          cancellation;   (d)  all   instruments   relating  to  the  admission,
          withdrawal,  removal or  substitution  of any Partner  pursuant to, or
          other events described in, Articles 11, 12 or 13 hereof or the Capital
          Contribution of any Partner;  and (e) all certificates,  documents and
          other  instruments  relating  to  the  determination  of  the  rights,
          preferences and privileges of a Partnership Interest; and

     (2)  execute, swear to, seal,  acknowledge and file all ballots,  consents,
          approvals,  waivers, certificates and other instruments appropriate or
          necessary,  in the sole and absolute discretion of the General Partner
          or any  Liquidator,  to make,  evidence,  give,  confirm or ratify any
          vote,  consent,  approval,  agreement or other action which is made or
          given by the  Partners  hereunder or is  consistent  with the terms of
          this Agreement or appropriate or necessary,  in the sole discretion of
          the General  Partner or any  Liquidator,  to  effectuate  the terms or
          intent of this Agreement.

Nothing  contained  herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement  except in accordance  with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.

     B. The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest,  in  recognition  of the fact that each of the
Partners  will  be  relying  upon  the  power  of the  General  Partner  and any
Liquidator  to act as  contemplated  by this  Agreement  in any  filing or other
action by it on  behalf  of the  Partnership,  and it shall  survive  and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer  of all  or  any  portion  of  such  Limited  Partner's  or  Assignee's
Partnership  Units and shall  extend to such  Limited  Partner's  or  Assignee's
heirs,  successors,  assigns and  personal  representatives.  Each such  Limited
Partner or Assignee hereby agrees to be bound by any representation  made by the
General Partner or any  Liquidator,  acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses  which may be available to contest,  negate or disaffirm  the action of
the General Partner or any  Liquidator,  taken in good faith under such power of
attorney.  Each  Limited  Partner or Assignee  shall  execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's  request therefor,  such further  designation,
powers  of  attorney  and  other  instruments  as  the  General  Partner  or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.

     Section 2.5 Term

     The term of the  Partnership  commenced  on December 4, 1997,  the date the
Certificate  was filed in the office of the  Secretary  of State of  Delaware in
accordance with the Act, and shall continue until December 31, 2097,  unless the
Partnership is dissolved  sooner  pursuant to the 


                                       12
<PAGE>

provisions of Article 13 or as otherwise provided by law.

                                    ARTICLE 3
                                     PURPOSE

     Section 3.1 Purpose and Business

     The purpose and nature of the business to be  conducted by the  Partnership
is (i) 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 be  classified  as a REIT,  unless the  General  Partner
ceases to qualify as a REIT for reasons  other than the conduct of the  business
of the Partnership,  (ii) to enter into any partnership,  joint venture or other
similar arrangement to engage in any of the foregoing or to own interests in any
entity  engaged in any of the foregoing,  and (iii) 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  discretion,  to  cease
qualifying as a REIT, the Partners  acknowledge  the General  Partner's  current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner.

     Section 3.2 Powers

     The  Partnership is empowered to do any and all acts and things  necessary,
appropriate,  proper, advisable, incidental to or convenient for the furtherance
and  accomplishment  of the purposes and business  described  herein and for the
protection and benefit of the Partnership,  provided that the Partnership  shall
not take,  or refrain  from  taking,  any action  which,  in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General  Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section 857 or Section
4981  of  the  Code,  or  (iii)  could  violate  any  law or  regulation  of any
governmental body or agency having  jurisdiction over the General Partner or its
securities,  unless  such  action (or  inaction)  shall  have been  specifically
consented to by the General Partner in writing.

                                    ARTICLE 4
                              CAPITAL CONTRIBUTIONS

     Section 4.1 Capital Contributions of the Partners

     At the time of the  execution of this  Agreement,  the Partners  shall make
Capital Contributions as set forth in Exhibit A to this Agreement.  The Partners
shall own  Partnership  Units in the amounts set forth for each such  Partner in
Exhibit A and shall have a Percentage  Interest in the  Partnership as set forth
in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time
to time by the General  Partner to the extent  necessary  to reflect  accurately
redemptions,  Capital  Contributions,  the  issuance of  additional  Partnership
Units, or similar events having an effect on any Partner's  Percentage Interest.
The number of Partnership 


                                       13
<PAGE>

Units held  directly by the General  Partner  (equal to one percent  (1%) of all
outstanding  Partnership  Units  from  time to time)  shall be  deemed to be the
General Partner  Interest.  Except as provided in Sections 4.2, 7.7(I) and 10.5,
the  Partners  shall  have  no  obligation  to  make  any   additional   Capital
Contributions  or loans to the  Partnership.  The General Partner shall maintain
the  information  set forth in Exhibit A to the Agreement,  as such  information
shall  change  from time to time,  in such  form as the  General  Partner  deems
appropriate for the conduct of the Partnership  affairs,  and Exhibit A shall be
deemed amended from time to time to reflect the information so maintained by the
General  Partner,  whether or not a formal  amendment to the  Agreement has been
executed  amending such Exhibit A. Such information shall reflect (and Exhibit A
shall be  deemed  amended  from time to time to  reflect)  the  issuance  of any
additional  Partnership  Units to the General  Partner or any other Person,  the
transfer of Partnership  Units and the redemption of any Partnership  Units, all
as contemplated in the Agreement.

     Section 4.2 Issuances of Additional Partnership Interests

     The General Partner is hereby authorized to cause the Partnership from time
to time to  issue to the  Partners  (including  the  General  Partner)  or other
Persons  additional  Partnership Units or other Partnership  Interests 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
Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including,  without limitation,
(i) the allocations of items of Partnership  income,  gain, loss,  deduction and
credit to each such class or series of Partnership Interests;  (ii) the right of
each such  class or  series of  Partnership  Interests  to share in  Partnership
distributions;  and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership.

                                    ARTICLE 5
                                  DISTRIBUTIONS

     Section 5.1 Requirement and Characterization of Distributions

     The General  Partner shall  distribute at least annually an amount equal to
100% of  Available  Cash  generated  by the  Partnership  during  such annual or
shorter period to the Partners who are Partners on the  Partnership  Record Date
with  respect  to such  annual  or  shorter  period  in  accordance  with  their
respective  Percentage  Interests on such Partnership Record Date; provided that
in no event may a Partner  receive a distribution of Available Cash with respect
to a Partnership  Unit if such Partner is entitled to receive a distribution out
of such Available  Cash with respect to a REIT Share for which such  Partnership
Unit has been redeemed or exchanged.

     Section 5.2 Amounts Withheld

     All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.5 hereof with respect to any allocation, payment or
distribution to the General Partner,  the Limited Partners or Assignees shall be
treated as amounts  distributed to the General  Partner,  Limited  Partners,  or
Assignees pursuant to Section 5.1 for all purposes under this


                                       14
<PAGE>

Agreement.

     Section 5.3 Distributions Upon Liquidation

     Proceeds from a Terminating Capital Transaction and any other cash received
or reductions  in reserves made after  commencement  of the  liquidation  of the
Partnership  shall be  distributed  to the Partners in  accordance  with Section
13.2.

                                    ARTICLE 6
                                   ALLOCATIONS

     Section 6.1 Allocations For Capital Account Purposes

     For purposes of maintaining  the Capital  Accounts and in  determining  the
rights of the Partners  among  themselves,  the  Partnership's  items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated  among the  Partners  in each  taxable  year (or  portion  thereof) as
provided hereinbelow.

     A. Net Income.  After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, Net Income shall be allocated (i) first,
to the General Partner to the extent that Net Losses previously allocated to the
General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income
previously  allocated  to the  General  Partner  pursuant  to this clause (i) of
Section  6.1.A,  and (ii)  thereafter,  Net  Income  shall be  allocated  to the
Partners in accordance with their respective Percentage Interests.

     B. Net Losses.  After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached  hereto,  Net Losses  shall be  allocated to the
Partners in accordance with their  respective  Percentage  Interests;  provided,
however,  that Net Losses shall not be allocated to any Limited Partner pursuant
to this  Section  6.1.B to the  extent  that such  allocation  would  cause such
Limited  Partner to have an Adjusted  Capital Account Deficit at the end of such
taxable year (or increase any existing  Adjusted Capital Account  Deficit).  All
Net Losses in excess of the limitations set forth in this Section 6.1.B shall be
allocated to the General Partner.

     Section 6.2 Other Allocation Rules.

     A. Excess  Nonrecourse  Liabilities.  Solely for purposes of  determining a
Partner's  proportionate  share of the "excess  nonrecourse  liabilities" of the
Partnership  within  the  meaning of  Regulations  Section  1.752-3(a)(3),  such
"excess nonrecourse  liabilities" first shall be allocated to those Partners who
have, and in an amount equal to, such Partners'  built-in gain under Regulations
Section  1.704-3(a)(3)(ii) less any Nonrecourse Built-in Gain, and then shall be
allocated  among the Partners in  accordance  with their  respective  Percentage
Interests.

     B. Recapture Income. Recapture Income shall be allocated in accordance with
Regulations Sections 1.1245-1(c) or 1.1250-1(f) as applicable.

                                       15
<PAGE>

                                    ARTICLE 7
                      MANAGEMENT AND OPERATIONS OF BUSINESS

     Section 7.1 Management

     A. Except as otherwise expressly provided in this Agreement, all management
powers  over  the  business  and  affairs  the  Partnership  are  and  shall  be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to  participate  in or  exercise  control  or  management  power  over the
business and affairs of the Partnership.  The General Partner may not be removed
by the Limited  Partners with or without cause. In addition to the powers now or
hereafter granted to a general partner of a limited partnership under applicable
law or which are granted to the General  Partner  under any other  provision  of
this Agreement,  the General Partner,  subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the  business of the  Partnership,  to exercise  all powers set forth in
Section  3.2 hereof and to  effectuate  the  purposes  set forth in Section  3.1
hereof, including, without limitation:

     (1)  the making of any  expenditures,  the  lending or  borrowing  of money
          (including,  without  limitation,  making  prepayments  on  loans  and
          borrowing money to permit the Partnership to make distributions to its
          Partners in such  amounts as will permit the General  Partner (so long
          as the General  Partner  qualifies  as a REIT) to avoid the payment of
          any federal income tax  (including,  for this purpose,  any excise tax
          pursuant to Section 4981 of the Code) and to make distributions to the
          General  Partner such that the General  Partner can  distribute to its
          shareholders  amounts  sufficient  to permit  the  General  Partner to
          maintain  REIT  status),  the  assumption  or  guarantee  of, or other
          contracting for,  indebtedness and other liabilities,  the issuance of
          evidence of  indebtedness  (including  the securing of same by deed to
          secure debt,  mortgage,  deed of trust or other lien or encumbrance on
          the  Partnership's  assets) and the  incurring of any  obligations  it
          deems necessary for the conduct of the activities of the Partnership;

     (2)  the making of tax,  regulatory  and other  filings,  or  rendering  of
          periodic or other reports to  governmental  or other  agencies  having
          jurisdiction over the business or assets of the Partnership;

     (3)  the   acquisition,   disposition,   mortgage,   pledge,   encumbrance,
          hypothecation or exchange of any assets of the Partnership  (including
          the  exercise  or  grant  of  any  conversion,  option,  privilege  or
          subscription  right or other right  available in  connection  with any
          assets at any time held by the  Partnership) or the combination of the
          Partnership with or into another entity (all of the foregoing  subject
          to any prior  approval  only to the extent  required  by  Section  7.3
          hereof);



                                       16
<PAGE>

     (4)  the  use  of  the  assets  of  the  Partnership  (including,   without
          limitation, cash on hand) for any purpose consistent with the terms of
          this  Agreement  and on any  terms  it sees  fit,  including,  without
          limitation,  the  financing  of the conduct of the  operations  of the
          General  Partner,   the  Partnership  or  any  of  the   Partnership's
          Subsidiaries,  the  lending  of  funds to  other  Persons  (including,
          without  limitation,  the  Subsidiaries of the Partnership  and/or the
          General  Partner) and the repayment of obligations of the  Partnership
          and its  Subsidiaries  and any other  Person in which it has an equity
          investment,   and  the   making  of  capital   contributions   to  its
          Subsidiaries;

     (5)  the management,  operation, leasing, landscaping,  repair, alteration,
          demolition or improvement of any real property or  improvements  owned
          by the Partnership or any Subsidiary of the Partnership;

     (6)  the  negotiation,   execution,   and  performance  of  any  contracts,
          conveyances or other  instruments  that the General Partner  considers
          useful or necessary to the conduct of the Partnership's  operations or
          the   implementation  of  the  General  Partner's  powers  under  this
          Agreement,   including   contracting  with  contractors,   developers,
          consultants,  accountants,  legal counsel, other professional advisors
          and other agents and the payment of their  expenses  and  compensation
          out of the Partnership's assets;

     (7)  the  distribution of Partnership cash or other  Partnership  assets in
          accordance with this Agreement;

     (8)  holding, managing,  investing and reinvesting cash and other assets of
          the Partnership;

     (9)  the collection and receipt of revenues and income of the Partnership;

     (10) the  establishment  of one or more divisions of the  Partnership,  the
          selection and dismissal of employees of the Partnership,  any division
          of  the  Partnership,  or  the  General  Partner  (including,  without
          limitation,   employees  having  titles  such  as  "president,"  "vice
          president,"  "secretary"  and  "treasurer"  of  the  Partnership,  any
          division  of the  Partnership,  or the General  Partner),  and agents,
          outside  attorneys,  accountants,  consultants  and contractors of the
          General Partner or the Partnership or any division of the Partnership,
          and the  determination  of  their  compensation  and  other  terms  of
          employment or hiring;



                                       17
<PAGE>

     (11) the  maintenance of such insurance for the benefit of the  Partnership
          and the Partners as it deems necessary or appropriate;

     (12) the  formation  of,  or   acquisition  of  an  interest  in,  and  the
          contribution   of  property   to,  any  further   limited  or  general
          partnerships,  joint  ventures  or other  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 investment from time to time);

     (13) the control of any matters affecting the rights and obligations of the
          Partnership,  including  the  settlement,  compromise,  submission  to
          arbitration  or any other form of dispute  resolution,  or abandonment
          of, any claim,  cause of action,  liability,  debt or damages,  due or
          owing to or from the  Partnership,  the  commencement  or  defense  of
          suits, legal proceedings,  administrative proceedings,  arbitration or
          other  forms of dispute,  resolution,  and the  representation  of the
          Partnership  in  all  suits  or  legal   proceedings,   administrative
          proceedings,  arbitrations or other forms of dispute  resolution,  the
          incurring  of legal  expense,  and the  indemnification  of any Person
          against liabilities and contingencies to the extent permitted by law;

     (14) the  undertaking  of any action in connection  with the  Partnership's
          direct or indirect  investment in its Subsidiaries or any other Person
          (including,  without limitation,  the contribution or loan of funds by
          the Partnership to such Persons);

     (15) the determination of the fair market value of any Partnership property
          distributed in kind using such  reasonable  method of valuation as the
          General Partner may adopt;

     (16) the exercise,  directly or  indirectly,  through any  attorney-in-fact
          acting  under a general or limited  power of  attorney,  of any right,
          including  the right to vote,  appurtenant  to any asset or investment
          held by the Partnership;

     (17) the exercise of any of the powers of the General Partner enumerated in
          this  Agreement on behalf of or in connection  with any  Subsidiary of
          the  Partnership  or any other Person in which the  Partnership  has a
          direct or indirect  interest,  or jointly with any such  Subsidiary or
          other Person;

     (18) the exercise of any of the powers of the General Partner


                                       18
<PAGE>

          enumerated  in this  Agreement  on behalf  of any  Person in which the
          Partnership does not have an interest pursuant to contractual or other
          arrangements with such Person; and

     (19) the  making,  execution  and  delivery  of any and all deeds,  leases,
          notes,  deeds to secure  debt,  mortgages,  deeds of  trust,  security
          agreements,    conveyances,    contracts,   guarantees,    warranties,
          indemnities,  waivers,  releases or legal  instruments or agreement in
          writing  necessary  or  appropriate  in the  judgment  of the  General
          Partner  for the  accomplishment  of any of the powers of the  General
          Partner enumerated in this Agreement.

     B.  Each of the  Limited  Partners  agrees  that  the  General  Partner  is
authorized to execute,  deliver and perform the  above-mentioned  agreements and
transactions on behalf of the Partnership  without any further act,  approval or
vote of the  Partners,  notwithstanding  any other  provision of this  Agreement
(except as provided in Section  7.3),  the Act or any  applicable  law,  rule or
regulation,  to the fullest extent  permitted under the Act or other  applicable
law.  The  execution,  delivery or  performance  by the  General  Partner or the
Partnership of any agreement  authorized or permitted under this Agreement shall
not  constitute  a breach by the  General  Partner of any duty that the  General
Partner may owe the  Partnership  or the Limited  Partners or any other  Persons
under this Agreement or of any duty stated or implied by law or equity.

     C. At all times from and after the date  hereof,  the  General  Partner may
cause the  Partnership to obtain and maintain (i) casualty,  liability and other
insurance on the properties of the Partnership and (ii) liability  insurance for
the Indemnities hereunder.

     D. At all times from and after the date  hereof,  the  General  Partner may
cause the  Partnership  to establish  and maintain at any and all times  working
capital  accounts  and other cash or  similar  balances  in such  amounts as the
General  Partner,  in its sole and absolute  discretion,  deems  appropriate and
reasonable from time to time.

     E. In exercising its authority  under this Agreement and except as provided
at Section 5.1, the General  Partner may, but shall be under no  obligation  to,
take into account the tax consequences to any Partner of any action taken by it.
The General  Partner and the  Partnership  shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability  incurred
by such  Limited  Partner as a result of an action (or  inaction) by the General
Partner pursuant to its authority under this Agreement.

     Section 7.2 Certificate of Limited Partnership

     The General Partner has previously filed the Certificate with the Secretary
of State of Delaware as required by the Act. The General  Partner  shall use all
reasonable  efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation,  continuation,
qualification and operation of a limited  partnership (or a partnership in which
the limited  partners  have limited  liability) in the State of Delaware and any

                                       19
<PAGE>

other state, or the District of Columbia,  in which the Partnership may elect to
do business or own property. To the extent that such action is determined by the
General  Partner to be  reasonable  and  necessary or  appropriate,  the General
Partner shall file amendments to and  restatements of the Certificate and do all
the  things  to  maintain  the  Partnership  as  a  limited  partnership  (or  a
partnership in which the limited partners have limited liability) under the laws
of the State of  Delaware  and each other  state or the  District of Columbia in
which the Partnership  may elect to do business or own property.  Subject to the
terms of Section  8.5.A(4)  hereof,  the General  Partner shall not be required,
before or after  filing,  to  deliver or mail a copy of the  Certificate  or any
amendment thereto to any Limited Partner.

     Section 7.3 Restrictions on General Partner Authority

     The General Partner may not take any action in  contravention of an express
prohibition or limitation of this Agreement  without the written  consent of all
of the Limited Partners.

     Section 7.4 Reimbursement of the General Partner

     A. Except as provided in this Section 7.4 and  elsewhere in this  Agreement
(including the provisions of Articles 5 and 6 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  expenses  that it incurs  relating  to the  ownership  and
operation of, or for the benefit of, the  Partnership;  provided that the amount
of any such reimbursement shall be reduced by any interest earned by the General
Partner with respect to bank accounts or other  instruments  or accounts held by
it on behalf of the  Partnership  as  permitted  in Section  7.5.A.  The Limited
Partners  acknowledge  that, for purposes of this Section 7.4.B, all expenses of
the General Partner are deemed incurred for the benefit of the Partnership. Such
reimbursements  shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7 hereof.

     C. As set forth in Section  4.3,  the General  Partner  shall be treated as
having made a Capital  Contribution in the amount of all expenses that it incurs
relating to the organization  and/or  reorganization  of the Partnership and the
General Partner, and any other issuance of additional  Partnership  Interests or
REIT Shares pursuant to Section 4.2 hereof.

     Section 7.5 Outside Activities of the General Partner

     Nothing herein  contained  shall prevent or prohibit the General Partner or
any employee or other  Affiliate  of the General  Partner  from  entering  into,
engaging in or conducting any other activity or performing for a fee any service
including  (without  limiting the generality of the  foregoing)  engaging in any
business dealing with real property of any type or location,  including, without
limitation,  property  of a  type  similar  to  those  properties  owned  by the
Partnership,  its  Subsidiaries or any other Person in which the Partnership has
an  equity  investment;  acting  as a  


                                       20
<PAGE>

director, officer or employee of any corporation,  as a trustee of any trust, as
a general  partner  of any  partnership,  as a  managing  member of any  limited
liability  company,  or as an  administrative  official  of any  other  business
entity;  or receiving  compensation for services to, or participating in profits
derived from,  the  investments  of any such  corporation,  trust,  partnership,
limited liability company or other entity, regardless of whether such activities
are  competitive  with the  Partnership,  and nothing  herein shall  require the
General  Partner or any employee or  Affiliate  thereof to offer any interest in
such activities to the Partnership or any Partner.

     Section 7.6 Contracts with Affiliates

     A. The  Partnership  may lend or  contribute  funds or other  assets 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.

     B. Except as provided in Section 7.5.A, the Partnership may transfer assets
to joint ventures,  other partnerships,  corporations or other business entities
in which it is or thereby  becomes a participant  upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.

     C. The  Partnership  may enter  into  agreements  with  Affiliates  for the
provision  of  services to the  Partnership  upon such terms and subject to such
conditions  consistent  with this  Agreement and  applicable  law as the General
Partner, in its sole and absolute discretion, believes are advisable.

     D. The General  Partner is expressly  authorized to enter into, in the name
and on behalf of the Partnership,  a right of first opportunity  arrangement and
other conflict  avoidance  agreements with various Affiliates of the Partnership
and the General Partner,  on such terms as the General Partner,  in its sole and
absolute discretion, believes are advisable.

     Section 7.7 Indemnification

     A. Except as provided at Section  7.7(I),  hereof,  the  Partnership  shall
indemnify each Indemnitee from and against any and all losses, claims,  damages,
liabilities,   joint  or  several,  expenses  (including,   without  limitation,
attorneys   fees  and  other  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,  the General  Partner as set
forth  in this  Agreement  in  which  such  Indemnitee  may be  involved,  or is
threatened  to be involved,  as a party or otherwise,  unless it is  established
that:  (i) the act or  omission  of the  Indemnitee  was  material to the matter
giving rise to the  proceeding  and either was committed in bad faith or was the
result  of  active  and  deliberate  dishonesty;  (ii) the  Indemnitee  actually
received an improper personal benefit in money,  property or services;  or (iii)
in the case of any criminal  proceeding,  the Indemnitee had reasonable cause to

                                       21
<PAGE>

believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity  shall extend to any liability of any  Indemnitee,  pursuant to a loan
guaranty or otherwise for any  indebtedness of the Partnership or any Subsidiary
of the Partnership  (including  without  limitation,  any indebtedness which the
Partnership  or any Subsidiary of the  Partnership  has assumed or taken subject
to), and the General  Partner is hereby  authorized and empowered,  on behalf of
the Partnership,  to enter into one or more indemnity agreements consistent with
the  provisions  of this  Section  7.7 in  favor  of any  Indemnitee  having  or
potentially having liability for any such  indebtedness.  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  7.7.A  with  respect  to the  subject  matter of such  proceeding.  The
termination  of any  proceeding by conviction of an Indemnitee or upon a plea of
nolo  contendere or its equivalent by an Indemnitee,  or an entry of an order of
probation  against  an  Indemnitee  prior  to  judgment,  creates  a  rebuttable
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.7.A.  Any  indemnification  pursuant to this Section 7.7 shall be
made only out of the assets of the Partnership,  and neither the General Partner
nor any Limited  Partner shall have any  obligation to contribute to the capital
of the Partnership or otherwise provide funds, to enable the Partnership to fund
its obligations under this Section 7.7.

     B.  Reasonable  expenses  incurred  by an  Indemnitee  who is a party  to a
proceeding may be paid or reimbursed by the  Partnership in advance of the final
disposition of the proceeding  upon receipt by the  Partnership of (i) a written
affirmation  by the  Indemnitee of the  Indemnitee's  good faith belief that the
standard  of  conduct  necessary  for  indemnification  by  the  Partnership  as
authorized in Section 7.7.A. has been met, and (ii) a written  undertaking by or
on  behalf of the  Indemnitee  to repay the  amount  if it shall  ultimately  be
determined that the standard of conduct has not been met.

     C. The indemnification provided by this Section 7.7 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 unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.

     D. The  Partnership  may,  but  shall not be  obligated  to,  purchase  and
maintain  insurance,  on behalf of the Indemnities 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.

     E. Any  liabilities  which an  Indemnitee  incurs  as a result of acting on
behalf of the  Partnership  or the General  Partner  (whether as a fiduciary  or
otherwise) in connection with the operation, administration or maintenance of an
employee  benefit plan or any related trust or funding  mechanism  (whether such
liabilities  are in the form of excise taxes  assessed by the  Internal  Revenue
Service,  penalties assessed by the Department of Labor,  restitutions to such a
plan or trust or other funding  mechanism or to a participant  or beneficiary of
such plan, trust of 


                                       22
<PAGE>

other  funding  mechanism,  or  otherwise)  shall be treated as  liabilities  or
judgments  or fines under this  Section 7.7 unless such  liabilities  arise as a
result of (i) such Indemnitee's  intentional misconduct or knowing violations of
the law, or (ii) any  transaction in which such  Indemnitee  received a personal
benefit in violation or breach of any provision of this  Agreement or applicable
law.

     F. In no event may an  Indemnitee  subject any of the  Partners to personal
liability  by  reason  of the  indemnification  provisions  set  forth  in  this
Agreement.

     G. An Indemnitee  shall not be denied  indemnification  in whole or in part
under this Section 7.7 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. 

     H.  The  provisions  of  this  Section  7.7  are  for  the  benefit  of the
Indemnities,  their heirs, successors,  assigns and administrators and shall not
be deemed  to create  any  rights  for the  benefit  of any other  Persons.  Any
amendment,  modification  or repeal of this Section 7.7 or any provision  hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's  liability to any  Indemnitee  under this Section 7.7 as in effect
immediately  prior to such  amendment,  modification,  or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment,  modification  or repeal,  regardless of when such claims may
arise or be asserted.

     I. The Partners hereby  acknowledge that, in conjunction with the financing
and the  refinancing  of the  property  owned by the  Partnership,  the  General
Partner may agree to guarantee part or all of such debt. The Partners understand
that,  pursuant  to  Regulations  Section   1.752-(2)(b)(3)(i),   such  guaranty
obligation would,  absent the  indemnification  provided  hereinafter,  serve to
increase  the  General  Partner's  share of such debt  pursuant  to  Regulations
Section 1.752-2(a).  Inasmuch as, notwithstanding such guaranty obligation, each
of the  Limited  Partners  desires  to  increase  his share of such debt and the
General  Partner  desires to  decrease  its share of such debt (for  purposes of
Regulations  Section  1.752-2(a)),  each of the Limited Partners,  to the extent
provided in Exhibit F, attached  hereto,  hereby agrees to indemnify the General
Partner in the event and to the extent that the General Partner both is required
to make a payment to the lender under any such guaranty obligation and is unable
to sell any or all of the assets of the Partnership for money or moneys worth to
make the General Partner whole on account of such payment.  This indemnification
is  effective  only at the  time,  in the event  and to the  extent  that upon a
dissolution  and  liquidation  of the  Partnership,  the  General  Partner  is a
creditor of the  Partnership  due to its  guaranty of  Partnership  debt and the
proceeds  of  sale in such  dissolution  and  liquidation  are  insufficient  to
reimburse the General  Partner for any amounts paid on such guaranty  obligation
as  contemplated  in this  Section  7.7(I).  As  provided  in  Exhibit  F,  this
indemnification is limited on a per Unit basis to Units owned by an indemnifying
Limited Partner at the time an  indemnification is due to the General Partner as
provided by this Section 7.7(I), such that each Limited Partner's  obligation is
reduced upon a redemption  of Units as provided in Section 8.6 or upon any other
transfer or disposition of Units. 

     Section 7.8 Liability of the General Partner

                                       23
<PAGE>

     A.  Notwithstanding  anything to the contrary set forth in this  Agreement,
the General Partner shall not be liable for monetary damages to the Partnership,
any Partners or any Assignees for losses sustained or liabilities  incurred as a
result of errors in judgment  or of any act or  omission if the General  Partner
acted in good faith and with due care and loyalty.

     B. The Limited Partners  expressly  acknowledge that the General Partner is
acting on behalf  of the  Partnership  and the  General  Partner's  shareholders
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 Assignees) in deciding whether to cause
the  Partnership to take (or decline to take) any actions,  and that 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 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by 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 the General Partner in good faith.

     D.  Any  amendment,  modification  or  repeal  of this  Section  7.8 or any
provision  hereof 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 7.8 as in effect  immediately  prior to such
amendment,  modification  or  repeal  with  respect  to claims  arising  from or
relating to matters  occurring,  in whole or in part,  prior to such  amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

     Section 7.9 Other Matters Concerning the General Partner

     A. The  General  Partner  may rely and  shall be  protected  in  acting  or
refraining from acting upon any resolution,  certificate, statement, instrument,
opinion,  report, notice,  request,  consent,  order, bond, debenture,  or other
paper or  document  believed  by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.

     B. The  General  Partner  may  consult  with  legal  counsel,  accountants,
appraisers,  management consultants,  investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act  taken or  omitted  to be taken in  reliance  upon the  opinion  of such
Persons as to matters  which such  General  Partner  reasonably  believes  to be
within such Person's  professional  or expert  competence  shall be conclusively
presumed to have been done or omitted in good faith and in accordance  with such
opinion.

     C. The  General  Partner  shall  have the  right,  in respect of any of its
powers or  obligations  hereunder,  to act  through  any of its duly  authorized
officers and a duly appointed attorney or attorneys-in-fact.  Each such attorney
shall,  to the extent  provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every


                                       24
<PAGE>

act and duty which is  permitted  or required to be done by the General  Partner
hereunder.

     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 (i) to protect the ability of the General Partner to continue
to qualify as a REIT or (ii) to avoid the General  Partner  incurring  any taxes
under  Section 857 or Section 4981 of the Code,  is expressly  authorized  under
this Agreement and is deemed approved by all of the Limited Partners.

     E. As of the date hereof, the General Partner holds its Limited Partnership
Interests through a Subsidiary,  FAC Properties Holding Corp. As a result, where
the Partnership  Agreement refers to (i) contributions  from the General Partner
to  the  Partnership,  (ii)  the  General  Partner's  ownership  of  Partnership
Interests,  (iii) issuances of Units to the General Partner, (iv) repurchases of
Units by the Partnership from the General Partner or (v) similar matters,  it is
understood  that such  actions  may  involve  the  General  Partner  directly or
indirectly through a Subsidiary.

     Section 7.10 Title to Partnership Assets

     Title to 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.  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 the General  Partner or such nominee or  Affiliate  for the use
and  benefit  of the  Partnership  in  accordance  with the  provisions  of this
Agreement;  provided,  however,  that the  General  Partner  shall  use its best
efforts to cause  beneficial and record 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.

     Section 7.11 Reliance by Third Parties

     Notwithstanding  anything  to the  contrary in this  Agreement,  any Person
dealing  with the  Partnership  shall be  entitled  to assume  that the  General
Partner has full power and authority,  without  consent or approval of any other
Partner or Person, to encumber,  sell or otherwise use in any manner any and all
assets  of the  Partnership  and to enter  into any  contracts  on behalf of the
Partnership,  and take any and all actions on behalf of the Partnership and such
Person  shall be  entitled  to deal with the  General  Partner as if the General
Partner  were  the  Partnership's  sole  party in  interest,  both  legally  and
beneficially.  Each Limited  Partner hereby waives any and all defenses or other
remedies  which may be  available  against  such  Person to  contest,  negate or
disaffirm any action of the General Partner in connection with any such dealing.
In  no  event 


                                       25
<PAGE>

shall any Person  dealing  with the General  Partner or its  representatives  be
obligated to ascertain  that the terms of this Agreement have been complied with
or to  inquire  into the  necessity  or  expedience  of any act or action of the
General Partner or its representatives.  Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its  representatives  shall be  conclusive  evidence  in favor of any and  every
Person  relying  thereon  or  claiming  thereunder  that  (i) at the time of the
execution  and  delivery  of such  certificate,  document  or  instrument,  this
Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (iii) such certificate,  document or
instrument  was duly  executed and  delivered in  accordance  with the terms and
provisions of this Agreement and is binding upon the Partnership.

                                    ARTICLE 8
                  S RIGHTS AND OBLIGATIONS OF LIMITED PARTNER

     Section 8.1 Limitation of Liability

     The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Sections 7.7(I) and 10.5 hereof,
or under the Act.

     Section 8.2 Management of Business

     No Limited Partner or Assignee (other than the General Partner,  any of its
Affiliates or any officer, director,  employee, partner, agent or trustee of the
General Partner,  the Partnership or any of their Affiliates,  in their capacity
as such) shall take part in the  operation,  management  or control  (within the
meaning of the Act) of the Partnership's business,  transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director,  employee, partner, agent or trustee of
the  General  Partner,  the  Partnership  or any of their  Affiliates,  in their
capacity as such,  shall not affect,  impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.

     Section 8.3 Outside Activities of Limited Partners

     Subject to any agreements entered into pursuant to Section 7.6.E hereof and
any other  agreements  entered into by a Limited  Partner or its Affiliates with
the  Partnership  or a Subsidiary,  any Limited  Partner (other than the General
Partner) and any  officer,  director,  employee,  agent,  trustee,  Affiliate or
shareholder  of any Limited  Partner  (other than 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  that are in  direct  competition  with the  Partnership  or that are
enhanced by the activities of the  Partnership.  Neither the Partnership nor any
Partners  shall  have any  rights by virtue of this  Agreement  in any  business
ventures of any Limited Partner or Assignee. None of the Limited Partners (other
than the General  Partner)  nor any other Person shall have any rights by virtue
of this  Agreement or the  Partnership  relationship  established  hereby in any
business  ventures of any other  Person  (other 


                                       26
<PAGE>

than the  General  Partner to the extent  expressly  provided  herein)  and such
Person shall have no obligation pursuant to this Agreement to offer any interest
in any such business  ventures to the  Partnership,  any Limited  Partner or any
such  other  Person,  even if  such  opportunity  is of a  character  which,  if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.

     Section 8.4 Return of Capital

     Except  pursuant to the right of  redemption  set forth in Section  8.6, no
Limited  Partner  shall be entitled to the  withdrawal  or return of its Capital
Contribution,  except  to the  extent of  distributions  made  pursuant  to this
Agreement or upon termination of the Partnership as provided  herein.  Except to
the extent  provided by Exhibit C hereof or as  permitted by Section  4.2.B,  or
otherwise  expressly provided in this Agreement,  no Limited Partner or Assignee
shall have priority over any other Limited  Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.

     Section 8.5 Rights of Limited Partners Relating to the Partnership

     A. In addition to other  rights  provided by this  Agreement or by the Act,
and except as limited by Section 8.5.C hereof,  each Limited  Partner shall have
the right, for a purpose  reasonably  related to such Limited Partner's interest
as a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner's own expense  (including
such copying and  administrative  charges as the General  Partner may  establish
from time to time):

     (1)  to obtain a copy of the most recent annual and quarterly reports filed
          with the  Securities  and Exchange  Commission by the General  Partner
          pursuant to the Securities Exchange Act of 1934;

     (2)  to obtain a copy of the Partnership's  federal, state and local income
          tax returns for each Partnership Year;

     (3)  to  obtain  a  current  list of the  name  and  last  known  business,
          residence or mailing address of each Partner;

     (4)  to  obtain  a copy  of this  Agreement  and  the  Certificate  and all
          amendments  thereto,  together with  executed  copies of all powers of
          attorney  pursuant to which this  Agreement,  the  Certificate and all
          amendments thereto have been executed; and

     (5)  to obtain true and full information regarding the amount of cash and a
          description   and   statement  of  any  other   property  or  services
          contributed  by each  Partner  and which  each  Partner  has agreed to
          contribute in the future, and the date on which each became a Partner.

                                       27
<PAGE>

     B. The  Partnership  shall notify each Limited  Partner upon request of the
then current and applicable Conversion Factor.

     C.  Notwithstanding  any other  provision  of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General  Partner  determines  in its sole and absolute  discretion  to be
reasonable,  any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other  information  the disclosure of which
the General  Partner in good faith  believes is not in the best interests of the
Partnership  or  could  damage  the  Partnership  or its  business  or (ii)  the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.

     Section 8.6 Redemption Right

     A. Subject to Sections 8.6.B and 8.6.C,  each Limited  Partner,  other than
the General Partner or a Subsidiary of the General Partner, shall have the right
(the  "Redemption  Right") to require the  Partnership  to redeem on a Specified
Redemption Date all or a portion of the  Partnership  Units held by such Limited
Partner at a redemption  price equal to and in the form of the Cash Amount to be
paid by the Partnership.  The Redemption Right shall be exercised  pursuant to a
Notice of Redemption  delivered to the  Partnership  (with a copy to the General
Partner) by the Limited  Partner who is  exercising  the  redemption  right (the
"Redeeming  Partner");  provided,  however,  that the  Partnership  shall not be
obligated  to satisfy such  Redemption  Right if the General  Partner  elects to
purchase the Partnership  Units subject to the Notice of Redemption  pursuant to
Section 8.6.B. A Limited Partner may not exercise the Redemption  Right for less
than the lesser of (i) all of the Partnership Units held by such Partner or (ii)
1,000 of the Partnership Units held by such Partner. The Redeeming Partner shall
have no right, with respect to any Partnership Units so redeemed, to receive any
Partnership  distributions  paid on or after the Specified  Redemption Date. The
Assignee of any Limited  Partner may exercise the rights of such Limited Partner
pursuant to this Section 8.6, and such Limited  Partner  shall be deemed to have
assigned such rights to such Assignee and shall be bound by the exercise of such
rights by such Assignee.  In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.

     B.  Notwithstanding the provisions of Section 8.6.A, a Limited Partner that
exercises  the  Redemption  Right  shall be deemed to have  offered  to sell the
Partnership  Units  described in the Notice of Redemption 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 Redeeming
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
Redemption  Date,  whereupon the General  Partner shall acquire the  Partnership
Units offered for  redemption by the Redeeming  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  8.6.B with respect to a Notice of  Redemption,  it shall so
notify the Redeeming  Partner within five (5) Business Days after the receipt by
the General Partner of such Notice of Redemption. Unless the General Partner (in
its  sole  and  absolute  discretion)  shall 


                                       28
<PAGE>

exercise  its right to purchase  Partnership  Units from the  Redeeming  Partner
pursuant to its right to purchase  Partnership  Units under this Section  8.6.B,
the General  Partner shall not have any  obligation to the Redeeming  Partner or
the  Partnership  with  respect  to  the  Redeeming  Partner's  exercise  of the
Redemption  Right.  In the event the General Partner shall exercise its right to
purchase Partnership Units with respect to the exercise of a Redemption Right in
the  manner  described  in  the  first  sentence  of  this  Section  8.6.B,  the
Partnership  shall have no obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming  Partner's exercise of such Redemption Right, and
each of the Redeeming  Partner,  the Partnership,  and the General Partner shall
treat the transaction  between the General Partner and the Redeeming Partner for
federal  income tax purposes as a sale of the  Redeeming  Partner's  Partnership
Units to the General  Partner.  Each  Redeeming  Partner  agrees to execute such
documents as the General  Partner may reasonably  require in connection with the
issuance  of  REIT  Shares  upon   exercise   of  the   Redemption   Right.  

     C.  Notwithstanding  the  provisions of Section 8.6.A and Section  8.6.B, a
Partner  shall not be entitled  to exercise  the  Redemption  Right  pursuant to
Section  8.6.A if the delivery of REIT Shares to such  Partner on the  Specified
Redemption Date by the General Partner pursuant to Section 8.6.B  (regardless of
whether or not the  General  Partner  would in fact  exercise  its rights  under
Section 8.6.B) would be prohibited under the Articles of Incorporation.

                                    ARTICLE 9
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

     Section 9.1 Records and Accounting

     The General Partner shall keep or cause to be kept at the principal  office
of the Partnership those records and documents  required to be maintained by the
Act and other books and records deemed by the General  Partner to be appropriate
with respect to the Partnership's business,  including,  without limitation, all
books and records  necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Sections 8.5.A
and 9.3 hereof. Any records maintained by or on behalf of the Partnership in the
regular  course  of its  business  may be kept on,  or be in the form of,  punch
cards,  magnetic  tape,  photographs,  micrographics  or any  other  information
storage  device,  provided that the records so maintained are  convertible  into
clearly  legible  written form within a reasonable  period of time. The books of
the Partnership shall be maintained,  for financial and tax reporting  purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such  other  basis as the  General  Partner  determines  to be  necessary  or
appropriate.

     Section 9.2 Partnership Year

     The fiscal year of the Partnership shall be the calendar year.

     Section 9.3 Reports

     A. As soon as practicable,  but in no event later than the date when mailed
to the shareholders of the General  Partner,  the General Partner shall cause to
be mailed to each Limited 


                                       29
<PAGE>

Partner,  as of the close of the Partnership  Year, 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  Partnership  Year,  presented in accordance  with  generally  accepted
accounting principles,  such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner.

     B. As soon as practicable,  but in no event later than the date when mailed
to the shareholders of the General  Partner,  the General Partner shall cause to
be mailed to each Limited Partner, as of the last day of the calendar quarter, a
report containing  unaudited  financial  statements of the Partnership or of the
General Partner,  if such statements are prepared solely on a consolidated basis
with the  General  Partner,  and such other  information  as may be  required by
applicable  law  or  regulation,  or as the  General  Partner  determines  to be
appropriate.

                                   ARTICLE 10
                                   TAX MATTERS

     Section 10.1 Preparation of Tax Returns

     The General  Partner shall arrange for the preparation and timely filing of
all returns of Partnership  income,  gains,  deductions,  losses and other items
required of the  Partnership for federal and state income tax purposes and shall
use all reasonable  efforts to furnish,  within ninety (90) days of the close of
each taxable year, the tax information  reasonably  required by Limited Partners
for federal and state income tax reporting purposes.

     Section 10.2 Tax Elections

     Except as otherwise provided herein, the General Partner shall, in its sole
and  absolute  discretion,  determine  whether  to make any  available  election
pursuant to the Code. The General Partner shall have the right to seek to revoke
any such election (including, without limitation, the election under Section 754
of the Code) upon the General  Partner's  determination in its sole and absolute
discretion that such revocation is in the best interests of the Partners.

     Section 10.3 Tax Matters Partner

     A.  The  General  Partner  shall  be  the  "tax  matters  partner"  of  the
Partnership for federal income tax purposes.  Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an  administrative
proceeding  with  respect to the  Partnership,  the tax  matters  partner  shall
furnish the IRS with the name,  address,  taxpayer  identification  number,  and
profit  interest of each of the Limited  Partners and the  Assignees;  provided,
however,  that such  information  is provided to the  Partnership by the Limited
Partners and the Assignees.

     B. The tax matters partner is authorized, but not required:

     (1)  to  enter  into  any  settlement  with  the IRS  with  respect  to any
          administrative   or  judicial   proceedings   for  the  adjustment  of
          Partnership  items  required to


                                       30
<PAGE>

          be taken into  account by a Partner  for  income  tax  purposes  (such
          administrative proceedings being referred to as a "tax audit" and such
          judicial  proceedings being referred to as "judicial review"),  and in
          the settlement  agreement the tax matters  partner may expressly state
          that  such  agreement  shall  bind  all  Partners,  except  that  such
          settlement  agreement  shall not bind any  Partner (i) who (within the
          time  prescribed  pursuant  to  the  Code  and  Regulations)  files  a
          statement  with the IRS providing  that the tax matters  partner shall
          not have the authority to enter into a settlement  agreement on behalf
          of such  Partner  or (ii) who is a "notice  partner"  (as  defined  in
          Section  6231(a)(8)  of the Code) or a member of a "notice  group" (as
          defined in Section 6223(b)(2) of the Code);

     (2)  in the event that a notice of a final administrative adjustment at the
          Partnership  level of any item  required to be taken into account by a
          Partner for tax purposes (a "final  adjustment")  is mailed to the tax
          matters  partner,  to seek judicial  review of such final  adjustment,
          including the filing of a petition for readjustment with the Tax Court
          or the filing of a complaint  for refund with the United States Claims
          Court or the District  Court of the United  States for the district in
          which the Partnership's principal place of business is located;

     (3)  to intervene in any action  brought by any other  Partner for judicial
          review of a final adjustment;

     (4)  to file a request for an  administrative  adjustment with the IRS and,
          if any part of such  request  is not  allowed  by the IRS,  to file an
          appropriate  pleading (petition or complaint) for judicial review with
          respect to such request;

     (5)  to enter  into an  agreement  with the IRS to extend  the  period  for
          assessing  any tax which is  attributable  to any item  required to be
          taken into account by a Partner for tax purposes, or any item affected
          by such item; and

     (6)  to take any other action on behalf of the Partners or the  Partnership
          in connection with any tax audit or judicial review  proceeding to the
          extent permitted by applicable law or regulations.

     The  taking of any  action  and the  incurring  of any  expense  by the tax
matters  partner in connection  with any such  proceeding,  except to the extent
required  by law,  is a matter in the sole and  absolute  discretion  of the tax
matters partner and the provisions  relating to  indemnification  of the General
Partner set forth in Section 7.7 of this Agreement shall be fully  applicable to
the tax matters partner in its capacity as such.

     C. The tax matters partner shall receive no compensation  for its services.
All third 


                                       31
<PAGE>

party costs and expenses  incurred by the tax matters  partner in performing its
duties as such (including legal and accounting fees and expenses) shall be borne
by  the  Partnership.   Nothing  herein  shall  be  construed  to  restrict  the
Partnership  from engaging an accounting  firm to assist the tax matters partner
in discharging its duties  hereunder,  so long as the  compensation  paid by the
Partnership for such services is reasonable.

     Section 10.4 Organizational Expenses

     The Partnership  shall elect to deduct expenses,  if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.

     Section 10.5 Withholding

     Each Limited Partner hereby  authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Limited  Partner any amount of federal,
state,  local,  or foreign taxes that the General  Partner  determines  that the
Partnership  is  required  to  withhold  or  pay  with  respect  to  any  amount
distributable  or allocable to such Limited Partner  pursuant to this Agreement,
including,  without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any such
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited  Partner,  which loan shall be repaid by
such  Limited  Partner  within  fifteen  (15) days after notice from the General
Partner that such repayment must be made,  unless (i) the Partnership  withholds
such repayment from a distribution  which would otherwise be made to the Limited
Partner  or (ii) the  General  Partner  determines,  in its  sole  and  absolute
discretion,  that such repayment may be satisfied out of the available  funds of
the  Partnership  which would,  but for such  repayment,  be  distributed to the
Limited Partner.  Any amounts withheld  pursuant to the foregoing clauses (i) or
(ii) shall be treated as having been distributed to such Limited  Partner.  Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security  interest in such Limited  Partner's  Partnership  Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section  10.5.  In the event that a Limited  Partner
fails to pay any amounts owed to the  Partnership  pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the  payment  to the  Partnership  on  behalf  of such  defaulting  Limited
Partner,  and in such event  shall be deemed to have  loaned such amount to such
defaulting  Limited  Partner.  Without  limitation,  in such  event the  General
Partner (i) shall have the right to receive  distributions  that would otherwise
be  distributable  to such  defaulting  Limited  Partner until such time as such
loan,  together with all interest  thereon,  has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed  to the  defaulting  Limited  Partner  and  immediately  paid by the
defaulting  Limited Partner to the General Partner in repayment of such loan and
(ii) shall succeed to all rights and remedies of the Partnership as against such
defaulting  Limited Partner.  Any amounts payable by a Limited Partner hereunder
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,  plus four (4) percentage  points,  or (B) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date such amount is due (i.e.,  fifteen (15) days after  demand)  until such
amount 


                                       32
<PAGE>

is paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.

                                   ARTICLE 11
                            TRANSFERS AND WITHDRAWALS

     Section 11.1 Transfer

     A. The term  "transfer",  when used in this  Article  11 with  respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner  purports to assign all or any part of its General  Partner  Interest to
another Person or by which a Limited Partner  purports to assign all or any part
of its  Limited  Partner  Interest  to  another  Person,  and  includes  a sale,
assignment, gift, pledge, encumbrance,  hypothecation, mortgage, exchange or any
other  disposition by law or otherwise.  The term  "transfer"  when used in this
Article 11 does not include  any  redemption  of  Partnership  Interests  by the
Partnership from a Limited Partner or any acquisition of Partnership  Units from
a Limited Partner by the General Partner or from the General Partner pursuant to
Section 8.6.

     B. No  Partnership  Interest  shall  be  transferred,  in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any  transfer  or  purported  transfer  of a  Partnership  Interest  not made in
accordance with this Article 11 shall be null and void.

     Section 11.2 Transfer of General Partner's Partnership Interests

     A. Without the written consent of the Limited Partners, the General Partner
may not transfer any of its General Partner Interest (other than any transfer to
an entity in which the General Partner owns beneficially 100 percent) other than
in connection  with a  transaction  permitted  under  Section  11.2.B or Section
11.2.C.  Any transfer or purported transfer of the General Partner's Interest in
violation of this Section 11.2 shall be null and void.

     B. Except as permitted  elsewhere in this  Agreement,  the General  Partner
shall not engage in any merger, consolidation or other business combination with
or into another Person or sale of all or substantially all of its assets, or any
reclassification,  or  recapitalization  or change of  outstanding  REIT  Shares
(other  than a change in par value,  or from par value to no par value,  or as a
result of a  subdivision  or  combination  as  described  in the  definition  of
Conversion  Factor)  ("Transaction"),  unless as a result of the Transaction the
Limited Partner  thereafter  remains  entitled to exchange each Partnership Unit
owned by the Limited Partner (after application of the Conversion Factor) for an
amount of cash,  securities,  or other property equal to the greatest  amount of
cash,  securities  or  other  property  paid to a holder  of one  REIT  Share in
consideration of one REIT Share at any time during the period from and after the
date on which the  Transaction  is consummated  which the Limited  Partner would
have received after such  Transaction,  as if the Limited  Partner had exercised
its Redemption Right immediately prior to the Transaction,  provided that if, in
connection with the Transaction, a purchase, tender or exchange offer shall have
been  made to and  accepted  by the  holders  of more  than  50  percent  of the
outstanding  REIT 


                                       33
<PAGE>

Shares,  the holders of Partnership  Units shall receive the greatest  amount of
cash,  securities,  or other  property  which the  Limited  Partner  would  have
received  had it exercised  the  Redemption  Right and  received  REIT Shares in
exchange for its Partnership  Units  immediately prior to the expiration of such
purchase, tender or exchange offer.

     C. With the written  consent of the Limited  Partners,  the General Partner
may withdraw as general partner or instate a substitute general partner.

     Section 11.3 Limited Partners' Rights to Transfer

     A. No transfer  of a Limited  Partner  Interest  by any Limited  Partner is
permitted  without the prior written consent of the General  Partner,  which the
General  Partner  may  withhold  in its sole and  absolute  discretion.  

     B.  If  a  Limited   Partner  is  subject  to  Incapacity,   the  executor,
administrator,  trustee,  committee,  guardian,  conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those  enjoyed by other  Limited  Partners,  for the purpose of
selling or  managing  the estate  and such  power as the  Incapacitated  Limited
Partner  possessed  to  transfer  all or any part of his or its  interest in the
Partnership.  The Incapacity of a Limited Partner,  in and of itself,  shall not
dissolve or terminate the Partnership.

     C. The General  Partner may prohibit  any transfer by a Limited  Partner of
its  Partnership  Units if, in the opinion of legal counsel to the  Partnership,
such transfer  would (i) require filing of a  registration  statement  under the
Securities Act of 1933; (ii) otherwise  violate any federal or state  securities
laws or regulations  applicable to the Partnership or the  Partnership  Unit; or
(iii) cause the  Partnership  to register the  Partnership  Units under  Section
12(g) of the  Securities  Exchange  Act of 1934,  as  amended  or any  successor
provision.

     D. No transfer by a Limited Partner of its Partnership Units may be made to
any Person if (i) in the opinion of legal counsel for the Partnership,  it would
result  in  the  Partnership  being  treated  as  an  association  taxable  as a
corporation,  or (ii) 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.

     E. 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,  without the consent of the General Partner, 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.

     Section 11.4 Substituted Limited Partners

                                       34
<PAGE>

     A. No Limited  Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted  Limited  Partner,  which consent
may be  given or  withheld  by the  General  Partner  in its  sole and  absolute
discretion.  The General  Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted  Limited  Partner shall not give rise
to any cause of action against the Partnership or any Partner.

     B. A transferee who has been admitted as a Substituted  Limited  Partner in
accordance  with this  Article  11 shall  have all the  rights and powers and be
subject to all the  restrictions and liabilities of a Limited Partner under this
Agreement.

     C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address, number of Partnership Units,
and Percentage  Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary,  the name, address and interest of the predecessor of such
Substituted Limited Partner.

     Section 11.5 Assignees

     If the  General  Partner,  in its sole and  absolute  discretion,  does not
consent to the  admission of any  permitted  transferee  under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this  Agreement.  An Assignee shall be
deemed  to  have  had   assigned  to  it,  and  shall  be  entitled  to  receive
distributions  from the  Partnership  and the share of Net  Income,  Net Losses,
Recapture  Income,  and any other items,  gain, loss deduction and credit of the
Partnership  attributable to the Partnership  Units assigned to such transferee,
but  shall  not be  deemed  to be a holder  of  Partnership  Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units  in  any  matter  presented  to the  Limited  Partners  for a  vote  (such
Partnership  Units  being  deemed to have been voted on such  matter in the same
proportion as all other  Partnership  Units held by Limited Partners are voted).
In the event any such  transferee  desires to make a further  assignment  of any
such Partnership  Units,  such transferee shall be subject to all the provisions
of this  Article  11 to the same  extent and in the same  manner as any  Limited
Partner desiring to make an assignment of Partnership Units.

     Section 11.6 General Provisions

     A. No Limited  Partner may withdraw  from the  Partnership  other than as a
result of a permitted  transfer  of all of such  Limited  Partner's  Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.

     B. Any Limited Partner who shall transfer all of its Partnership Units in a
transfer  permitted  pursuant  to this  Article  11 shall  cease to be a Limited
Partner  upon  the  admission  of all  Assignees  of such  Partnership  Units as
Substituted Limited Partners.  Similarly, any Limited Partner who shall transfer
all of its Partnership  Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.



                                       35
<PAGE>

     C. Transfers  pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the  Partnership,  unless the General  Partner  otherwise
agrees.

     D. If any  Partnership  Interest  is  transferred  or  assigned  during any
quarterly  segment of the Partnership  Year in compliance with the provisions of
this Article 11 or redeemed or  transferred  pursuant to Section 8.6, on any day
other than the first day of a  Partnership  Year,  then Net Income,  Net Losses,
each item  thereof and all other items  attributable  to such  interest for such
Partnership Year shall be divided and allocated  between the transferor  Partner
and the transferee Partner by taking into account their varying interests during
the Partnership  Year in accordance  with Section 706(d) of the Code,  using the
interim  closing  of the books  method.  Solely  for  purposes  of  making  such
allocations,  each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption  occurs shall be allocated to
the Redeeming Partner.  All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner  or the  Redeeming  Partner,  as the case  may be,  and in the case of a
transfer or assignment other than a redemption,  all  distributions of Available
Cash  thereafter  attributable  to such  Partnership  Unit  shall be made to the
transferee Partner.

                                   ARTICLE 12
                              ADMISSION OF PARTNERS

     Section 12.1 Admission of Successor General Partner

     A successor to all of the General Partner Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor  General  Partner  shall be
admitted  to the  Partnership  as  the  General  Partner,  effective  upon  such
transfer.  Any such  transferee  shall carry on the business of the  Partnership
without  dissolution.  In each  case,  the  admission  shall be  subject  to the
successor  General  Partner  executing  and  delivering  to the  Partnership  an
acceptance of all of the terms and  conditions of this  Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items  attributable to the General Partner  Interest for such  Partnership  year
shall be allocated  between the transferring  General Partner and such successor
as provided in Section 11.6.D hereof.

     Section 12.2 Admission of Additional Limited Partners

     A. After the date hereof, a Person who makes a Capital  Contribution to the
Partnership  in  accordance  with  this  Agreement  shall  be  admitted  to  the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form  satisfactory  to the General Partner
of all of the  terms  and  conditions  of  this  Agreement,  including,  without
limitation,  the power of  attorney  granted in Section 2.4 hereof and (ii) such
other  documents  or  instruments  as may be required in the  discretion  of the
General  


                                       36
<PAGE>

Partner in order to effect such  Person's  admission  as an  Additional  Limited
Partner.

     B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional  Limited  Partner  without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole and  absolute  discretion.  The  admission  of any Person as an  Additional
Limited  Partner shall become  effective on the date upon which the name of such
Person is recorded on the books and records of the  Partnership,  following  the
consent of the General Partner to such admission.

     C. If any Additional  Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership  Year shall be allocated among such Additional  Limited Partner
and all other  Partners  and  Assignees  by taking into  account  their  varying
interests  during the Partnership  Year in accordance with Section 706(d) of the
Code,  using the interim  closing of the books  method.  Solely for  purposes of
making such  allocations,  each of such items for the calendar month in which an
admission of any Additional  Limited Partner occurs shall be allocated among all
the  Partners  and  Assigns  including  such  Additional  Limited  Partner.  All
distributions  of Available  Cash with respect to which the  Partnership  Record
Date is before the date of such  admission  shall be made solely to Partners and
Assignees  other than the Additional  Limited Partner and all  distributions  of
Available  Cash  thereafter  shall be made to all of the Partners and  Assignees
including such Additional Limited Partner.

     Section 12.3 Amendment of Agreement and Certificate of Limited Partnership

     For the admission to the  Partnership of any Partner,  the General  Partner
shall  take all  steps  necessary  and  appropriate  under  the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment  of this  Agreement  (including  an  amendment  of Exhibit A) and,  if
required by law, shall prepare and file an amendment to the  Certificate and may
for this purpose  exercise the power of attorney granted pursuant to Section 2.4
hereof.

                                   ARTICLE 13
                    DISSOLUTION, LIQUIDATION AND TERMINATION

     Section 13.1 Dissolution

     The  Partnership  shall not be  dissolved by the  admission of  Substituted
Limited  Partners  or  Additional  Limited  Partners  or by the  admission  of a
successor  General Partner in accordance with the terms of this Agreement.  Upon
the  withdrawal  of the General  Partner,  any successor  General  Partner shall
continue the business of the Partnership.  The Partnership  shall dissolve,  and
its affairs  shall be wound up, upon the first to occur of any of the  following
("Dissolution Events"):

     A. the expiration of its term as provided in Section 2.5 hereof.

                                       37
<PAGE>

     B. an event of  withdrawal  of the General  Partner,  as defined in the Act
(other than an event of  bankruptcy),  unless within ninety (90) days after such
event of  withdrawal a majority in interest of the remaining  Partners  agree in
writing to continue  the  business of the  Partnership  and to the  appointment,
effective as of the date of withdrawal, of a successor General Partner;

     C. an election to dissolve the Partnership made by the General Partner,  in
its sole and absolute discretion;

     D. entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Act;

     E. the sale of all or substantially all of the assets and properties of the
Partnership; or

     F. a final and  non-appealable  judgment is entered by a court of competent
jurisdiction  ruling that the General  Partner is  bankrupt or  insolvent,  or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction  against  the  General  Partner,  in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect,  unless prior
to the entry of such order or judgment all of the  remaining  Partners  agree in
writing to continue  the  business of the  Partnership  and to the  appointment,
effective  as of a date  prior  to the  date of such  order  or  judgment,  of a
substitute General Partner.

     Section 13.2 Winding Up

     A. Upon the  occurrence  of a Dissolution  Event or a  Terminating  Capital
Transaction,  the Partnership  shall continue solely for the purposes of winding
up its affairs in an orderly manner,  liquidating its assets, and satisfying the
claims of its creditors  and Partners.  No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of the
Partnership's  business and affairs. The General Partner, or, in the event there
is no remaining General Partner, any Person elected by a majority in interest of
the Limited Partners (the General Partner or such other Person being referred to
herein as the "Liquidator"),  shall be responsible for overseeing the winding up
and  dissolution  of  the  Partnership  and  shall  take  full  account  of  the
Partnership's  liabilities  and property and the  Partnership  property shall be
liquidated as promptly as is consistent  with  obtaining the fair value thereof,
and the proceeds  therefrom (which may, to the extent  determined by the General
Partner,  include  shares of stock in the General  Partner) shall be applied and
distributed in the following order:

     (1)  First, to the payment and discharge of all of the Partnership's  debts
          and liabilities to creditors other than the Partners;

     (2)  Second, to the payment and discharge of all of the Partnership's debts
          and liabilities to the General Partner;

     (3)  Third, to the payment and discharge of all of the Partnership's  debts
          and liabilities to the other Partners; and

                                       38
<PAGE>

     (4)  The  balance,  if  any,  after  giving  effect  to all  contributions,
          distributions, and allocations for all periods, to those Partners with
          positive  Capital  Account  balances,  to the extent of such  positive
          Capital Account balances.

The  General  Partner  shall not  receive any  additional  compensation  for any
services performed pursuant to this Article 13.

     B.  Notwithstanding  the  provisions of Section 13.2.A hereof which require
liquidation  of the  assets  of the  Partnership,  but  subject  to the order of
priorities  set  forth  therein,   if  prior  to  or  upon  dissolution  of  the
Partnership,  the Liquidator determines that an immediate sale of part or all of
the  Partnership's  assets would be impractical or would cause undue loss to the
Partners,  the Liquidator may, in its sole and absolute discretion,  defer for a
reasonable  time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including those to Partners as creditors) and/or
distribute  to the  Partners,  in lieu of cash,  as  tenants  in  common  and in
accordance with the provisions of Section 13.2.A hereof,  undivided interests in
such  Partnership  assets as the Liquidator  deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator,  such  distributions  in kind are in the best interest of the
Partners,  and shall be subject to such  conditions  relating to the disposition
and  management  of such  properties  as the  Liquidator  deems  reasonable  and
equitable and to any  agreements  governing the operation of such  properties at
such time. The Liquidator  shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.

     C.  In  the  discretion  of  the  Liquidator,  a pro  rata  portion  of the
distributions  that would  otherwise be made to the General  Partner and Limited
Partners pursuant to this Article 13 may be:

     (1)  distributed  to a trust  established  for the  benefit of the  General
          Partner  and  Limited   Partners  for  the  purposes  of   liquidating
          Partnership  assets,  collecting amounts owed to the Partnership,  and
          paying any contingent or unforeseen  liabilities or obligations of the
          Partnership  or the General  Partner  arising out of or in  connection
          with  the  Partnership.   The  assets  of  any  such  trust  shall  be
          distributed to the General  Partner and Limited  Partners from time to
          time,  in the  reasonable  discretion of the  Liquidator,  in the same
          proportions as the amount distributed to such trust by the Partnership
          would  otherwise  have been  distributed  to the  General  Partner and
          Limited Partners pursuant to this Agreement; or

     (2)  withheld or escrowed to provide a reasonable  reserve for  Partnership
          liabilities  (contingent  or otherwise)  and to reflect the unrealized
          portion  of any  installment  obligations  owed  to  the  Partnership,
          provided that such withheld or escrowed  amounts shall be  distributed
          to the General Partner and Limited Partners in the manner and order of
          priority set forth in Section 13.2.A as soon as practicable.



                                       39
<PAGE>

     Section 13.3 Negative Capital Accounts

     No Partner,  General or Limited,  shall be liable to the  Partnership or to
any other Partner for any negative  balance  outstanding  in each such Partner's
Capital  Account,  whether  such  negative  Capital  Account  results  from  the
allocation of Net Losses or other items of deduction and loss to such Partner or
from distributions to such Partner.

     Section 13.4 Deemed Distribution and Recontribution

     Notwithstanding  any other  provision  of this Article 13, in the event the
Partnership is considered  liquidated within the meaning of Regulations  Section
1.704-l(b)(2)(ii)(g),  but no Dissolution Event has occurred,  the Partnership's
property shall not be liquidated,  the  Partnership's  liabilities  shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.

     Section 13.5 Rights of Limited Partners

     Except as otherwise provided in this Agreement,  each Limited Partner shall
look  solely to the  assets of the  Partnership  for the  return of its  Capital
Contributions  and shall  have no right or power to demand or  receive  property
other  than cash from the  Partnership.  Except as  otherwise  provided  in this
Agreement,  no Limited  Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distribution or allocations.

     Section 13.6 Notice of Dissolution

     In the event a Dissolution  Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners  pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall provide within thirty (30) days thereafter  written notice thereof to each
of the Partners.

     Section 13.7  Termination of Partnership and Cancellation of Certificate of
                   Limited Partnership

     Upon the completion of the liquidation of the Partnership cash and property
as provided in Section 13.2  hereof,  the  Partnership  shall be  terminated,  a
certificate  of  cancellation  shall be  filed,  and all  qualifications  of the
Partnership as a foreign  limited  partnership in  jurisdictions  other than the
State of Delaware  shall be canceled and such other  actions as may be necessary
to terminate the Partnership shall be taken.

     Section 13.8 Reasonable Time for Winding-Up

     A  reasonable  time  shall be allowed  for the  orderly  winding-up  of the
business  and  affairs  of the  Partnership  and the  liquidation  of its assets
pursuant  to Section  13.2  hereof,  in order to minimize  any losses  otherwise
attendant  upon such  winding-up,  and the  provisions of this 


                                       40
<PAGE>

Agreement  shall  remain in effect  between  the  Partners  during the period of
liquidation.

     Section 13.9 Waiver of Partition

     Each  Partner  hereby  waives  any right to  partition  of the  Partnership
property.

                                   ARTICLE 14
                  AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

     Section 14.1 Amendments

     A. Except as set forth in Section  14.1.B,  the General  Partner shall have
the power,  without the consent of the Limited Partners,  to amend any provision
of this  Agreement  other than Section 7.3 in its sole and absolute  discretion.
The  General  Partner  will  provide ten (10) days prior  written  notice to the
Limited Partners when any action under this Section 14.1.A is taken.

     B.  Notwithstanding  Section  14.1.A hereof,  this  Agreement  shall not be
amended without the consent of each Partner adversely affected if such amendment
would (i) convert a Limited Partner's interest in the Partnership into a General
Partner  Interest,  (ii) alter  rights of the  Partner to receive  distributions
pursuant to Article 5 or Article 13, or the  allocations  specified in Article 6
(except as  permitted  pursuant to Section 4.2 and  Section  14.1.B(3)  hereof),
(iii) alter or modify the  Redemption  Right and REIT Shares Amount as set forth
in  Section  8.6,  and the  related  definitions,  in a manner  adverse  to such
Partner, or (iv) amend this Section 14.1.B.  Further, no amendment may alter the
restrictions on the General Partner's authority set forth in Section 7.3 without
the consent specified in that section.

                                   ARTICLE 15
                               GENERAL PROVISIONS

     Section 15.1 Addresses and Notice

     Any notice,  demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed  given or made when  delivered  in person or when sent by first  class
United States mail or by other means of written  communication to the Partner or
Assignee at the  address  set forth in Exhibit A or such other  address of which
the Partner shall notify the General Partner in writing.

     Section 15.2 Titles and Captions

     All  article  or  section  titles or  captions  in this  Agreement  are for
convenience  only. They shall not be deemed part of this Agreement and in no way
define,  limit, extend or describe the scope or intent of any provisions hereof.
Except  as  specifically  provided  otherwise,   references  to  "Articles"  and
"Sections" are to Articles and Sections of this Agreement.

     Section 15.3 Pronouns and Plurals



                                       41
<PAGE>

     Whenever the context may require,  any pronoun used in this Agreement shall
include the plural and vice versa.

     Section 15.4 Further Action

     The  parties  shall  execute  and  deliver  all   documents,   provide  all
information  and take or  refrain  from  taking  action as may be  necessary  or
appropriate to achieve the purpose of this Agreement.

     Section 15.5 Binding Effect

     This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
parties hereto and their heirs,  executors,  administrators,  successors,  legal
representatives and permitted assigns.

     Section 15.6 Creditors

     Other than as expressly  set forth herein with respect to the  Indemnities,
none of the provisions of this  Agreement  shall be for the benefit of, or shall
be enforceable by, any creditors of the Partnership.

     Section 15.7 Waiver

     No  failure  by any  party to insist  upon the  strict  performance  of any
covenant,  duty,  agreement or  condition  of this  Agreement or to exercise any
right or remedy  consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.

     Section 15.8 Counterparts

     This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not  signatories  to the original or the same  counterpart.
Each party shall become bound by this  Agreement  immediately  upon affixing its
signature hereto.

     Section 15.9 Applicable Law

     This  Agreement  shall be  construed  and enforced in  accordance  with and
governed by the laws of the State of Delaware,  without regard to the principles
of conflicts of law.

     Section 15.10 Invalidity of Provisions

     If any  provision  of this  Agreement  is or  becomes  invalid,  illegal or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.



                                       42
<PAGE>

     Section 15.11 Entire Agreement

     This Agreement  contains the entire  understanding  and agreement among the
Partners  with respect to the subject  matter  hereof and  supersedes  any other
prior  written or oral  understandings  or  agreement  among  them with  respect
thereto.


                                       43
<PAGE>


     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above.

                                         GENERAL PARTNER:

                                         FAC REALTY TRUST, INC.


                                         By: ___________________________






                                         LIMITED PARTNER:

                                         FAC PROPERTIES HOLDING CORP.


                                         By: ____________________________




                                       44
<PAGE>


                                    EXHIBIT A
                PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS

<TABLE>
<CAPTION>
----------------------------------- ----------------------------- ------------------------- ------------------------------------
  Name and Address                         Agreed Value of               Partnership                     Percentage
     of Partners                        Contributed Property                 Units                        Interest
----------------------------------- ----------------------------- ------------------------- ------------------------------------
<S>                                           <C>                       <C>                                 <C>

----------------------------------- ----------------------------- ------------------------- ------------------------------------


----------------------------------- ----------------------------- ------------------------- ------------------------------------

General Partner
----------------------------------- ----------------------------- ------------------------- ------------------------------------

FAC Realty Trust, Inc.
11000 Regency Parkway
Suite 300                                      $1.00                                                        1%
Cary, North Carolina 27511
----------------------------------- ----------------------------- ------------------------- ------------------------------------


----------------------------------- ----------------------------- ------------------------- ------------------------------------


----------------------------------- ----------------------------- ------------------------- ------------------------------------

Limited Partners
----------------------------------- ----------------------------- ------------------------- ------------------------------------

FAC Properties Holding Corp.
11000 Regency Parkway
Suite 300                                      $99.00                                                       99%
Cary, North Carolina 27511
----------------------------------- ----------------------------- ------------------------- ------------------------------------
</TABLE>


<PAGE>




                                                                    
                                    EXHIBIT B
                           CAPITAL ACCOUNT MAINTENANCE

1.   Capital Accounts of the Partners

     A. The  Partnership  shall  maintain  for each  Partner a separate  Capital
Account in accordance with the rules of Regulations  Section  1.704-l(b)(2)(iv).
Such  Capital  Account  shall be  increased  by (i) the  amount  of all  Capital
Contributions  and any other  deemed  contributions  made by such Partner to the
Partnership  pursuant to this Agreement and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and  allocated to such Partner  pursuant to Section  6.1.A of
the Agreement  and Exhibit C hereof,  and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed  distributions of cash or property made to
such  Partner  pursuant  to this  Agreement  and (y) all  items  of  Partnership
deduction and loss computed in accordance  with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.

     B. For  purposes  of  computing  the  amount of any item of  income,  gain,
deduction or loss to be  reflected in the  Partners'  Capital  Accounts,  unless
otherwise  specified  in this  Agreement,  the  determination,  recognition  and
classification  of any  such  item  shall  be  the  same  as its  determination,
recognition  and  classification  for federal income tax purposes  determined in
accordance  with  Section  703(a)  of the Code (for  this  purpose  all items of
income,  gain, loss or deduction  required to be stated  separately  pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:

     (1)  Except    as    otherwise    provided    in    Regulations     Section
          1.704-l(b)(2)(iv)(m),  the  computation of all items of income,  gain,
          loss and deduction  shall be made without regard to any election under
          Section 754 of the Code which may be made by the Partnership, provided
          that the  amounts  of any  adjustments  to the  adjusted  bases of the
          assets of the Partnership  made pursuant to Section 734 of the Code as
          a result of the  distribution  of  property  by the  Partnership  to a
          Partner (to the extent that such  adjustments have not previously been
          reflected in the Partners' Capital Accounts) shall be reflected in the
          Capital  Accounts  of the  Partners  in the manner and  subject to the
          limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m)(4).

     (2)  The  computation of all items of income,  gain, and deduction shall be
          made  without  regard  to the fact that  items  described  in  Section
          705(a)(2)(B)  of the Code are not  includible  in gross  income or are
          neither  currently  deductible nor  capitalized for federal income tax
          purposes.

     (3)  Any income,  gain or loss  attributable to the taxable  disposition of
          any Partnership  property shall be determined as if the adjusted basis
          of such property as of such date of  disposition  were equal in amount
          to the  Partnership's  Carrying Value with respect to such property as
          of such date.



<PAGE>


     (4)  In lieu of the  depreciation,  amortization  and other  cost  recovery
          deductions  taken into  account in computing  such  taxable  income or
          loss,  there shall be taken into account  Depreciation for such fiscal
          year.

     (5)  In the event the Carrying Value of any  Partnership  Asset is adjusted
          pursuant  to Section  1.D  hereof,  the amount of any such  adjustment
          shall be taken into  account as gain or loss from the  disposition  of
          such asset.

     (6)  Any items  specifically  allocated under Section 2 of Exhibit C hereof
          shall not be taken into account. 

     C. Generally,  a transferee  (including an Assignee) of a Partnership  Unit
shall succeed to a pro rata portion of the Capital Account of the transferor.

     D. (1) Consistent   with  the   provisions   of   Regulations   Section
          1.704-l(b)(2)(iv)(f),  and as provided in Section l.D(2), the Carrying
          Value of all  Partnership  assets shall be adjusted upward or downward
          to reflect any Unrealized Gain or Unrealized Loss attributable to such
          Partnership  property,  as of the times of the adjustments provided in
          Section l.D(2) hereof,  as if such  Unrealized Gain or Unrealized Loss
          had been  recognized  on an  actual  sale of each  such  property  and
          allocated pursuant to Section 6.1 of the Agreement.

     (2)  Such  adjustments  shall  be  made  as of  the  following  times:  (a)
          immediately prior to the acquisition of an additional  interest in the
          Partnership by any new or existing Partner in exchange for more than a
          de minimis Capital Contribution; (b) immediately prior to distribution
          by the  Partnership  to a Partner of more than a de minimis  amount of
          property as consideration for an interest in the Partnership;  and (c)
          immediately  prior to the  liquidation of the  Partnership  within the
          meaning  of  Regulations   Section   1.704-1(b)(2)(ii)(g),   provided,
          however,  that adjustments pursuant to clauses (a) and (b) above shall
          be made only if the General Partner  determines that such  adjustments
          are  necessary  or  appropriate  to  reflect  the  relative   economic
          interests of the Partners in the Partnership.

     (3)  In  accordance  with  Regulations  Section  1.704-l(b)(2)(iv)(e),  the
          Carrying  Value of  Partnership  assets  distributed  in kind shall be
          adjusted  upward  or  downward  to  reflect  any  Unrealized  Gain  or
          Unrealized Loss attributable to such Partnership  property,  as of the
          time any such asset is distributed.

     (4)  In determining Unrealized Gain or Unrealized Loss for purposes of this
          Exhibit B, the  aggregate  cash  amount and fair  market  value of all
          Partnership  assets  (including  cash or cash  equivalents)  shall  be
          determined 


<PAGE>

          by the General Partner using such reasonable method of valuation as it
          may adopt,  or in the case of a liquidating  distribution  pursuant to
          Article 13 of the Agreement,  shall be determined and allocated by the
          Liquidator using such reasonable methods of valuation as it may adopt.
          The General  Partner,  or the  Liquidator,  as the case may be,  shall
          allocate such aggregate  value among the assets of the Partnership (in
          such manner as it  determines  in its sole and absolute  discretion to
          arrive at a fair market value for individual properties).

     E. The  provisions of this  Agreement  (including  this Exhibit B and other
Exhibits to this Agreement)  relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and  applied  in a manner  consistent  with such  Regulations.  In the event the
General Partner shall determine that it is prudent to modify the manner in which
the  Capital  Accounts,  or any debits or credits  thereto  (including,  without
limitation,  debits or credits  relating  to  liabilities  which are  secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner,  or the Limited  Partners) are computed in order to comply with
such Regulations,  the General Partner may make such modification without regard
to  Article  14 of the  Agreement,  provided  that  it is not  likely  to have a
material effect on the amounts  distributable  to any Person pursuant to Article
13 of the Agreement upon the dissolution of the Partnership. The General Partner
also  shall  (i) make any  adjustments  that are  necessary  or  appropriate  to
maintain equality between the Capital Accounts of the Partners and the amount of
Partnership  capital reflected on the  Partnership's  balance sheet, as computed
for book purposes in accordance with Regulations  Section  1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate  modifications in the event  unanticipated  events
might  otherwise  cause this  Agreement not to comply with  Regulations  Section
1.704-1(b).

2.   No Interest

     No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.

3.   No Withdrawal

     No  Partner  shall  be  entitled  to  withdraw  any  part  of  his  Capital
Contribution  or his  Capital  Account or to receive any  distribution  from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.


<PAGE>




                                    EXHIBIT C
                            SPECIAL ALLOCATION RULES


1.   Special Allocation Rules

     Notwithstanding any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:

     A. Minimum Gain Chargeback.  Notwithstanding  the provisions of Section 6.1
of the  Agreement or any other  provisions  of this Exhibit C, if there is a net
decrease in Partnership  Minimum Gain during any Partnership  Year, each Partner
shall be specially  allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Partner's share
of the net decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g).  Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section  1.704-2(f)(6).  This Section 1.A is intended to comply
with the minimum gain chargeback  requirements in Regulations Section 1.704-2(f)
and shall be  interpreted  consistently  therewith.  Solely for purposes of this
Section 1.A, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other  allocations  pursuant to Section 6.1 during such Partnership
Year.

     B. Partner Minimum Gain Chargeback.  Notwithstanding any other provision of
Section 6.1 of this Agreement or any other  provisions of this Exhibit C (except
Section  l.A  hereof),  if there  is a net  decrease  in  Partner  Minimum  Gain
attributable to a Partner  Nonrecourse  Debt during any  Partnership  Year, each
Partner who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse   Debt,   determined  in   accordance   with   Regulations   Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary,  subsequent  years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner  Nonrecourse  Debt,  determined in accordance with  Regulations  Section
1.704-2(i)(5).  Allocations  pursuant to the previous  sentence shall be made in
proportion to the  respective  amounts  required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section  1.704-2(i)(4).  This Section 1.B is intended to comply
with the minimum gain chargeback  requirement in such Section of the Regulations
and shall be  interpreted  consistently  therewith.  Solely for purposes of this
Section l.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations  pursuant to Section 6.1 of the Agreement or this
Exhibit with respect to such Partnership  Year, other than allocations  pursuant
to Section l.A hereof.

                                                                 
     C. Qualified Income Offset. In the event any Partner unexpectedly  receives
any adjustments,  allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), and
after  giving  effect to the  allocations  required  under  Sections l.A and l.B
hereof,  such  Partner  has  an  Adjusted  Capital  Account  Deficit,  items  of
Partnership  income and gain  (consisting  of a pro rata portion of each 



<PAGE>

item of Partnership income,  including gross income and gain for the Partnership
Year) shall be  specifically  allocated  to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital   Account   Deficit   created  by  such   adjustments,   allocations  or
distributions as quickly as possible.

     D. Nonrecourse Deductions.  Nonrecourse Deductions for any Partnership Year
shall  be  allocated  to  the  Partners  in  accordance  with  their  respective
Percentage  Interests.  If the  General  Partner  determines  in its good  faith
discretion that the Partnership's  Nonrecourse Deductions must be allocated in a
different  ratio to satisfy  the safe  harbor  requirements  of the  Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon  notice to the  Limited  Partners,  to revise the  prescribed  ratio to the
numerically  closest  ratio for such  Partnership  Year which would satisfy such
requirements.

     E. Partner Nonrecourse  Deductions.  Any Partner Nonrecourse Deductions for
any Partnership  Year shall be specially  allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner  Nonrecourse  Deductions are attributable in accordance with Regulations
Section 1.704-2(i).

     F.  Code  Section  754  Adjustments.  To the  extent an  adjustment  to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required,  pursuant to Regulations Section  1.704-1(b)(2)(iv)(m),
to be taken into account in  determining  Capital  Accounts,  the amount of such
adjustment to the Capital  Accounts  shall be treated as an item of gain (if the
adjustment  increases  the  basis  of the  asset)  or loss  (if  the  adjustment
decreases  such  basis),  and  such  item of gain or  loss  shall  be  specially
allocated to the Partners in a manner  consistent with the manner in which their
Capital  Accounts  are  required to be adjusted  pursuant to such Section of the
Regulations.

2.   Allocations for Tax Purposes

     A. Except as otherwise  provided in this Section 2, for federal  income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income,  gain,
loss or  deduction  is allocated  pursuant to Section 6.1 of the  Agreement  and
Section 1 of this Exhibit C.

     B. In an  attempt  to  eliminate  Book-Tax  Disparities  attributable  to a
Contributed  Property or Adjusted  Property,  items of income,  gain,  loss, and
deduction  shall be allocated for federal income tax purposes among the Partners
as follows:

     (1)  (a)  In the case of a Contributed  Property,  such items  attributable
               thereto shall be allocated among the Partners consistent with the
               principles of Section 704(c) of the Code to take into account the
               variation  between  the  704(c)  Value of such  property  and its
               adjusted basis at the time of contribution; and

          (b)  any item of Residual  Gain or  Residual  Loss  attributable  to a


<PAGE>

               Contributed Property shall be allocated among the Partners in the
               same  manner as its  correlative  item of "book"  gain or loss is
               allocated  pursuant to Section 6.1 of the Agreement and Section 1
               of this Exhibit C.

     (2)  (a)  In the case of an Adjusted Property, such items shall

               (1)  first,   be  allocated   among  the  Partners  in  a  manner
                    consistent with the principles of Section 704(c) of the Code
                    to take into account the Unrealized  Gain or Unrealized Loss
                    attributable  to such property and the  allocations  thereof
                    pursuant to Exhibit B, and

               (2)  second,   in  the  event  such  property  was  originally  a
                    Contributed  Property,  be allocated among the Partners in a
                    manner consistent with Section 2.B(1) of this Exhibit C; and

          (b)  any item of Residual  Gain or Residual  Loss  attributable  to an
               Adjusted  Property  shall be allocated  among the Partners in the
               same  manner  its  correlative  item  of  "book"  gain or loss is
               allocated  pursuant to Section 6.1 of the Agreement and Section 1
               of this Exhibit C.

     (3)  all other items of income,  gain loss and deduction shall be allocated
          among the Partners the same manner as their correlative item of "book"
          gain or loss is allocated pursuant to Section 6.1 of the Agreement and
          Section 1 of the Exhibit C.

     C. To the  extent  Treasury  Regulations  promulgated  pursuant  to Section
704(c) of the Code  permit a  partnership  to  utilize  alternative  methods  to
eliminate  the  disparities  between  the  Carrying  Value of  property  and its
adjusted  basis,  the General  Partner may elect,  in its sole  discretion,  the
traditional  method without  curative  allocations to be used by the Partnership
(or the remedial  method) or any other permitted  alternative  method,  and such
election shall be binding on all Partners.

3.   No Withdrawal

     No  Partner  shall  be  entitled  to  withdraw  any  part  of  his  Capital
Contribution  or his  Capital  Account or to receive any  distribution  from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.




<PAGE>


                                    EXHIBIT D
                          VALUE OF CONTRIBUTED PROPERTY


                              DELIBERATELY OMITTED


<PAGE>



                                                            
                                    EXHIBIT E
                              NOTICE OF REDEMPTION


     The  undersigned  Limited  Partner hereby  irrevocably  (i) redeems Limited
Partnership  Units in FAC  Properties,  L.P. in accordance with the terms of the
Amended and Restated  Agreement of Limited  Partnership of FAC Properties,  L.P.
and the  Redemption  Right  referred to therein,  (ii)  surrenders  such Limited
Partnership Units and all right,  title and interest therein,  and (iii) directs
that the Cash  Amount  of REIT  Shares  Amount  (as  determined  by the  General
Partner)  deliverable  upon exercise of the Redemption Right be delivered to the
address  specified  below,  and if REIT  Shares are to be  delivered,  such REIT
Shares be registered or placed in the name(s) and at the  address(es)  specified
below.  The undersigned  hereby,  represents,  warrants,  and certifies that the
undersigned  (a)  has  marketable  and   unencumbered   title  to  such  Limited
Partnership Units, free and clear of the rights or interests of any other person
or entity, (b) has the full right,  power, and authority to redeem and surrender
such  Limited  Partnership  Units as provided  herein,  and (c) has obtained the
consent or  approval  of all  person or  entities,  if any,  having the right to
consent or approve such redemption and surrender.


Dated:__________________________


Name of Limited Partner:___________________________________
                                    Please Print


                                      _________________________________
                                      (Signature of Limited Partner)



                                      _________________________________
                                      (Street Address)


                                      _________________________________
                                      (City)    (State)     (Zip Code)



<PAGE>



If REIT Shares are to be issued, issue to:


Name:_____________________________________


Please insert social security or identifying number:____________


                                       2

<PAGE>



                                                                 
                                    EXHIBIT F
                      INDEMNIFICATION UNDER SECTION 7.7(I)

<TABLE>
<CAPTION>
-------------------------------------------- ----------------------------- ------------------------


                                             Indemnification                DELIBERATELY OMITTED
Limited Partner                              Per Unit
-------------------------------------------- ----------------------------- ------------------------
<S>                                           <C>                             <C>   


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</TABLE>