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                                    EXHIBIT A

                          LIMITED PARTNERSHIP AGREEMENT
         MERIDIAN HEALTH CARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP

                                TABLE OF CONTENTS

                                                                                                                            Page

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    Preliminary Statement               ........................................................... A-3
    Article I - Defined Terms                   ................................................... A-3
    Article II -Name; Purpose; Term and Certificate                                ................ A-10
        Section 2.1 Name; Formation                    ............................................ A-10
        Section 2.2 Place of Registered Office                     ................................ A.10
        Section 2.3 Purpose             ........................................................... A-10
        Section 2.4 Term           ................................................................ A-10
        Section 2.5 Recording of Certificate                    ................................... A-10
    Article III - Partners; Capital                 ............................................... A-10
        Section 3.1 General Partners; Assignor Limited Partner;
           Subordinated Limited Partners                    ....................................... A-10
        Section 3.2 Investors            .......................................................... A-11
        Section 3.3 Partnership Capital                  .......................................... A-11
        Section 3.4 Liability of Partners and Investors                        .................... A-12
    Article IV - Allocations, Distributions and Applicable Rules                     .............  A-12
        Section 4.1 Allocation of Profit or Loss from a Sale                             .......... A-12
        Section 4.2 Distribution of Net Proceeds from a Refinancing or Sale        ...............  A-13
        Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from
           Operations         ..................................................................... A-13
        Section 4.4 Liquidation or Dissolution                      ............................... A-14
        Section 4.5 General and Special Rules                       ............................... A-14
    Article V - Rights, Powers and Duties of Partners                               ............... A-18
        Section 5.1 Management and Control of the Partnership; Tax Matters Partner     ............ A-18
        Section 5.2 Authority of General Partners                         ......................... A-18
        Section 5.3 Authority of Investors                   ...................................... A-21
        Section 5.4 Restrictions on Authority                     ................................. A-21
        Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ..........A-22
        Section 5.6 Duties and Obligations of the General Partners         .......................  A-23
        Section 5.7 Compensation of General Partners                           .................... A-25
        Section 5.8 Other Businesses of Partners                       ..................... ...... A-25
        Section 5.9 Liability of General Partners and Assignor Limited Partner to Limited
           Partners or Investors            ....................................................... A-25
        Section 5.10 Indemnification                ............................................... A-25
    Article VI - Transferability of a General Partner's Interest    ............................... A-26
        Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
           Transfer of Interests           ........................................................ A-26
        Section 6.2 Election and Admission of Successor or Additional General Partners  ............A-26
        Section 6.3 Events of Withdrawal of A General Partner         ............................. A-26
        Section 6.4 Liability of a Withdrawn General Partner                         .............. A-27
        Section 6.5 Valuation of Partnership Interest of General Partner             .............  A-27
    Article VII - Assignment of Assignee Units to Investors; Transferability of Limited
           Partner Interests and Units                ............................................. A-28
        Section 7.1 Assignments of the Assignee Units to Investors   .............................  A-28
        Section 7.2 Transferability of Units                   .................................... A-29
        Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a
           Limited Partner           .............................................................. A-30
        Section 7.4 Effective Date               ........................................ ......... A-30

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       Section 7.5 Substitute Limited Partners                  ...............................A-30
       Section 7.6 Retirement or Withdrawal of a Limited Partner                            .. A-30
    Article VIII - Dissolution, Liquidation and Termination of the Partnership                 A-31
       Section 8.1 Events Causing Dissolution                   ...............................A-31
       Section 8.2 Liquidation            .................................................... A-31
       Section 8.3 Capital Contribution Upon Dissolution                        .............. A-32
    Article IX - Certain  Payments to the General  Partners and  Affiliates  ...
       A-32  Section  9.1  Reimbursement  of Certain  Costs and  Expenses of the
       General Partners and

          Affiliates    ................................................................... .. A-32
       Section 9.2 Fees        ............................................................... A-33
    Article X - Books and Records; Bank Accounts; Reports                    ................. A-34
       Section 10.1 Books and Records                 ........................................ A-34
       Section 10.2 Bank Accounts               .............................................. A-34
       Section 10.3 Reports          ......................................................... A-34
       Section 10.4 Federal Tax Elections                ................................... . A-35
    Article XI - Meetings of Investors                .......................................  A-36
       Section 11.1 Calling Meetings            .............................................. A-36
       Section 11.2 Notice; Procedure               .......................................... A-36
       Section 11.3 Right to Vote             ................................................ A-36
       Section 11.4 Proxies; Rules             ............................................... A-36
    Article XII - General Provisions                .......................................... A-37
       Section 12.1 Appointment of Administrative General Partner as Attorney-in-Fact          A-37
       Section 12.2 Waiver of Partition               ........................................ A-37
       Section 12.3 Notification        ...................................................... A-37
       Section 12.4 Word Meanings             ................................................ A-37
       Section 12.5 Binding Provisions            ............................................ A-37
       Sectio   12.6 Applicable Law           ................................................ A-37
       Section 12.7 Counterparts             ................................................. A-38
       Section 12.8 Separability of Provisions                ................................ A-38
       Sectio   12.9 Paragraph Titles          ............................................... A-38
       Section 12.10 Entire Agreement               .......................................... A-38
       Section 12.11 Amendments               ................................................ A-38
    Signatures    ............................................................................ A-39
    Schedule A       ..........................................................................A-41

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     MERIDIAN HEALTH CARE GROWTH AND INCOME FUND LIMITED  PARTNERSHIP  AGREEMENT
OF  LIMITED  PARTNERSHIP  THIS  AGREEMENT  OF LIMITED  PARTNERSHIP,  dated as of
December  8,  1987,  is  by  and  among  Brown  Healthcare,   Inc.,  a  Maryland
corporation,   as  the  Administrative  General  Partner,   Meridian  Healthcare
Investments,  Inc., a Maryland corporation,  as the Development General Partner,
Realty Associates 1988 Limited Partnership, a Maryland limited partnership,  and
Meridian Healthcare Investments,  Inc., a Maryland corporation,  as Subordinated
Limited   Partners,   and  Brown  Healthcare   Holding  Co.,  Inc.,  a  Maryland
corporation, as the Assignor Limited Partner.

                              Preliminary Statement

     The General Partners,  the Subordinated Limited Partners,  and the Assignor
Limited  Partner  desire to form  Meridian  Healthcare  Growth and  Income  Fund
Limited  Partnership  (the  "Fund"),  pursuant to the Delaware  Revised  Uniform
Limited Partnership Act. NOW, THEREFORE, in consideration of the mutual promises
made herein, the parties hereto,  intending to be legally bound, hereby agree as
follows: ARTICLE I DEFINED TERMS The defined terms used in this Agreement shall,
unless the context otherwise expressly requires,  have the meanings specified in
this Article I.

     "Accountants"   means  such  nationally   recognized  firm  of  independent
certified  public  accountants  as shall  be  engaged  from  time to time by the
General Partners on behalf of the Fund.

     "Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses,  travel and  communications  expenses,  costs of  appraisals,
non-refundable  option  payments on property not acquired,  accounting  fees and
expenses,  title insurance,  and miscellaneous expenses related to selection and
acquisition  of Facilities or Operating  Partnership  Interests,  whether or not
acquired.

     "Acquisition  Fees" means the total of all fees and commissions paid by any
party on behalf of the Fund or an Operating  Partnership in connection  with the
selection,  purchase or  development  of, or investment  in, any Facility by the
Fund or an Operating Partnership, including, without limitation, any real estate
commission, selection fee, non-recurring management fee, development fee, or any
fee of a similar nature, however designated.

     "Act" means the Delaware  Revised  Uniform Limited Fund Act (6 DEL.C 17-101
et. seq.) as amended or modified from time to time.

     "Additional  General  Partner"  means  any  Person  who is  admitted  as an
Additional  General  Partner of the Fund,  under the  provisions  of Article VI,
after the date of this Agreement.

     "Adjusted  Capital  Balance" of a Partner or an Investor  means the Capital
Contribution of the Partner or the Assignor Limited Partner made on behalf of an
Investor,  less any Net Proceeds of Sale or Refinancing  actually distributed to
the Partner or Investor (other than that portion, if any, which is payment of an
unpaid  Preferred  Return),  as  provided  in Article IV herein,  at the time of
reference thereto.

     "Administrative  General Partner" means Brown Healthcare,  Inc., a Maryland
corporation,  or any  Person who is  designated  as the  Administrative  General
Partner in the Schedule at the time in question.

     "Affiliate"  means  (i) any  Person  directly  or  indirectly  controlling,
controlled  by or under  common  control with  another  Person,  (ii) any Person
owning or controlling 10% or more of the outstanding  voting  securities of such
other Person, (iii) any officer, director or partner of such Person, and (iv) if

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such other Person is an officer, director or partner, any company for which such
Person acts in any such capacity.

     "Agreement" means this Limited Partnership Agreement as originally executed
and as  amended  from  time to time,  as the  context  requires.  Words  such as
"herein", "hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used
with reference to this Agreement,  refer to this Agreement as a whole unless the
context otherwise requires.

     "Assigned Limited Partnership  Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner on the books and records of the Fund
in respect of a  purchase  of one Unit by an  Investor.  Each  Assigned  Limited
Partnership  Interest represents a contribution to the capital of the Fund equal
to $25, regardless of any reduction in Selling Commissions.

     "Assignee  Units" means the ownership  interests of an Investor in the Fund
at any  particular  time,  including  the right of such  Investor to any and all
benefits to which an Investor may be entitled as provided in this Agreement. The
ownership  interests  of the  Investors  in the Fund are  sometimes  referred to
herein as "Units".

     "Assignor  Limited Partner" means Brown Healthcare  Holding Co., Inc. which
will (i) own any  Assigned  Limited  Partnership  Interests  issued  pursuant to
Sections 3.2 and 7.1 hereof,  and (ii)  transfer and assign to those Persons who
acquire  Units all of its rights and  interest in Assigned  Limited  Partnership
Interests in accordance with Sections 3.2 and 7.1 hereof.

     "Capital Account" means (i) the separate account maintained and adjusted on
the  books  and  records  of the  Fund for each  Partner  and (ii) the  separate
subaccount of the Capital Account of the Assignor Limited Partner maintained and
adjusted for each Investor.  Each Partner's and  Investor's  Capital  Account is
credited  with his  Capital  Contributions  and his  distributive  share of Fund
Profit (or item  thereof).  Each  Partner's  or  Investor's  Capital  Account is
debited with the cash and the fair market value of any property  distributed  to
him (net of liabilities  assumed by such Partner or Investor and  liabilities to
which such distributed property is subject), his distributive share of Fund Loss
(and  deduction  (or  item  thereof)),   and  his  distributive  share  of  Fund
expenditures  described in Section  705(a)(2)(B) of the Code  (including  losses
disallowed  under Section  267(a)(1) or 707(b) of the Code,  and Section  709(a)
syndication  expenditures applied to reduce the Capital Accounts of the Partners
or  Investor's  to  whom  such  expenditures  are  allocable  at the  time  such
expenditures  are paid or  incurred).  Each  Partner's  and  Investor's  Capital
Account  shall also be adjusted  pursuant to Sections  4.4 and 4.5 hereof and as
required  by the Income Tax  Regulations  promulgated  under  Section 704 of the
Code. Any questions  concerning a Partner's or Investor's  Capital Account shall
be resolved by the General  Partners in their reasonably  exercised  discretion,
applying   principles   consistent  with  this  Agreement  and  the  regulations
promulgated  under  Section  704 of  the  Code  in  order  to  assure  that  all
allocations  herein will have  substantial  economic effect or will otherwise be
respected for income tax purposes.  For purposes of this paragraph, a Partner or
Investor who has more than one Partnership Interest or Unit, as the case may be,
shall  have a  single  Capital  Account  that  reflects  all of his  Partnership
Interests and Units,  regardless of the class of Interests owned (e.g.,  general
or  limited)  and  regardless  of the time or manner  in which  the  Partnership
Interests and Units were acquired.

     "Capital  Contribution"  means the total amount of cash and the fair market
value  of any  other  assets  contributed  to the  Fund  by a  Partner  (net  of
liabilities  assumed by the Fund and  liabilities to which any such  contributed
assets are subject) and, with respect to an Investor,  the Capital  Contribution
of the Assignor Limited Partner made on behalf of such Investor  (without regard
to any reduction of Selling Commissions). Any reference in this Agreement to the
Capital  Contribution  of a  then-Partner  or Investor  shall  include a Capital
Contribution  previously  made by any prior  Partner or Investor with respect to
the Interest or Unit of such then-Partner or then-Investor, except to the extent
that all or a portion of the  Interest or Unit of any prior  Partner or Investor
shall have been  terminated and the portion so terminated  not  transferred to a
successor Partner or Investor.

     "Cash Flow Deficit Guaranty  Agreement" means that certain  agreement to be
entered into by the Fund pursuant to which the Development  General Partner will
agree to fund,  on a monthly  basis,  up to $570,000 of the  operating  deficits
generated by the Development Facilities (on a combined basis)

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in excess of $570,000 of the aggregate  operating  deficits generated in respect
of such  Facilities  during the first two years of operations of the Development
Facilities. Payments made by the Development General Partner under the Cash Flow
Deficit Guaranty Agreement will be non-interest  bearing until the first quarter
after the Commencement  Date that Investors receive  distributions  equal to the
Preferred Return and will be repaid as provided in Article IV.

     "Certificate" means the Certificate of Limited Partnership establishing the
Fund,  as filed  with  the  office  of the  Secretary  of State of the  State of
Delaware on or about the date of this Agreement,  as it may be amended from time
to time in accordance with the terms of this Agreement and the Act. "Code" means
the Internal Revenue Code of 1986, as amended (or any corresponding provision of
succeeding law).

     "Commencement Date" means the date Facility V commences  operations and the
Fund  effectively  acquires  the  Operating  Partnership  Interest  relating  to
Facility V under the applicable  Development  Partnership  Interest  Acquisition
Agreement.

     "Consent of the  Investors"  shall mean the  affirmative  vote of Investors
owning more than 50% of the outstanding Units.

     "Controlling  Person" of any General Partner or Affiliate thereof means any
person who (a) performs  functions for a General Partner or Affiliate similar to
those of (i) a  Chairman  or member of the Board of  Directors,  (ii)  executive
management, such as a President, or a Vice-President, Secretary or Treasurer, or
(iii)  senior  management;  or (b)  holds a 5% or more  equity  interest  in the
General Partner or Affiliate,  or has the power to direct or cause the direction
of the General  Partner,  or Affiliate,  whether through the ownership of voting
securities, by contract or otherwise.

     "Development General Partner" means Meridian Healthcare Investments,  Inc.,
or any  Person  who is  designated  as the  Development  General  Partner in the
Schedule at the time of reference thereto.

     "Development  Partnership  Interest  Acquisition  Agreements"  means  those
agreements  pursuant  to  which  the  Fund  will  acquire,  subject  to  raising
sufficient  proceeds of the  Offering,  Operating  Partnership  Interests of the
Operating Partnerships that own Facility V, Facility VI and Facility VII.

     "Due Diligence Expense  Reimbursement Fee" means the fee equal to 2% of the
Gross  Proceeds  of the  Offering  allowed to the  Selling  Agent,  which may be
re-allowed  to  Soliciting  Dealers,   for  advisory  services,   due  diligence
activities and the reimbursement of expenses.

     "Entity" means any general partnership,  limited partnership,  corporation,
joint venture, trust, estate, business trust, cooperative,  association or other
legal form of organization.

     "Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other
escrow agent chosen by the General  Partners to hold funds from Persons who have
subscribed to become Investors pending the assignment of Assignee Units to them.

     "Existing   Partnership  Interest   Acquisition   Agreements"  means  those
agreements  pursuant  to  which  the  Fund  will  acquire,  subject  to  raising
sufficient proceeds of the Offering, Operating Partnership Interests relating to
Facility III and Facility IV.

     "Facilities" mean the nursing centers described in the Prospectus which are
to be acquired,  developed,  owned and operated by the  Operating  Partnerships,
including all  replacements  thereto and all personal  property which is used in
connection  therewith.  Any one of the Facilities may herein be referred to as a
"Facility".  The terms  "Facility I" through  "Facility VII" shall be defined by
reference to the use of such terms in the Prospectus.

     "Front-End  Fees"  means  fees  and  expenses  paid by any  Person  for any
services  rendered  during the  organization  or acquisition  phase of the Fund,
including the Offering and Organization  Expense Fee, the Due Diligence  Expense
Reimbursement  Fee,  the Selling  Commissions,  the  Acquisition  Expenses,  the
Acquisition  Fees,  mortgage  placement,  financing or refinancing  fees and any
other similar fees.

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     "Fund"  means  the  limited  partnership  formed  in  accordance  with this
Agreement by the parties  hereto,  as said limited  partnership may from time to
time be constituted.

     "Fund Property" means all or any portion of the assets owned or to be owned
by the Fund,  including the Operating  Partnership  Interests and all incidental
personal property.

     "General  Partner" means any Person  designated as a General Partner in the
Schedule and any Person who becomes a Successor or Additional General Partner as
provided  herein,  in each such  Person's  capacity as a General  Partner of the
Fund.

     "Gross  Proceeds of the Offering"  means the aggregate of the proceeds from
the sale of Units in the  Offering,  which  amount  is equal to the total of all
Capital Contributions of the Investors.

     "Increased  Maximum  Offering Amount" means the total amount of $38,500,000
in Gross Proceeds of the Offering.

     "Interest" or "Partnership  Interest" means the entire  ownership  interest
(which maybe  segmented into and/or  expressed as a percentage of various rights
and/or  liabilities) of a Partner in the Fund at any particular time,  including
the right of such  Partner  to any and all  benefits  to which a Partner  may be
entitled  as  provided  in the  Agreement  and in the  Act,  together  with  the
obligations  of such Partner to comply with all the terms and provisions of this
Agreement and of the Act.

     "Interest  Income" means interest income under the Purchase Money Financing
with respect to an installment or other deferred Sale.

     "Interest  Income Cash" means Net Proceeds from a Sale  attributable  to an
installment or other deferred Sale.

     "Interim  Investments"  means the short-term  investments made with the Net
Proceeds of the Offering  until such Net Proceeds of the Offering are  disbursed
for acquisition of the Operating Partnership Interests.

     "Investor" means (i) any Person who holds an Assignee Unit and is reflected
as an Investor on the books and records of the Fund,  and (ii) any  Investor who
has been  admitted  to the Fund as a  Substitute  Limited  Partner  pursuant  to
Section 7.5 hereof.

     "Investment in Properties" means the amount of Capital  Contributions  used
to make or invest in mortgage loans or the amount  actually paid or allocated to
the purchase and  development  of the  Facilities or the  Operating  Partnership
Interests  (including  the  purchase of  properties,  working  capital  reserves
allocable  thereto (except that working  capital  reserves in excess of 5% shall
not be  included),  and  other  cash  payments  such as  interest  and taxes but
excluding Front-End Fees).

     "Limited  Partner" means any Person who is designated as a Limited  Partner
on the books and records of the Fund at the time of reference  thereto,  in each
such Person's capacity as a Limited Partner of the Fund.

     "Limited Partnership Interest" means the ownership interest of the Assignor
Limited Partner and all other Limited Partners in the Fund.

     "Limited  Partnership Interest Percentage" in respect of any Investor means
the percentage  obtained by converting to a percentage  the fraction  having the
number of Assignee  Units owned by such Investor as its numerator and having the
number of Assignee Units owned by all Investors at the time of reference thereto
as its denominator.

     "Majority  Vote  of the  Investors"  shall  mean  the  affirmative  vote of
Investors owning more than 50% of the outstanding Units.

     "Management  Agreements" means those certain  agreements to be entered into
by the Operating  Partnerships  and the Nursing Center Manager pursuant to which
the Nursing  Center  Manager shall manage each of the Facilities for a fee of 6%
of the total revenues of the Facilities,  provided however, that one-half of the
management fee (3% of total revenues) payable in respect of a Development

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Facility  will be deferred  to the extent  necessary  to support the  Investors'
Preferred Return for the first two years after the Commencement Date.

     "Maximum  Offering  Amount" means the total amount of  $24,500,000 in Gross
Proceeds of the Offering.

     "Minimum  Gain" means with  respect to each  non-recourse  liability of the
Fund  (including  the  Fund's  share  of  the  non-recourse  liabilities  of the
Operating  Partnerships) and subject to certain  adjustments  pursuant to Income
Tax Reg. ss.1.704-1(b)(4)(iv)(c), the amount of gain (of whatever character), if
any,  that would be realized by the Fund,  if the Fund disposed of (in a taxable
transaction) any of the assets subject to such liability in full satisfaction of
the liability.  For this purpose, only the portion of the assets' adjusted basis
allocated to non-recourse liabilities of the Fund shall be taken into account.

     "Minimum  Offering Amount" means the amount of $2,830,000 in Gross Proceeds
of the Offering.

     "Net Cash Flow" means,  with respect to any fiscal period,  the excess,  if
any, of (i) all cash funds  derived from the  operations of the Fund during such
period,  including  the yield  from the  Interim  Investments  and  excess  cash
reserves deemed  distributable by the General Partners  pursuant to Section 3.3E
hereof,  over (ii) all cash  disbursed in the operations of the Fund during such
period,  including  cash used to pay,  or  establish  reasonable  reserves  for,
operating expenses, fees, commissions,  debt service and loan repayments (except
for  repayment  of advances  under the Cash Flow  Deficit  Guaranty  Agreement),
improvements, repairs, replacements,  contingencies and anticipated obligations,
except to the extent any such payment is made out of reserves set aside for such
purpose.  Net  Cash  Flow  shall  not  include  amounts  distributed  or  to  be
distributed under Section 4.2 hereof.

     "Net  Proceeds of the  Offering"  means the Gross  Proceeds of the Offering
less the Selling Commis- sions, the Due Diligence Expense Reimbursement Fee, and
the Offering and Organization Expense Fee.

     "Net Proceeds from a  Refinancing"  means the gross proceeds to the Fund of
any Refinancing, less any amounts deemed necessary by the General Partners to be
allocated  to the  establishment  of  reserves,  the  payment  of any  debts and
liabilities  of the Fund to creditors  (except for  repayment  of the  Operating
Deficit  Loan and the  Deferred  Management  Fee Loans),  and the payment of any
reasonable expenses or costs associated with the Refinancing,  including but not
limited to, fees, points, or commissions paid to any unaffiliated Persons.

     "Net  Proceeds  from a Sale"  means the gross  proceeds  to the Fund of any
Sale, less any amounts deemed  necessary by the General Partners to be allocated
to the  establishment  of reserves,  the payment of any debts and liabilities of
the Fund to creditors  (except for repayment of the  Operating  Deficit Loan and
the Deferred  Management Fee Loans), and the payment of any reasonable  expenses
or costs  associated  with the Sale,  including but not limited to, fees or real
estate brokerage  commissions  paid to any unaffiliated  Persons and, subject to
Sections  5.2.A(viii) and 9.2.A(vi),  fees or real estate brokerage  commissions
paid to the General Partners or Affiliates.

     "Net Proceeds of sale or Refinancing" means the Net Proceeds from a Sale or
Net Proceeds from a Refinancing, as the case may be.

     "Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person,  sent or delivered to such Person in
accordance with the provisions of Section 12.3 of this Agreement.

     "Nursing   Center   Manager"   means   Meridian   Nursing   Centers,   Inc.
"Offering"means the offering and sale of Units for a minimum of $2,830,000 and a
maximum of $38,500,000, as more fully described in the Prospectus.

     "Offering  and  Organization  Expense  Fee"  means  the  fee  paid  to  the
Administrative  General  Partner  equal to 4.35% of the  Gross  Proceeds  of the
Offering, payable at such times as the Investors

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are recognized as such on the books of the Fund, for services rendered and costs
incurred in  connection  with the  Organization  of the Fund and the offering of
Units.

     "Operating  Deficit  Loan"  means  the  funds  advanced  to the Fund by the
Development  General  Partner under the terms of the Cash Flow Deficit  Guaranty
Agreement.

     "Operating Partnerships" means the limited partnerships, each of which will
own and operate a Facility.

     "Operating  Partnership  Interest" means the 98.99% partnership interest of
the Fund in an Operating Partnership.

     "Partner" means any General Partner or Limited Partner.

     "Partnership Interest Options" means those agreements pursuant to which the
Fund will  acquire,  subject to raising  sufficient  proceeds of this  Offering,
Operating Partnership Interests in respect of Facility I and Facility II.

     "Person" means any individual or Entity.

     "Preferred Return" means the cumulative, non-compounded annual return equal
to 10. 125% of the Adjusted  Capital Balance of each Investor  commencing on the
earlier of (i) the final closing for the sale of Units or (ii) June 30, 1988. At
the time of a Sale or Refinancing,  if any portion of the Preferred Return of an
Investor has not been paid from Net Cash Flow, such unpaid portion will be added
to the  Investor's  priority  distribution  from  the  Net  Proceeds  of Sale or
Refinancing, all as more fully set forth in Article IV.

     "Profit" or "Loss" means,  for each fiscal year or other period,  an amount
equal to the Fund's  taxable  income or loss for such year or  period,  with the
following adjustments:

     (i) Any income of the Fund that is exempt from federal  income tax shall be
added to such taxable income or loss;

     (ii) Any expenditures of the Fund described in Section  705(a)(2)(B) of the
Code, or treated as Section  705(a)(2)(B) of the Code  expenditures  pursuant to
Income Tax Reg.  ss.1.704-1(b)(2)(iv)(i),  shall be subtracted from such taxable
income or loss; and

     (iii) In lieu of the  depreciation,  amortization  and other cost  recovery
deductions  taken into account in  computing  such  taxable  income or loss,  an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable  with  respect to an asset for such year or other  period for  federal
income tax purposes shall be taken into account,  except that if the fair market
value on the date that the asset is  contributed to the Fund (or if the basis of
such asset for book purposes is adjusted under the Income Tax Regulations,  such
adjusted  book basis)  differs  from its adjusted  basis for federal  income tax
purposes  at the  beginning  of such  year or other  period,  the  depreciation,
amortization  and other cost  recovery  deductions  taken into account  shall be
equal to an amount  which  bears the same ratio to such  beginning  fair  market
value  (or  adjusted  book  basis)  as  the  federal  income  tax  depreciation,
amortization,  or other cost  recovery  deduction  for such year or other period
bears to such beginning adjusted tax basis. Except as otherwise provided herein,
each item of income,  gain, loss,  deduction,  preference or recapture  entering
into the  computation  of Profit or Loss  hereunder  shall be  allocated to each
Partner in the same proportion as Profit and Loss are allocated.

     "Prospectus"  means the Fund's  Prospectus  contained  in the  Registration
Statement filed on Form S-1 with the Securities and Exchange  Commission for the
registration of the Units under the Securities Act of 1933, in the final form in
which it is filed with the Securities and Exchange  Commission and as thereafter
supplemented  pursuant  to Rule  424  under  the  Securities  Act of  1933.  Any
reference  herein  to "date of the  Prospectus"  shall be deemed to refer to the
date  of the  Prospectus  in the  form  filed  pursuant  to Rule  424(b)  of the
Securities Act of 1933.

     "Purchase  Money  Financing"  means a purchase  money note or other form of
installment sale obligation received by the Fund pursuant to a Sale.

                                       A-8

<PAGE>

     "Refinancing" means the replacement, increase, consolidation, modification,
extension of all or any component of any loan, debt,  obligation or financing of
the Fund or any Operating Partnership.

     "Sale"  means  any  transaction  entered  into by the Fund or an  Operating
Partnership  resulting in the receipt of cash or other consideration (other than
the  receipt  of  Capital  Contributions)  not in  the  ordinary  course  of its
business,   including,   without   limitation,   sales  or  exchanges  or  other
dispositions of Facilities, Operating Partnership Interests and real or personal
property of the Fund,  condemnations,  recoveries of damage awards and insurance
proceeds (other than business or rental interruption  insurance  proceeds),  but
excepting any borrowing, mortgage financings or Refinancings.

     "Schedule" means Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference thereto.

     "Selling Agent" means Alex. Brown Realty Securities,  Inc., an Affiliate of
the Administrative General Partner, which will offer the Units on a best efforts
basis pursuant to the Selling Agent Agreement.

     "Selling Agent Agreement"  means that certain  agreement to be entered into
by the Fund, Alex. Brown Realty  Securities,  Inc., the  Administrative  General
Partner,  and the Development  General  Partner,  pursuant to which Alex.  Brown
Realty Securities, Inc. will offer and sell the Units on a best efforts basis.

     "Selling  Commissions"  means the maximum total (or any portion thereof) of
7.0% of the Gross  Proceeds of the Offering  paid to the Selling  Agent or other
soliciting  dealers for their  efforts in offering  the Units.  The 7.0% maximum
Selling  Commissions  will be reduced  for volume  purchases  and  purchases  by
certain Affiliates as specified in the Prospectus.

     "Sponsor"  means  any  Person   directly  or  indirectly   instrumental  in
organizing, wholly or in part, the Fund or who will manage or participate in the
management of the Fund,  and any Affiliate of such Person,  but does not include
(a) any Person whose only  relationship  with the Fund or the General Partner is
that of an independent  property manager if such person's only compensation from
the Fund is in the  form of fees  for the  performance  of  property  management
services,   or  (b)  wholly-   independent  third  parties  such  as  attorneys,
accountants  and  broker-dealers  whose only  compensation  from the Fund is for
professional services rendered in connection with the Offering or the operations
of the Fund.

     "Subordinated  Limited  Partner"  means any Person who is  designated  as a
Subordinated Limited Partner on the books and records of the Fund.

     "Substitute  Limited Partner" means any Investor who has elected to convert
from an Investor to a Limited Partner pursuant to Section 7.5 of this Agreement.

     "Successor General Partner" means any Person who is admitted as a Successor
General Partner to the Fund under the provisions of Article VI after the date of
this Agreement.

     "Tax Matters Partner" means the  Administrative  General Partner designated
in Section 5.1 as the tax matters partner,  as defined in Section  6231(a)(7) of
the Code.

     "Termination  Date of the Offering"  means the date upon which the Offering
will terminate, which, if not sooner terminated by the General Partners, will be
one year from the date of the Prospectus.

     "Unit"  means (i) an  Assignee  Unit  representing  the  assignment  by the
Assignor Limited Partner of one Assigned Limited Partnership Interest,  and (ii)
the Partnership Interest attributable to one Unit of any Investor who has become
a Substitute Limited Partner pursuant to Section 7.5 hereof.

     "U.S.  Person"  means a Person  who is (i) an  individual  who is  either a
United States  citizen or a resident of the United States for federal income tax
purposes,  (ii) a  corporation,  partnership,  or other legal entity  created or
organized in or under the laws of the United States or any political subdivision
thereof,  (iii) a  corporation  that is not created or organized in or under the
laws of the United  States or any  political  subdivision  thereof but which has
made an election under Section 897(i) of the Code to

                                       A-9

<PAGE>

be treated as a domestic  corporation  for certain  purposes  of federal  income
taxation,  or (iv) an estate or trust  whose  income  from  sources  without the
United States is includable in its gross income for federal  income tax purposes
regardless of its connection  with a trade or business  carried on in the United
States.

     "Working  Capital  Reserves"  means,  initially,  the  portion  of the  Net
Proceeds  of the  Offering  set aside as working  capital  reserves  pursuant to
Section 3.3E, as increased or decreased  from time to time at the  discretion of
the General Partners.

                                   ARTICLE II

                       NAME; PURPOSE; TERM AND CERTIFICATE

     Section  2.1  Name;   Formation  The  Partners   hereby  form  the  limited
partnership to be known as "Meridian  Healthcare  Growth and Income Fund Limited
Partnership",  and such name shall be used at all times in  connection  with the
Fund's  business and  affairs;  provided,  however,  that the Fund may use trade
names in its business operations. The Fund shall be governed by the Act.

     Section 2.2 Place of Registered Office The address of the registered office
in the State of Delaware of the Fund is  Corporation  Trust Center,  1209 Orange
Street, Wilmington, Delaware 19801; the name of the registered agent for service
of  process  on the  Fund  in the  State  of  Delaware  at that  address  is The
Corporation  Trust  Company.  The  Fund's  principal  place of  business  is 555
Fairmount Avenue,  Suite 301, Towson,  Maryland 21204, or such other place(s) as
the General Partners may hereafter determine.  Notification of any change in the
location of the principal office shall be given to the Partners and Investors on
or before the date of any such change.

     Section 2.3 Purpose  The purpose of the Fund is to acquire,  own,  develop,
maintain,  finance, encumber, operate as a business, lease, sell, dispose of and
otherwise deal with the Operating  Partnership  Interests,  and to do all things
necessary, convenient or incidental to the achievement of the foregoing.

     Section 2.4 Term The Fund shall continue  until  December 31, 2037,  unless
the  Fund  is  sooner  dissolved  in  accordance  with  the  provisions  of this
Agreement.

     Section 2.5 Recording of  Certificate  The General  Partners shall take all
necessary action to maintain the Fund in good standing as a limited  partnership
under the Act, including,  without limitation, the filing of the Certificate and
such  amendments and further  certificates as may be necessary under the Act and
necessary  to qualify  the Fund to do  business  in such states as the Fund owns
property.  The  General  Partners  shall not be  required  to send a copy of the
Fund's filed Certificate to each Partner and Investor.

                                   ARTICLE III

                                PARTNERS; CAPITAL

     Section  3.1  General  Partners;  Assignor  Limited  Partner;  Subordinated
Limited Partners

     The name,  address and Capital  Contribution of each General  Partner,  the
Assignor Limited Partner and the Subordinated  Limited Partners are set forth on
the Schedule.  Upon the  dissolution  and  termination of the Fund, each General
Partner,  within 90 days after the fiscal year in which the  dissolution  of the
Fund occurs, shall make a Capital Contribution to the Fund in an amount equal to
the lesser of (i) the deficit  balance,  if any, in its Capital  Account or (ii)
its proportionate share of the

                                      A-10

<PAGE>

excess of 1.01 % of the  Capital  Contributions  of the  Investors  and  Limited
Partners  (excluding  capital  contributions  of the Assignor Limited Partner on
behalf of Investors) over the Capital  Contributions  previously  contributed by
the General Partners.

     Section 3.2 Investors

     A. The General  Partners are authorized to accept orders for Units pursuant
to the Offering. All orders for Units shall be held in trust and deposited in an
escrow  account  with the Escrow  Agent.  Orders for Units  shall be accepted or
rejected  by the  General  Partners  within 30 days after  their  receipt by the
Escrow Agent.

     B. Upon the  receipt by the Escrow  Agent of orders for an amount  equal to
the Minimum  Offering  Amount,  the Escrow Agent shall  release the funds in the
escrow account to the Assignor Limited Partner which shall immediately  transmit
such funds to the Fund.  Subsequent  orders for Units that are  accepted  by the
General  Partners shall be released from the escrow  account and  transmitted to
the Fund or returned to  subscribers  in accordance  with the  Prospectus.  Upon
release of an Investor's  funds from the escrow account to the Fund, an Assigned
Limited  Partnership  Interest shall be credited to the Assignor Limited Partner
on the books and  records of the Fund in  respect of such Unit and the  Assignor
Limited  Partner  shall assign all of its rights with  respect to such  Assigned
Limited Partnership  Interest to the Investor to the extent permitted by, and in
accordance  with, the Agreement and applicable law. The Assignor Limited Partner
hereby  agrees to  exercise  any and all rights  with  respect to such  Assigned
Limited Partnership  Interest as directed by the Investor.  At such times as the
General  Partners deem  practicable  and as required by the Act, the Certificate
and this  Agreement  shall be amended to reflect the  ownership  by the Assignor
Limited Partner of Assigned Limited Partnership  Interests in the amount of such
purchased Units.

     C. Any interest  earned on moneys paid by Investors  during the period such
moneys  are  held in  escrow  by the  Escrow  Agent  shall  be paid to the  Fund
following  the release of orders and shall be  distributed  in  accordance  with
Section 4.5A hereof.  Persons whose orders for Units are rejected by the General
Partners shall be returned their moneys (and interest earned  thereon)  within10
days after such rejection.

     D. No order for Units sold as part of the Offering  shall be accepted after
the  Termination  Date of the  Offering.  If the General  Partners do not accept
orders totalling an amount equal to the Minimum Offering Amount on or before the
Termination  Date of the Offering,  the Escrow Agent shall  promptly  return all
moneys  deposited  by  subscribers  together  with any  interest  earned on such
moneys.

     E. For purposes of this  Agreement,  an Investor who acquires  Units in the
Offering  shall be  recognized  as an Investor with respect to such Units on the
date that the General Partners accept the order for such Units.

     Section 3.3 Partnership Capital

     A. Each Partner's and Investor's Capital Contribution shall be paid in cash
on or prior to the date of such  Partner's  admission to the Fund or the date of
the recognition of the Investor on the books and records of the Fund.

     B.  Except to the extent of any  interest  income  earned on an  Investor's
Capital  Contribution  while it is held in escrow, and later distributed to such
Investor pursuant to Section 4.5A, no Partner or Investor shall be paid interest
on any Capital Contribution.

     C. Except as otherwise  provided in this Agreement,  no Partner or Investor
shall  have the right to  withdraw,  or  receive  any  return  of,  his  Capital
Contribution prior to December 31, 2037.

     D. Under circumstances  requiring a return of any Capital Contribution,  no
Partner shall have the right to receive property other than cash.

     E.  The Fund  shall  initially  set  aside  Working  Capital  Reserves  for
contingencies  related to ownership of the Operating Partnership Interests in an
amount equal to at least 3.0% of the Gross  Proceeds of the Offering;  provided,
however, that if only the Minimum Offering Amount is received

                                      A-11

<PAGE>

by the Fund,  Working Capital Reserves shall be approximately  1.5% of the Gross
Proceeds  of the  Offering.  If in any  fiscal  quarter,  the  General  Partners
determine  that the  Working  Capital  Reserves of the Fund are in excess of the
amount  deemed  sufficient  in  connection  with the  ownership of the Operating
Partnership Interests and that such Working Capital Reserves may be reduced, the
amount of such  reduction may be  distributed to the Partners and Investors as a
portion  of the Fund's Net Cash Flow.  If in any  fiscal  quarter,  the  General
Partners  determine  that the  Working  Capital  Reserves  are  insufficient  in
connection  with the Fund's  operations and that such Working  Capital  Reserves
shall be increased, the amount of such increase shall reduce Net Cash Flow. Upon
the Sale or  disposition  of a Facility or  Operating  Partnership,  any Working
Capital  Reserves  maintained for such Facility or Operating  Partnership may be
distributed,  in the General Partners' discretion,  to Partners and Investors or
applied as Working Capital Reserves for other Facilities.

     Section 3.4 Liability of Partners and Investors

     A. Except as provided in the Act, the Limited  Partners and Investors shall
be liable  only to pay their  Capital  Contributions  and no Limited  Partner or
Investor will be personally  liable for the debts,  liabilities,  contracts,  or
other obligations of the Fund. In accordance with Section 17-608 of the Act, (i)
if a Limited  Partner or an Investor  has received the return of any part of his
Capital  Contribution  in  violation  of the  Agreement  or the Act, he shall be
liable to the Fund for a period of six years  thereafter  for the  amount of the
Capital  Contribution  wrongfully  returned,  (ii)  if  without  violating  this
Agreement or the Act, a Limited Partner or an Investor  receives a return of any
part of his  Capital  Contribution,  then he shall be  liable  to the Fund for a
period of one year thereafter for the amount of the returned  contribution,  but
only to the extent necessary to discharge  liabilities to creditors who extended
credit to the Fund  during the period the Capital  Contribution  was held by the
Fund and (iii) a Limited  Partner or  Investor  receives a return of his Capital
Contribution  to the extent that a distribution  to him reduces his share of the
fair  market  value of the net assets of the Fund below the agreed  value of his
Capital Contribution that has not been distributed to him.

     B. Except as set forth in 3.4A,  no Limited  Partner or  Investor  shall be
required to lend any funds to the Fund or,  after his Capital  Contribution  has
been fully paid, to make any further capital contribution to the Fund, nor shall
any Limited  Partner or Investor be liable for or have any obligation to restore
any negative balance in his Capital Account.

     C. Subject to the provisions of Sections 3.1 and 5.9 of this Agreement,  no
General  Partner  shall have any  personal  liability  for the  repayment of the
Capital  Contribution or the Preferred Return of any Limited Partner or Investor
or be required to repay to the Fund all or any portion of any  negative  balance
of the Capital Accounts of the Limited Partners or the Investors.

     D. The funds  advanced by the  Development  General  Partner under the Cash
Flow Deficit Guaranty  Agreement shall not constitute a Capital  Contribution of
the  Development  General  Partner or be credited to the Capital  Account of the
Development General Partner.

                                   ARTICLE IV
                 ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES

     Section 4.1 Allocation of Profit or Loss from a Sale

     A.  Profit  from any Sale (and  Profit  from any deemed  Sale  pursuant  to
Sections 4.4 or 4.5) shall be allocated in the following order of priority:

     (i) First,  if one or more Partners or Investors has a negative  balance in
his Capital  Account,  to such  Partners and  Investors,  in proportion to their
negative Capital Accounts, until all such Capital Accounts have zero balances.

     (ii) Second,  any Profit not allocated pursuant to Section 4.IA(i) shall be
allocated to the Investors  until the Capital  Account of each Investor is equal
to the sum of his Adjusted Capital Balance plus his unpaid Preferred  Return, if
any.

                                      A-12

<PAGE>

     (iii)  Third,  any  remaining  Profit  shall be  allocated  80.816%  to the
Investors,  14.143%  to  the  Development  General  Partner,  4.041%  to  Realty
Associates 1988 Limited Partnership,  .5% to the Development General Partner and
 .5% to the Administrative  General Partner. B. Loss from any Sale (and Loss from
any deemed  Sale  pursuant to Sections  4.4 and 4.5) shall be  allocated  in the
following order of priority:

     (i) First,  if one or more  Partners or  Investors  has a positive  Capital
Account, to such Partners or Investors,  in proportion to their positive Capital
Accounts, until all such positive Capital Accounts have zero balances.

     (ii) Any  remaining  Loss shall be  allocated  as  follows:  80.816% to the
Investors,  14.143%  to  the  Development  General  Partner,  4.041%  to  Realty
Associates 1988 Limited Partnership,  .5% to the Development General Partner and
 .5% to the Administrative General Partner.

     Section 4.2 Distribution of Net Proceeds of Sale or Refinancing

     A. Upon a  Refinancing  and upon a Sale that does not  constitute a Sale of
all or substantially all of the Facilities or Operating  Partnership  Interests,
Net Proceeds from a Refinancing or Net Proceeds from a Sale, as the case may be,
shall be distributed, credited and applied in the following order of priority:

     (i) First,  to the  Investors  until each  Investor  has received an amount
equal to his unpaid  Preferred  Return,  if any, and then his  Adjusted  Capital
Balance.

     (ii)  Second,  to repay  accrued  and unpaid  interest  under the Cash Flow
Deficit Guaranty Agreement and the Deferred Management Fee Loans.

     (iii) Third, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.

     (iv) Fourth,  any  remaining Net Proceeds of Sale or  Refinancing  shall be
distributed 80.816% to the Investors 14.143% to the Development General Partner,
4.041% to Realty  Associates  1988 Limited  Partnership,  .5% to the Development
General Partner and .5% to the Administrative  General Partner. B. Upon the Sale
of  all  or  substantially  all  of  the  Facilities  or  Operating  Partnership
Interests,  Net Proceeds from such Sale, if any, shall be distributed,  credited
and applied in the following order of priority:

     (i) First, to repay accrued and unpaid interest under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.

     (ii) Second, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.

     (iii) Third, to the Partners and Investors, in proportion to their positive
Capital  Accounts,  after the allocation of Profit and Loss pursuant to Sections
4.lA and 4.1B, until all such Capital Accounts have been reduced to zero.

     Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations A. Net Cash Flow, if any, for each year shall be distributed and
applied by the Fund in the following order of priority:

     (i) First,  99% to the Investors,  .5% to the Development  General Partner,
and .5% to the Administrative  General Partner, until each Investor has received
an amount equal to his unpaid Preferred Return.

     (ii) Second,  to repay any accrued but unpaid  interest under the Cash Flow
Deficit Guaranty Agreement and the Deferred Management Fee Loans.

                                      A-l3

<PAGE>

     (iii) Third, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement (but, only (i) if less than four years have elapsed since the
Commencement  Date, the Development  Facilities are at least 95% occupied and at
least 27% of the income  therefrom is from private pay sources,  or (ii) if four
or more  years  have  elapsed  since  the  Commencement  Date,  the  Development
Facilities are at least 90% occupied and at least 20% of the income therefrom is
from private pay sources, or (iii) if the Development  Facilities have been sold
by the Fund), and the Deferred Management Fee Loans.

     (iv) Fourth, 99% to the Investors,  .5% to the Development  General Partner
and .5% to the Administrative  General Partner, until each Investor has received
a non-compounded,  non-cumulative  return for the current year equal to 12.5% of
his Adjusted Capital Balance.

     (v) Fifth,  90.918% to the  Investors,  8.582% to the  Development  General
Partner and.5% to the  Administrative  General Partner.  To the extent feasible,
the  General  Partners  will  endeavor  to  distribute  any Net  Cash  Flow on a
quarterly basis.

     B. Profit from ordinary  operations for each fiscal year shall be allocated
as follows:

     (i) First,  to the Partners and Investors who have received a  distribution
of Net Cash Flow  during  such fiscal  year,  an amount of Profit from  ordinary
operations  equal to the  amount of such Net Cash  Flow,  in  proportion  to the
amount of such distribution received by each of them.

     (ii) Second, if there has been no distribution of Net Cash Flow during such
fiscal year,  or to the extent that the Profit from  ordinary  operations  is in
excess of the Net Cash Flow  during  such  fiscal  year,  Profit  from  ordinary
operations  shall be  allocated  99% to the  Investors,  .5% to the  Development
General  Partner and .5% to the  Administrative  General  Partner.  C. Loss from
ordinary  operations  for  each  fiscal  year  shall  be  allocated  99%  to the
Investors,  .5% to the Development General Partner and .5% to the Administrative
General Partner.

                     Section 4.4 Liquidation or Dissolution

     A. If the Fund is  liquidated  or  dissolved,  the net  proceeds  from such
liquidation,  as  provided  in  Article  VIII,  shall  be  distributed  first to
creditors,  including  Partners  who  are  creditors,  to the  extent  otherwise
permitted by law (whether by payment or by  establishment  of  reserves),  other
than liabilities for distributions to Partners and Investors,  and any remaining
net proceeds shall be  distributed in proportion to the Capital  Accounts of the
Partners and Investors,  determined  after the allocations in Sections 4.1 A and
4.1 B,  unless  applicable  law  shall  otherwise  require,  in which  event the
allocations  set forth in Sections 4.1A and 4.1B shall be modified to the extent
necessary, but only to the extent necessary, to comply with such applicable law.

     B. All distributions under this Section 4.4 shall be made by the end of the
taxable  year of  liquidation  of the  Fund  or,  within  90 days of the date of
liquidation, whichever is later.

     Section 4.5 General and Special Rules

     A.  Except as  otherwise  provided  herein,  the  timing  and amount of all
distributions shall be determined by the General Partners. No Partner shall have
the right to demand and receive any  distribution  of property  other than cash.
Notwithstanding  any other  provision of this  Agreement,  the General  Partners
shall  have  authority  to make the  following  distributions  to certain of the
Investors:  First,  if the Fund has  realized a savings  on Selling  Commissions
payable  by the Fund with  respect to the  purchase  of Units (as more fully set
forth in the Prospectus), the General Partners shall make a distribution to such
Investor equal to the amount of such savings  realized by the Fund.  Second,  if
any interest is earned on an Investors Capital  Contribution while it is held in
escrow pending recognition as an Investor under Article VII, such interest shall
be paid by the Fund to such  Investor and Profit  attributable  to such interest
shall be allocated in the same manner.

                                      A-14

<PAGE>

     B.  Subject to all of the special  rules of this  Section  4.5, if any Fund
Property is distributed to the Partners in kind,  such Fund Property first shall
be valued on the basis of the fair market value  thereof to determine the Profit
or Loss that would have resulted if such Fund  Property had been sold,  and then
such Profit or Loss shall be  allocated  as provided in Section 4.lA and Section
4.1B,  and shall be  properly  credited  or charged to the  Capital  Accounts in
accordance  with  Income  Tax Reg.  ss.1.704-  l(b)(2)(iv)(e)  or any  successor
provision  thereto.  Any Partner  entitled to any  interest in such assets shall
receive such interest as a tenant-in-common with all other Partners so entitled.
The fair  market  value of such assets  shall be  determined  by an  independent
appraiser who shall be selected by the General Partners.

     C.  Notwithstanding  Sections 4.1 and 4.3 hereof,  if an allocation of Loss
(or item  thereof) to an  Investor or Partner  would cause or increase a deficit
balance  in his or its  Capital  Account  in  excess  of:  (i) in the case of an
Investor or Partner other than a General  Partner,  his  proportionate  share of
Minimum  Gain, or (ii) in the case of a General  Partner,  the sum of the amount
which it is obligated to restore to the Fund  pursuant to Section 3.1 hereof and
its  proportionate  share of  Minimum  Gain (in each  case,  such  excess  being
referred to  hereafter as the "Excess  Deficit  Balance"),  then the  allocation
shall not be made to such Investor or Partner.  Instead, such Loss (or deduction
or item thereof) shall be allocated  first to the Partners and Investors  having
positive  Capital  Accounts,  in proportion to such positive  Capital  Accounts,
until all such  positive  Capital  Accounts  have been reduced to zero,  and any
additional Loss (or deduction or item thereof) shall be allocated to the General
Partners in accordance  with their interests in the Fund. For purposes of making
the  determination  set forth above,  each Investor's and each Partner's Capital
Account  balance  shall  be  reduced  by  reasonably  expected   allocations  or
adjustments  of loss (or item thereof)  including  Loss from a Sale under Income
Tax Reg.  ss.ss.1.704-l(b)(2)(ii)(a)(4)  and  (5),  and by  reasonably  expected
distributions  to the extent not offset by reasonably  expected  Capital Account
increases  ("Account Reduction Items").  For purposes of calculating  reasonably
expected  Capital  Account  increases,  the value of the Fund's  assets shall be
presumed to be equal to their adjusted basis for federal income tax purposes.

     D.  Notwithstanding  Sections 4.1 and 4.3 hereof, in accordance with Income
Tax Reg. ss.ss.1.704-  1(b)(2)(ii)(d) and  1.704-1(b)(4)(iv)(e),  (i) if, in any
fiscal  year of the Fund,  an  Account  Reduction  Item  unexpectedly  causes or
increases an Investor's or Partner's Excess Deficit Balance, or (ii) if there is
a net  decrease in Minimum  Gain during a taxable  year,  then all  Investors or
Partners  with an  Excess  Deficit  Balance  at the end of such  year  shall  be
specially  allocated  Profit  and,  to the extent  necessary,  gross  income (as
defined  in  Section  61 of the  Code)  to the  extent  of such  Excess  Deficit
Balances,  in  proportion  to the Excess  Deficit  Balance of each  Investor  or
Partner.  Any  remaining  Profit  or Loss,  after  adjustment  has been made for
allocation of income or gain  pursuant to this Section 4.5D,  shall be allocated
in accordance  with Sections 4.1 and 4.3 hereof.  The General  Partners shall be
authorized  to  interpret  and apply  this  Section  4.5D so as to  satisfy  the
requirements    of    Income    Tax    Reg.ss.ss.1.704-    l(b)(2)(ii)(d)    and
1.704-1(b)(4)(iv)(e) and any successor provisions.

     E. Any special  allocations  of Profit,  Loss or gross income under Section
4.5D shall be taken into account in computing  subsequent  allocations of Profit
or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss
allocated to each  Partner or Investor  will be equal to the  aggregate  amounts
that would have been allocated to them in the absence of the unexpected  Account
Reduction Items.

     F. For each fiscal year, all Profit and Loss allocated  pursuant to Section
4.3  hereof to the  Investors  shall be  allocated  among the  Persons  that are
recognized  as  Investors  during such year by  determining  the Profit and Loss
attributable to each month during such year and by allocating the amount of such
Profit and Loss among  Persons who are  recognized  as Investors on the books of
the  Fund  on  the  first  business  day of  such  month.  The  Profit  or  Loss
attributable  to each month of the fiscal year shall be  determined  by dividing
the Profit or Loss for such year by the  number of days in such  year,  and then
multiplying such per diem amount by the number of days in each month.

     G. All Net Cash Flow  distributable  to the Investors  attributable to each
month of a fiscal  quarter,  if any,  pursuant to Section  4.3 hereof,  shall be
distributed  among the Persons  recognized as Investors on the books of the Fund
on the first business day of such month during the fiscal quarter. The Net

                                      A-15

<PAGE>

Cash Flow  attributable  to each month of the fiscal quarter shall be determined
by dividing  the amount of Net Cash Flow for such  quarter by the number of days
in the quarter,  and then multiplying such per diem amount by the number of days
in each month.

     H.  Notwithstanding  Sections  4.5F and  4.5G,  the Fund  shall  adopt  the
"interim  closing of the books"  method of  allocating  Fund Profit and Loss, in
accordance with a "semi-monthly convention",  among persons who become Investors
pursuant to a closing of the sale of the Units on or before the Termination Date
of the Offering.  Accordingly,  if there is more than one closing of the sale of
the Units,  Investors  who are  recognized on the books of the Fund (i) prior to
the  sixteenth day of a calendar  month,  shall be treated as an Investor on the
books of the Fund on the first  business  day of the month of  recognition,  and
(ii) on or after the  sixteenth  day of a calendar  month shall be treated as an
Investor  on the books of the Fund on the first day of the month  following  the
month of recognition.

     I. Except as provided in Section 4.5M, for each taxable year, all Profit or
Loss  allocated  pursuant to Section 4.1 hereof and all Net  Proceeds of Sale or
Refinancing,  allocable  or  distributable  with  respect  to any Unit  which is
transferred   during  a  taxable  year  of  the  Fund,  shall  be  allocated  or
distributed,  as the case may be, to the Persons  recognized (in accordance with
Section 7.4 hereof) as Investors as of the first  business day of the month that
includes the date on which the Sale or Refinancing  occurs;  provided,  however,
that all such Profit or Loss which is attributable to, and all Net Proceeds from
a Sale which  represent,  Net  Proceeds  from a Sale  received  by the Fund as a
result  of an  installment  or  other  deferred  Sale,  shall  be  allocated  or
distributed,  as the case may be, to the Persons  recognized (in accordance with
Section 7.4 hereof) as Investors as of the first  business day of the month that
includes the date on which the deferred Net Proceeds from a Sale are received by
the Fund,  and the  allocable  cash basis items shall be  allocated  as required
under Section 706(d) of the Code and the Income Tax Regulations thereunder.

     J. In the event that any Investor fails to furnish to the General  Partners
evidence,   in  form  and  substance   satisfactory  to  the  General  Partners,
establishing  that the General Partners have no obligation under Section 1445 of
the Code with respect to such Investor to withhold and pay over an amount to the
Internal  Revenue  Service,  the General Partners may, in their sole discretion,
withhold  with  respect to such  Investor  the amount  they would be required to
withhold  pursuant to Section 1445 of the Code if such  Investor were not a U.S.
Person,  and any amount so  withheld  shall be treated as a  distribution  under
Sections 4.2 or 4.3 of this Agreement,  as the case may be, and shall reduce the
amount otherwise distributable to such Investor thereunder.  Alternatively,  the
General  Partners  may at their  option loan the Investor an amount equal to the
tax to be withheld (at an interest  rate equal to the Escrow  Agent's  announced
"prime rate" plus two  percentage  points),  such loan to be repaid by retaining
such investor's distributions.

     K. Nowithstanding anything to the contrary that may be expressed or implied
in this Agreement,  if at any time the allocation  provisions of this Article IV
do not result in the  allocation  to the General  Partners of an aggregate of at
least 1% of the Profit or Loss being  allocated,  the  General  Partners  in the
aggregate, shall be allocated 1% thereof.

     L. It is the  intent  of the  General  Partners  that each  Investor's  and
Partner's  distributive  share of  Profit  and  Loss  shall  be  determined  and
allocated in accordance with this Article IV to the fullest extent  permitted by
Sections  704(b) and 706 of the Code.  Therefore,  if the Fund is advised by the
Accountants  or the Fund's  legal  counsel,  that the  allocations  provided  in
Article IV of this Agreement are unlikely to be respected for federal income tax
purposes,  the General  Partners  have been granted the power in Section  12.2.B
hereof to amend the allocation  provisions of this  Agreement,  on advice of the
Accountants  or the Fund's legal  counsel,  to the minimum  extent  necessary to
conform  to  Sections  704(b)  and 706 of the Code the plan of  allocations  and
distributions  of Profit  and Loss,  Net Cash Flow and Net  Proceeds  of Sale or
Refinancing provided in this Agreement.

                                      A-16

<PAGE>

     M.  Notwithstanding  any other  provisions  of this  Agreement  other  than
Section 4.5K to the contrary,  "Interest  Income" shall be allocated for federal
income tax purposes, and "Interest Income Cash" shall be distributed,  among the
Investors and Partners as follows:

     (1) Profit or Loss from the Sale to which the Interest Income relates shall
be  calculated  as if the Fund  had made an  election  out of  installment  sale
treatment  under  Section  453 of the Code,  and such  Profit  or Loss  shall be
hypothetically allocated among the Investors and the Partners and hypothetically
credited or charged to their  Capital  Accounts as provided in Section  4.1. The
Capital Accounts of the Investors and the Partners, as hypothetically  adjusted,
shall be referred to as the  "Hypothetical  Capital  Accounts." The Hypothetical
Capital  Accounts shall be decreased from time to time by  distributions  to the
Investors  and the Partners and shall be adjusted  from time to time as a result
of any adjustment in the principal amount of the Purchase Money Financing (e.g.,
as a result of purchase price adjustments) to which the Interest Income relates.
The  Hypothetical  Capital  Accounts as so adjusted  shall be referred to as the
"Adjusted Hypothetical Capital Accounts."

     (2) Interest Income shall be allocated among the Investors and the Partners
for federal  income tax purposes in  proportion to their  Adjusted  Hypothetical
Capital  Accounts  and the Capital  Accounts of the  Investors  and the Partners
shall be increased accordingly.

     (3) Interest  Income Cash shall be distributed  among the Investors and the
Partners in the same  proportion  that Interest  Income was allocated  above for
federal  income tax  purposes.  Such  distributions  shall  decrease the Capital
Accounts accordingly.

     (4) The foregoing  allocations  and  distributions  shall be made as of the
last day of each  taxable  year of the Fund during  which the Fund has  Purchase
Money Financing,  based upon the per diem weighted average Adjusted Hypothetical
Capital  Accounts of the  Investors  and the  Partners  during each such taxable
year. N.  Notwithstanding  any other  provision of this  Agreement,  the General
Partners may, after giving 90 days' prior  Notification  to the  Investors,  (i)
adopt any other method for determining,  in the event of transfers of Units, the
Investors  entitled to distributions of Net Cash Flow or Net Proceeds of Sale or
Refinancing that the General Partners, subject to the review and approval of the
Accountants, determine is reasonable, and (ii) allocate Profit or Loss among the
Investors during the taxable year in any other manner that the General Partners,
determine satisfies the requirements of Section 706 of the Code, but only to the
extent such  allocation  of Profit and Loss  incorporates  the  minimum  changes
required to comply with such  section and is  supported by an opinion of counsel
to the Partnership.

     0.  Allocations and  distributions to Investors as a class shall be made to
each Investor  entitled to such allocation or distribution  based upon the ratio
of the number of Units owned by each such  Investor to the number of Units owned
by all Investors entitled to such allocation or distribution.

     P. In  accordance  with  Section  704(c)  of the  Code and the  Income  Tax
Regulations   thereunder,   income,   gain,   loss,  and  deduction   (including
depreciation)  with  respect to any property  contributed  to the capital of the
Fund shall be allocated  among the  Investors and Partners so as to take account
of any  variation  between the adjusted  basis of such  property to the Fund for
federal  income  tax  purposes  and  its  fair  market  value  on  the  date  of
contribution.  In the event the value at which Fund  assets  are  carried on its
balance sheet maintained under the terms of this Agreement are adjusted pursuant
to Income Tax Reg.  ss.1.704-1(b)(2)(iv)(f),  subsequent  allocations of income,
gain,  loss and deduction  with respect to such assets shall take account of any
variation  between  the  adjusted  basis of such  asset for  federal  income tax
purposes and the value carried on such balance sheet in the same manner as under
Section  704(c)  of the Code and the  Income  Tax  Regulations  thereunder.  Any
elections or other decisions  relating to such allocations  shall be made by the
General  Partners  in any  manner  that  reasonably  reflects  the  purpose  and
intention of this Agreement. Allocations pursuant to this Section are solely for
purposes of federal,  state and local taxes and shall not affect,  or in any way
be taken into account in computing,  any Investor's or Partner's Capital Account
or share of Profit,  Loss, Net Cash Flow, Net Proceeds from a Sale, Net Proceeds
from a  Refinancing,  or other  distributions  pursuant to any provision of this
Agreement.

                                      A- 17

<PAGE>

                                    ARTICLE V

                      RIGHTS, POWERS AND DUTIES OF PARTNERS

     Section 5.1 Management and Control of the Partnership; Tax Matters Partner

     A. Subject to the Consent of the Investors when required by this Agreement,
the General  Partners  shall have the exclusive  right to manage and control the
business of the Fund. Except as otherwise provided herein,  decisions to be made
by  the  General   Partners  shall  be  made  by  the  joint  agreement  of  the
Administrative General Partner and the Development General Partner.

     B.  Except as  otherwise  provided  herein,  the Fund shall be bound by the
signature of any General Partner.

     C. No Limited  Partner or  Investor  (except  one who may also be a General
Partner,  and then only in his capacity as General Partner) shall have the right
to participate in the control of the business of the Fund, or have any authority
or right to act for or bind the Fund.

     D. The Administrative  General Partner is hereby designated to serve as the
Fund's Tax Matters Partner and shall have all of the powers and responsibilities
of such position as provided in Sections 6221 et seq. of the Code. No income tax
returns  will  be  filed  until  the  Development  General  Partner  has had the
opportunity to review such returns.  All third party costs and expenses incurred
by the  Administrative  General  Partner in performing its duties as Tax Matters
Partner shall be borne by the Fund,  as shall all expenses  incurred by the Fund
and/or the Tax Matters  Partner in connection  with any tax audit or tax-related
administrative  or  judicial  proceeding.  Each  Partner and  Investor  shall be
responsible  for all costs  incurred by such Partner or Investor with respect to
any tax audit or tax related administrative or judicial proceeding in connection
with such Partner's or Investor's tax returns and all costs incurred by any such
Partner  or  Investor  who  participates  in  any  tax  audit  or  tax-  related
administrative  or judicial  proceeding  of or against the Fund or any  Partner.
Each  Partner  and  Investor  hereby (i)  expressly  authorizes  the Tax Matters
Partner to enter into any  settlement  with the  Internal  Revenue  Service with
respect  to any tax  matter,  tax  item,  tax  issue,  tax  audit,  or  judicial
proceeding,  which  settlement  shall be binding on all Partners and  Investors;
(ii)  waives  the  right  to  participate  in  any  administrative  or  judicial
proceeding in which the tax treatment of any Fund item is to be determined;  and
(iii) agrees to execute  such  consents,  waivers or other  documents as the Tax
Matters Partner may determine are necessary to accomplish the provisions of this
Section 5.1D. The Tax Matters  Partner shall have no liability to any Partner or
Investor or the Fund,  and shall be  indemnified  by the Fund to the full extent
provided by law,  for any act or omission  performed or omitted by it within the
scope of the  authority  conferred on it by this  Agreement,  except for acts of
negligence or for damages  arising from any  misrepresentation  or breach of any
other  agreement  with the Fund.  The liability and  indemnification  of the Tax
Matters  Partner  shall be  determined  in the same  manner  as is  provided  in
Sections 5.9 and 5.10 hereof.

     E.  Anything  herein to the contrary  notwithstanding,  if the  Development
General  Partner or its  Affiliates  shall be in Default (as  defined)  under an
agreement  with the Fund at any time during the term hereof,  then all decisions
to be made by the General  Partners  shall be made solely by the  Administrative
General Partner, provided that such Default shall not have been caused solely or
primarily by any act or omission of the  Administrative  General  Partner.  If a
Default  shall not have been cured  within the cure  period (if any)  applicable
thereto,  then for a period of 45 days the Administrative  General Partner shall
have the option to purchase the Interests of the Development  General Partner in
the Fund at a price  determined  and  payable in  accordance  with  Section  6.5
hereunder,  and if such Interests are purchased, it shall constitute a voluntary
withdrawal of the Development General Partner.

     Section 5.2 Authority of General Partners

     A.  Except to the extent  otherwise  provided  herein,  including,  without
limitation,  Sections  5.3A,  5.4 and 5.5, the General  Partners for, and in the
name of, and on behalf of, the Fund are hereby authorized:

                                      A-18

<PAGE>

     (i) to  enter  into any kind of  activity  and to  perform  and  carry  out
contracts of any kind necessary to, or in connection  with, or incidental to the
accomplishment  of the  purposes  of the Fund,  so long as said  activities  and
contracts may be lawfully carried on or performed by a limited partnership under
applicable laws and regulations;

     (ii) to engage  Persons,  including the Sponsors as provided in Article IX,
to provide  services or goods to the Fund and the Operating  Partnerships,  upon
such terms as the  General  Partners  deem fair and  reasonable  and in the best
interest of the Fund, provided,  however, that, as to services or goods provided
by a Sponsor, (a) the compensation for such services or goods must be comparable
and competitive with that of any other Person who provides  comparable  services
or goods and  shall be on  competitive  terms,  and will not  exceed  90% of the
competitive  price that would be charged by  non-affiliated  persons or entities
rendering  similar  types and  quality  of  services  in the same or  comparable
geographic  locations;  (b) the  compensation  and other terms of such contracts
shall be fully  disclosed to the  Investors in the reports of the Fund,  (c) the
Sponsor must have been  previously  engaged in the  business of  providing  such
services or goods,  independent of the Fund and as an ongoing business,  (d) all
such  transactions  shall be embodied in a written  contract that  describes the
services or goods to be provided and the compensation to be paid, which contract
may only be modified by the Majority Vote of the  Investors,  and which contract
shall permit  termination  without  penalty on sixty (60) days  notice,  and (e)
except for those  services to be provided under  agreements  referred to in this
Agreement or the Prospectus, any services provided by a Sponsor will be provided
only  under  extraordinary   circumstances  where  services  are  not  available
elsewhere;

     (iii) to acquire by lease or purchase, develop, own, sell, convey, finance,
improve,  assign,  mortgage,  lease or exchange  incident to a tax-free swap any
real estate and any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Fund;

     (iv) to develop, construct,  maintain, finance, improve, own, grant options
with respect to, sell,  convey,  assign,  mortgage or lease any Fund Property or
any other real estate or personal property  necessary,  convenient or incidental
to the accomplishment of the purposes of the Fund;

     (v) to execute any and all agreements, contracts, documents, certifications
and  instruments  necessary or convenient in  connection  with the  development,
construction,  management,  maintenance  and  operation  of any  Fund  Property,
including  without  limitation,  necessary  easements to public or  quasi-public
bodies or public utilities;

     (vi) to borrow money and issue  evidences of indebtedness in furtherance of
any or all of the purposes of the Fund, and to secure the same by deed of trust,
mortgage, security interest, pledge or other lien or encumbrance on any Property
or any other assets of the Fund and to borrow money on the general credit of the
Fund for use in the  business  of the Fund and to take any action and enter into
any agreement necessary or advisable in connection with such borrowing;

     (vii) to repay in whole or in part, negotiate, refinance, recast, increase,
renew,  modify or extend any secured,  or other indebtedness  affecting any Fund
Property  and in  connection  therewith to execute any  extensions,  renewals or
modifications  of any  evidences  of  indebtedness  secured  by deeds of  trust,
mortgages,  security interests,  pledges or other encumbrances covering any Fund
Property;

     (viii) to engage a real estate agent (including a Sponsor) to sell any Fund
Property or portions  thereof upon such terms and  conditions as are deemed fair
and  reasonable  by the General  Partners and to be in the best  interest of the
Fund, and to pay reasonable compensation for such services;  provided,  however,
that any real  estate  commission  paid  shall  not  exceed  the  lesser  of the
competitive  real  estate  commission  for like  properties  located in the same
geographic  area or six percent (6%) of the  contract  price for the Sale of any
Fund Property,  and, in addition,  if a Sponsor provides substantial services in
such regard,  to pay the Sponsor up to one-half of such real estate  commission,
provided,  however,  that the  payment  of such real  estate  commission  to the
Sponsor  shall be  subordinated  to the payment to Investors  of their  Adjusted
Capital Balance plus the unpaid portion, if any, of their Preferred Return.

                                      A-19

<PAGE>

     (ix) to recognize transferees of Units as Investors and to admit substitute
Limited  Partners in accordance  with the terms  described in the Prospectus and
Article VII of this Agreement;

     (x) to invest Working Capital  Reserves and,  pending the investment of the
Fund's  assets in the  Operating  Partnerships,  to  invest  the  Fund's  assets
(excluding  Working  Capital  Reserves),   in   interest-bearing   accounts  and
short-term  investments,  including  obligations  of  federal,  state  and local
governments and their agencies,  mutual funds,  regulated investment  companies,
commercial  paper and  certificates of deposit of  federally-insured  commercial
banks, savings banks or savings and loan associations;  provided,  however, that
such investments are short-term, highly-liquid and provide appropriate safety of
principal;

     (xi) to purchase,  cancel or otherwise retire or dispose of the Partnership
Interests  of Units of any Partner or Investor  according to the  provisions  of
this Agreement;

     (xii) to execute and deliver all documents necessary or appropriate for the
sale of Units,  including the Prospectus and filings under the Securities Act of
1933 and any other federal and state laws relating to the sale of securities;

     (xiii) to require  Investors to become Limited  Partners (in which case the
General  Partners  shall  have the power to amend  this  Agreement  without  the
Consent of the  Investors)  and to take such other  action  with  respect to the
manner  in which  Units  are  being or may be  transferred  or  traded as may be
necessary or appropriate to preserve the tax status of the Fund as a partnership
for federal  income tax  purposes  and the tax  treatment  of the  Investors  as
Partners (but such action shall be taken only to the minimum extent  required by
an opinion of Counsel  and only with the  Consent of  Investors  if the  changes
would adversely affect the Investors);

     (xiv) to take such steps  (including  amendment of this  Agreement)  as the
General Partners determine are advisable or necessary and will not result in any
material  adverse  effect on the economic  position of a majority in interest of
the  Investors  with  respect to the Fund in order to preserve the tax status of
the Fund as a partnership  for federal income tax purposes and the tax treatment
of the Investors as Partners, including, without limitation,  removing the Units
from public trading  markets and imposing  restrictions on transfers of Units or
Interests  (provided  such  restrictions  on  transfers  do not cause the Fund's
assets to be deemed "plan assets"  within the meaning of ERISA) (but such action
shall be taken only to the minimum extent  required by an opinion of Counsel and
only with the Consent of Investors  if the changes  would  adversely  affect the
Investors);

     (xv) to establish and maintain the Working  Capital  Reserves  described in
Section 3.3E;

     (xvi) to pay or reimburse any reasonable out-of-pocket expenses incurred by
any Affiliate of the General  Partners in connection with any report pursuant to
Section 10.3,  provided that no fee shall be paid to any Affiliate in connection
with any such report; and

     (xvii)  after  obtaining  the Consent of the  Investors  to the matters set
forth in Sections  5.4A(xvii),  5.4A(xviii)  or  5.4A(xix),  to take any actions
which  they deem  appropriate  to the  extent  authorized  by the  Investors  to
facilitate  the  purposes  described  in  such  sections,   including,   without
limitation,  amendments  to this  Agreement  to  change  the  dates  upon  which
transfers of Units will be recognized, and the General Partners shall give prior
written  notice to the Investors of any such  amendment.  B. Any person  dealing
with the Fund or the General Partners may rely upon a certificate  signed by any
General Partner, as to:

     (i) the identity of any General Partner or any Limited Partner;

     (ii) the existence or  non-existence  of any fact or facts that  constitute
conditions  precedent to acts by the General Partners or in any other manner are
germane to the affairs of the Fund;

     (iii) the Persons who are  authorized to execute and deliver any instrument
or document of the Fund; or

                                      A-20

<PAGE>

     (iv)  any  act or  failure  to act by the  Fund or as to any  other  matter
whatsoever involving the Fund or any Partner.

     Section  5.3  Authority  of  Investors  A.  By  the  Majority  Vote  of the
Investors, the Investors, without the consent of the General Partners, may:

     (i) amend this Agreement; provided that such amendment (a) shall not in any
manner allow the Investors to take part in the control of the Fund's business in
a manner which would subject them to liability as general partners under the Act
or any other  applicable  law,  and (b) shall not,  without  the  consent of any
General Partner  affected,  alter the rights,  powers, or duties of the affected
General  Partner or its interest in Profit and Loss, Net Cash Flow, Net Proceeds
of Sale or Refinancing, or alter any of the provisions of Section 8.2 hereof;

     (ii) dissolve or terminate the Fund prior to the expiration of its term;

     (iii)  remove a General  Partner and elect a new General  Partner;  or (iv)
approve  or  disapprove  of the  Sale of all or  substantially  all of the  Fund
Property.

     If a General Partner is removed pursuant to Section 5.3A(iii) hereof,  such
General Partner shall voluntarily withdraw as a general partner of the Operating
Partnerships.

     B. Any action  taken  pursuant  to  Section  5.3A  hereof  shall be void ab
initio,  if prior to or within 15 days after such vote either (i) the Fund shall
have received an opinion of counsel, which counsel is approved by the Consent of
Investors, that such action may not be effected without subjecting the Investors
to liability as general  partners  under the Act or under the laws of such other
jurisdiction in which the Fund owns  properties or is doing business,  or (ii) a
court of  competent  jurisdiction  shall have  entered a final  judgment  to the
foregoing  effect.  For  purposes  of this  paragraph,  counsel  will be  deemed
approved by the Consent of the Investors if proposed by the General Partners and
affirmatively  approved in writing within 45 days;  provided that if the holders
of 10% or more of the outstanding  Units propose counsel for this purpose,  such
proposed  counsel,  and not counsel proposed by the General  Partners,  shall be
submitted for such approval by the  Investors.  The existence of such an opinion
of counsel or court  judgment  with  respect to a particular  contemplated  Fund
action  shall not  affect the rights of the  Investors  to vote on other  future
actions or the  existence  of such  rights.  If the  opinion of counsel or court
judgment  referred  to above has not been  obtained  the vote  shall  proceed as
scheduled  and it shall not be delayed  or  postponed  for any reason  except as
otherwise permitted by the Act.

     Section 5.4 Restrictions on Authority

     A. With  respect to the Fund and Fund  Property,  the General  Partners and
their  Affiliates shall have no authority to perform any act in violation of any
applicable  laws or regulations  thereunder,  nor shall the General  Partners as
such have any authority:

     (i)  without  the  Consent of the  Investors,  to  voluntarily  dissolve or
terminate  the Fund prior to the  expiration  of its term;  (ii) to  purchase or
acquire  property  other than as  described in the  Prospectus;  (iii) except as
permitted in this Agreement, to do any act required to be approved by the

     Investors under the Act;

     (iv) to  reinvest  any Net  Proceeds  of Sale  or  Refinancing,  except  in
short-term securities pursuant to Section 10.2B;

     (v)  except  with  respect  to the  Interim  Investments,  to  invest in or
underwrite  securities of any type or kind for any purpose,  or make investments
other than in the Properties and the operations related and incidental  thereto;
(vi) to do any act in contravention of this Agreement;

                                      A-21

<PAGE>

     (vii) to do any act that would make it  impossible to carry on the ordinary
business of the Fund;

     (viii) to confess a judgment against the Fund;

     (ix) to offer Interests or Units in exchange for property;

     (x) to possess the Fund Property,  or assign the Fund's rights in same, for
other than the exclusive use of the Fund;

     (xi) to  operate  in such a manner as to be  classified  as an  "investment
company" under the meaning of the Investment Company Act of 1940;

     (xii) to purchase or lease any property  from or sell or lease  property to
the General  Partners or their Affiliates (with the exception of the purchase of
the Operating Partnership  Interests in the Operating  Partnerships that own the
Facilities  or  sales  under  the  Management  Agreement  as  described  in  the
Prospectus at the time the Registration  Statement is declared  effective by the
Securities and Exchange Commission);

     (xiii) to admit a Person as a General  Partner,  except as provided in this
Agreement;  (xiv) to admit a Person as an Investor or Limited Partner, except as
provided in this Agreement;

     (xv) without the Consent of the Investors, to sell all or substantially all
of the Fund  Property;

     (xvi) to create or suffer  to exist any lien,  security  interest  or other
charge or  encumbrance  upon or with  respect to any  portion  of the  Operating
Partnership  Interests or Facilities if the sum of the principal  amount of such
debt and the  principal  amount of all other debts of the Fund which are secured
by all or part of the Fund Property,  would exceed approximately 60% of the fair
market  value of all of the  Fund  Property,  as  determined  by an  independent
appraisal; provided, however, that the General Partners shall have the authority
to create or suffer to exist  any lien,  security  interest  or other  charge or
encumbrance  upon  or with  respect  to an  Operating  Partnership  Interest  or
Facility  with a debt  in  excess  of such  limitation,  but  not in  excess  of
approximately  75% of the then fair market value of such asset, as determined by
an independent appraiser;

     (xvii)  without the Consent of the  Investors,  to cause or facilitate  the
merger or consolidation of the Fund with other partnerships,  including, but not
limited to, mergers or consolidations in which the Investors receive in exchange
for their Units interests in the surviving entity, with the objective of listing
the  interests  of the  surviving  entity on a national or  regional  securities
exchange or NASDAQ;

     (xviii) subject to Section 7.2.B, without the Consent of the Investors,  to
list the Units on a securities  exchange or enable the Units to be traded in the
over-the-counter  market, or otherwise  facilitate the establishment of a market
for the  trading of Units,  or (except  as set forth in  Section  5.2A(xiv))  to
withdraw the Units from such listing; or

     (xix) without the Consent of the Investors,  to  restructure  the Fund as a
real estate  investment  trust for federal  income tax purposes.  B. The General
Partners shall not take any action which, for federal tax purposes,  shall cause
the  Fund  to  terminate  or  to  be  treated  as an  association  taxable  as a
corporation.

     Section 5.5  Authority  of  Partners  and  Affiliated  Persons to Deal with
Partnership

     A. The  General  Partners  may,  for, in the name of, and on behalf of, the
Fund, acquire property from, borrow money from, enter into agreements, contracts
or the like (in  addition to those set forth  herein)  with,  or  reimburse  for
reasonable out-of-pocket expenses incurred in connection with the preparation of
reports by, any Sponsor in an independent  capacity,  as distinguished from such
capacity  (if  any)  as a  Sponsor,  as if  such  Sponsor  were  an  independent
contractor;  provided,  however, that any such agreement shall be subject to the
conditions set forth in Section 5.2A(ii) herein.

                                      A-22

<PAGE>

     B. Neither the General  Partners nor any  Affiliate  thereof shall have the
authority:

     (i) to cause  the  Fund to  invest  in any  program,  partnership  or other
venture (other than the purchase of the Operating  Partnership  Interests in the
Operating  Partnerships  that own or will own the Facilities as set forth in the
Prospectus at the time the Registration  Statement is declared  effective by the
Securities and Exchange Commission);

     (ii) to receive any compensation, fee or expense not otherwise permitted to
be paid to it under the terms of this Agreement or the Prospectus;

     (iii) to cause the Fund to acquire an Operating  Partnership Interest in an
Operating  Partnership  that owns a Facility  without  first having  obtained an
appraisal with respect to the value of the Facility,  rendered by an independent
appraiser who is a member of a nationally  recognized society of appraisers,  in
which the appraised value equals or exceeds the purchase price paid by the Fund;

     (iv) to  commingle  the  Fund's  funds  with  those of any other  person or
entity,  or to  invest  any of  the  Net  Proceeds  of the  Offering  in  junior
mortgages, junior deeds of trust or other similar obligations, except that funds
of the Fund may be  temporarily  retained  by  agents  of the Fund  pursuant  to
contracts  for the  rendering  of services to the Fund by such agents or held in
accounts  established  and  maintained  for the  purpose of making  the  Interim
Investments and/or computerized disbursements;

     (v) to cause the Fund to lend money or other assets to the General Partners
or any  Affiliates  thereof;  (vi)  to  grant  to the  General  Partners  or any
Affiliates thereof an exclusive listing for the Sale of Fund Property;  (vii) to
receive any rebate or give-up,  or to  participate  in any  reciprocal  business
arrangement  with any General Partner or an Affiliate  thereof;  (viii) to cause
the Fund to acquire a Facility  that is under  construction  without  completion
bonds, fixed price guarantees or other satisfactory arrangements; or

     (ix) to  cause  the  Fund to  acquire  a  Facility  that is  owned or under
development by a Sponsor or a program, partnership or other venture in which the
Sponsor has an interest, other than the seven Facilities specifically identified
in the Prospectus.

     Section 5.6 Duties and Obligations of the General Partners

     A. The  General  Partners  shall take all action that may be  necessary  or
appropriate  (i) for the  continuation  of the  Fund's  existence  as a  limited
partnership  under the Act (and  under the laws of each  other  jurisdiction  in
which such  existence  is  necessary  to protect  the limited  liability  of the
Investors and the Limited Partners or to enable the Fund to conduct the business
in which it is engaged), and (ii) for the acquisition, maintenance, preservation
and operation of the  Operating  Partnerships  and the  Facilities in accordance
with the provisions of this Agreement and applicable laws and  regulations.  The
General  Partners shall devote to the Fund such time as may be necessary for the
proper  performance of their duties hereunder,  but neither the General Partners
nor any of their  Affiliates  shall be expected to devote their full time to the
performance of such duties.  The General Partners or their Affiliates may act as
general or  managing  partners  for other  partnerships  engaged  in  businesses
similar to that  conducted by the Fund.  Nothing  herein shall limit the General
Partners or their Affiliates from engaging in any such business  activities,  or
any other  activities  which may be  competitive  with the Fund, and the General
Partners  or their  Affiliates  shall  not incur any  obligation,  fiduciary  or
otherwise,  to disclose or offer any  interest in such  activities  to any party
hereto.

     B. The General  Partners  shall at all times  conduct  their  affairs,  the
affairs  of all their  Affiliates  and the  affairs of the Fund in such a manner
that no Limited Partner or Investor (except a Limited

                                      A-23

<PAGE>

Partner or Investor who is also a General  Partner)  will have any personal
liability  for Fund  debts  except  as  otherwise  set forth  herein  and in the
Prospectus.

     C. The  General  Partners  from time to time  shall  prepare  and file such
certificates (or amendments thereto) and other similar documents as are required
by the Act, and in the proper  office or offices in each other  jurisdiction  in
which the Fund is formed or  qualified,  any  certificates  and other  documents
required  by  the  applicable  statutes,   rules  or  regulations  of  any  such
jurisdiction.

     D. The General  Partners  shall prepare or cause to be prepared,  and shall
file, on or before the due date (or any extension thereof),  any federal,  state
or local tax  returns  required to be filed by the Fund.  The  General  Partners
shall cause the Fund to pay any taxes payable by the Fund to the extent same are
not payable by any other party.

     E. The  General  Partners  shall  obtain and keep in force,  or cause to be
obtained and kept in force during the term hereof,  fire and extended  coverage,
workmen's compensation,  and public liability insurance in favor of the Fund and
the Operating Partnerships with such insurers and in such amounts as the General
Partners deem advisable,  but in amounts not less (and with  deductible  amounts
not greater) than those  customarily  maintained with respect to nursing centers
comparable to the Facilities.

     F. The  General  Partners  shall be under a  fiduciary  duty to conduct the
affairs of the Fund in the best interests of the Fund, including the safekeeping
and use of all Fund funds and assets,  whether or not in the  General  Partners'
possession  or control,  and the use  thereof  for the benefit of the Fund.  The
General  Partners shall not enter into any contract or agreement  relieving them
of their common law fiduciary duty. The General  Partners shall at all times act
in good faith and  exercise  due  diligence  in all  activities  relating to the
conduct of the  business  of the Fund.  The  General  Partners  shall  treat the
Investors  as a group  and  shall not  favor  the  interests  of any  particular
Investor.

     G. The General  Partners shall cause the Fund to commit a percentage of the
Gross Proceeds of the Offering to investment in the Facilities which is equal to
the greater of. (i) 86.5% of the Gross Proceeds of the Offering reduced by.1625%
for each 1% of financing of the Fund; or (ii) 73.5% of the Gross Proceeds of the
Offering.  For the purpose of this  Section  5.6G,  the percent of  financing of
Facilities  owned by the Fund  shall be  determined  by  dividing  the amount of
financing of the Facilities by the purchase price of the  Facilities,  excluding
Front-End  Fees.  The  proceeds of the Offering  will be invested in  Facilities
within two years of the date of the Prospectus.

     H. Except for payment of the Selling  Commissions  and the  re-allowance of
the Due Diligence  Expense  Reimbursement  Fee, the General  Partners  shall not
directly or indirectly pay or award any commission or other  compensation to any
Person engaged by a potential Investor for investment advice as an inducement to
such advisor to advise the purchase of Units.

     I. On loans made  available to the Fund by a General  Partner,  the General
Partner  may not receive  interest  or similar  charges or fees in excess of the
amount which would be charged by unrelated  lending  institutions  on comparable
loans for the same purpose,  in the same locality of the property if the loan is
made in connection with a particular  property.  No prepayment charge or penalty
shall be required by the General Partner on a loan to the Fund secured by either
a first or a junior or all-inclusive  trust deed, mortgage or encumbrance on the
property,  except to the  extent  that such  prepayment  charge  or  penalty  is
attributable to the underlying encumbrance. In no event shall any loans provided
by a General Partner to the Fund provide for scheduled principal payments over a
period of 48 or more  months  or  provide  that  less than 50% of the  principal
amounts of such loan is scheduled to be paid during the first 24 months.

     J. The General Partners shall not reinvest Net Cash Flow or Net Proceeds of
Sale or  Refinancing.

     K The General  Partners in their  capacity as such or in their  capacity as
general  partners  of the  Operating  Partnerships  which  may  hold  title to a
Facility  shall not do or cause such  Operating  Partnership to do any act which
would not be permitted under this Partnership  Agreement to be done by it as the
General  Partner if title to the  Facility  were held  directly  by the Fund and
shall in general

                                      A-24

<PAGE>

act and cause the Operating Partnership to act in such capacity in the same
manner as if title to the Facility were held directly by the Fund.

     Section 5.7 Compensation of General Partners

     Except as  expressly  provided in  Articles  IV and IX herein,  the General
Partners shall receive no fees, salaries, profits, distributions,  reimbursement
or other compensation for serving as General Partners.

     Section 5.8 Other Businesses of Partners

     Neither  the Fund nor any  Partner  or  Investor  shall  have any rights or
obligations,  by virtue of this Agreement,  in or to any independent ventures of
any nature or description,  or the income or profits derived therefrom, in which
a Partner or Investor may engage, including,  without limitation, the ownership,
operation,  management,   syndication  and  development  of  other  real  estate
projects, even if in competition with the Facilities.

     Section  5.9  Liability  of  General  Partners  and  Affiliates  to Limited
Partners or Investors

     The General Partners and the Affiliates of the General Partners  performing
certain  services  on behalf of the Fund  shall not be liable,  responsible,  or
accountable,  in  liabilities,  damages or otherwise,  to any Investor,  Limited
Partner or the Fund for any loss, judgment, liability, expense or amount paid in
settlement  of any  claims  sustained  which  arise  out of any act or  omission
performed or omitted by them within the scope of the authority conferred on them
by this Agreement,  provided that the General Partners determine, in good faith,
that such act or omission was in the best interests of the Fund, except for acts
of negligence or misconduct or for damages arising from any misrepresentation or
breach of an agreement  with the Fund. The Fund shall not incur the cost of that
portion  of any  liability  insurance  which  insures a General  Partner  or the
Affiliates of the General Partners  performing certain services on behalf of the
Fund against any liability as to which a General Partner or Affiliate may not be
indemnified under Section 5.10 herein.

     Section 5.10 Indemnification

     A.  The  General  Partners  and  the  Affiliates  of the  General  Partners
performing  certain  services on behalf of the Fund shall be  indemnified to the
full extent provided by law for any loss, judgment, liability, expense or amount
paid in settlement of any claims sustained by them which arise out of any act or
omission  performed  or  omitted  by any or all of them  within the scope of the
authority  conferred  on  them  by  this  Agreement,  if  the  General  Partners
determine, in good faith, that such act or omission was in the best interests of
the  Fund and  that  such  act or  omission  did not  constitute  negligence  or
misconduct  or breach of any other  agreement  with the Fund,  provided that any
indemnity  under this Section shall be provided out of and to the extent of Fund
assets  only,  and no  Investor  or  Limited  Partner  shall  have any  personal
liability on account thereof.

     B. Notwithstanding  Section 5. 10A, the General Partners and the Affiliates
of the General  Partners  performing  certain services on behalf of the Fund and
any person acting as a  Broker-Dealer  shall not be 'indemnified by the Fund for
any liability,  loss or damage incurred by any or all of them in connection with
(i) any claim or  settlement  arising  under  federal or state  securities  laws
unless (a) there has been a successful  adjudication on the merits of each count
involving such securities  laws violations as to the particular  indemnities and
the court approves indemnification of the litigation costs, (b) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular  indemnities and the court approves  indemnification of the
litigation costs, or (c) a court of competent jurisdiction approves a settlement
of the claims and finds that indemnification of the settlement and related costs
should be made, after being advised as to the current position of the Securities
and Exchange Commission,  the Massachusetts  Securities Division, the California
Commissioner  of  Corporations,  the  Pennsylvania  Securities  Commission,  the
Tennes-   see   Securities   Commission   and  such   other   state   securities
administrators,  as shall be required by such court,  regarding  indemnification
for  violations  of  securities  law;  or (ii)  any  liability  imposed  by law,
including liability for negligence or misconduct.

                                      A-25

<PAGE>

                                   ARTICLE VI
                 TRANSFERABILITY OF A GENERAL PARTNER'S INTEREST

     Section  6.1  Removal,  Voluntary  Retirement  or  Withdrawal  of a General
Partner; Transfer of Interests

     A. A General Partner may be removed in the manner specified in Section 5.3A
herein.

     B. No General Partner may voluntarily  withdraw or retire from its position
as a General Partner of the Fund unless another  General Partner  (including any
Additional  or  Successor  General  Partner  admitted  pursuant to Section  6.2)
remains,  and  unless  (i)  counsel  for the Fund is of the  opinion  that  such
voluntary  retirement or withdrawal from the Fund win not cause the Fund: (a) to
be dissolved under the Act; (b) to be classified other than as a partnership for
federal  income  tax  purposes;  or (c) to  terminate  for  federal  income  tax
purposes;  and (ii) the approval of the  remaining  General  Partner(s)  and the
Consent of the Investors to such voluntary retirement or withdrawal is obtained.

     C. A General Partner who voluntarily  retires or withdraws from the Fund in
violation  of this  Section  6.1 shall be and remain  liable to the Fund and the
Partners  for  damages  resulting  from the  General  Partner's  breach  of this
Agreement, and, without limitation of remedies, the Fund may offset such damages
against the  amounts  otherwise  distributable  to the  retiring or  withdrawing
General Partner.

     D. No General Partner shall have the right to sell, exchange,  or otherwise
dispose of all or any portion of its Interest  unless the  proposed  assignee or
transferee  of all or a portion  of the  Interest  of such  General  Partner  is
admitted as a Successor or  Additional  General  Partner to the Fund pursuant to
the  provisions  of  Section  6.2  prior to any  such  sale,  exchange  or other
disposition.

     E. The voluntary retirement or withdrawal of a General Partner shall become
effective only upon (i) receipt by the Fund of the opinions of counsel  referred
to in Section  6.1(B)(i);  (ii)  receipt by the Fund of the approval and consent
referred  to in  Section  6.1B(ii);  and  (iii)  the  amendment  of  the  Fund's
Certificate  to  reflect  such  withdrawal  or  retirement  and its  filing  for
recordation.

     Section 6.2 Election and  Admission  of  Successor  or  Additional  General
Partners

     A. By the Majority Vote of the Investors,  a Successor  General Partner may
be elected  to replace a General  Partner  removed  in the manner  described  in
Section 5.3A herein.

     B.  Except as  otherwise  expressly  provided  herein,  no Person  shall be
admitted as a Successor or Additional General Partner unless (i) counsel for the
Fund is of the  opinion  that the  admission  of such  Successor  or  Additional
General  Partner  will not  cause  the  Fund to be  classified  other  than as a
partnership  for federal  income tax purposes or cause the Fund to terminate for
federal  income tax  purposes;  (ii) the  consent of the then  existing  General
Partner(s) is obtained; and (iii) the Consent of the Investors to such admission
has been obtained.

     C. The  admission of such  Successor or  Additional  General  Partner shall
become  effective  upon (i)  receipt by the Fund of the  opinion  referred to in
Section 6.2B(i); (ii) receipt by the Fund of the consents referred to in Section
6.2B(ii) and (iii), if applicable; and (iii) the amendment of the Certificate to
reflect the  admission of the Successor or  Additional  General  Partner and its
filing for recordation.

     Section 6.3 Events of Withdrawal of a General Partner

     A. In addition to a voluntary  withdrawal of a General Partner  pursuant to
Section 6.lE or Section 5. 1E, a General Partner shall be deemed to withdraw (i)
if the  General  Partner  assigns all of his  Interest in the Fund,  (ii) if the
General  Partner  is  removed  pursuant  to  Section  5.3A;  and (iii)  upon the
following acts or events:  (a) if a natural person,  upon his death or the entry
by a court of competent jurisdiction that such General Partner is incompetent to
manage  his  person  or his  property;  (b) if a  corporation,  the  filing of a
certificate  of  dissolution,  or its  equivalent,  for the  corporation  or the
revocation  of its  charter;  and  (c) if a  partnership,  the  dissolution  and
commencement  of  winding  up of the  General  Partner.  To the  maximum  extent
permitted by the Act, no other act or

                                      A-26

<PAGE>

event shall be deemed an event of withdrawal of a General  Partner or serve
to convert a General Partner to a Limited Partner.

     B. In the event of the withdrawal of a General  Partner who is not then the
sole General  Partner,  the remaining  General  Partner or General  Partners may
elect to continue the Fund,  and if such election is made,  shall  promptly give
Notification  of such  event and  shall  make and file  such  amendments  to the
Certificate  as are  required by the Act to reflect the fact that the  withdrawn
General Partner has ceased to be a General Partner of the Fund.

     C. In the event of the  withdrawal  of a General  Partner and the remaining
General  Partner  does not  elect to  continue  the Fund or in the  event of the
withdrawal of a sole General  Partner,  the withdrawn  General  Partner,  or its
successors,  representatives,  heirs or assigns shall promptly give Notification
of such withdrawal to all remaining  Partners and Investors.  In such event, the
Fund  shall be  dissolved  unless,  within 90 days after the  withdrawal  of the
General Partner, the Investors, by the Majority Vote of the Investors,  agree in
writing to continue the business of the Fund and to the  appointment,  effective
as of the  date  of  withdrawal  of the  sole  General  Partner,  of one or more
Additional General Partners. If the Investors elect to reconstitute the Fund and
agree to admit a substitute  General Partner,  the relationship of the Investors
and of  substitute  General  Partner  in the  Fund  shall  be  governed  by this
Agreement.

     Section 6.4 Liability of a Withdrawn General Partner

     A. Any General  Partner who  withdraws  from the Fund shall be, and remain,
liable for all obligations and  liabilities  incurred by it as General  Partner'
prior to the time such  withdrawal  becomes  effective.  In addition,  a General
Partner who  voluntarily  withdraws  in  violation  of this  Agreement  shall be
subject to the liability described in Section 6.l C.

     B. Upon the  withdrawal of a General  Partner,  such General  Partner shall
immediately  cease to be a General  Partner,  and,  unless a  Successor  General
Partner has acquired the Interest of the withdrawing General Partner pursuant to
Section 6.5, the withdrawn  General  Partner's  Interest shall be converted to a
limited partner  Interest of a new class.  Such conversion  shall not affect any
rights or liabilities of the withdrawn General Partner, except that such General
Partner shall no longer participate in the management of the Fund.

     C. The  personal  representatives,  heirs,  successors  or  assigns  of any
General  Partner who with- draws from the Fund shall be, and remain,  liable for
all obligations and liabilities  incurred by the General Partner prior to, or in
connection with, its withdrawal.  Section 6.5 Valuation of Partnership  Interest
of General  Partner Upon the  voluntary or  involuntary  withdrawal of a General
Partner,  the Fund or a Successor General Partner may purchase the Fund Interest
of the withdrawn General Partner at any time subsequent to withdrawal. The price
of the  withdrawn  General  Partner's  Interest  shall be  determined by two (2)
independent  appraisers,  one selected by the withdrawn  General Partner and one
selected by the  remaining  General  Partner,  or if none is  remaining,  by the
Investors. If the two appraisers are unable to agree on the value of the General
Partner's  Interest,  they shall jointly appoint a third  independent  appraiser
whose  determination  shall be final and  binding.  The Fund  shall then pay the
withdrawn  General  Partner the price of its Interest as a General Partner as so
determined.  The  expense  of the  appraisals  shall  be  borne  equally  by the
terminated  General  Partner and the Fund.  If the  withdrawal  is  involuntary,
payment shall be made by delivery of a promissory note bearing  interest payable
semiannually  at a floating rate of interest  equal to the lowest rate permitted
under the Code to avoid  the  imputation  of  interest  income to the  withdrawn
General  Partner,   payable  in  five  equal  annual  installments,   the  first
installment  to be  paid  as  soon  as  practicable  after  the  appraisal,  and
prepayable at any time. If the withdrawal is voluntary, payment shall be made by
delivery of a promissory note bearing no interest,  with principal  payable only
from distributions which the withdrawn General Partner would have received under
this Agreement had the General Partner not withdrawn. Immediately upon receiving
the note, the withdrawn  General Partner shall cease to be a Partner of the Fund
for all purposes, except that the withdrawn General Partner shall continue to be

                                      A-27

<PAGE>

subject to Section 6.4  hereunder.  All amounts  received  pursuant to this
Section 6.5 shall  constitute  complete and full discharge for all amounts owing
to the  withdrawn  General  Partner on account of its Interest in the Fund.  Any
disputes  regarding  valuation or payment pursuant to this Section which are not
resolved in a binding manner by the provisions of this Section shall be resolved
by  arbitration  in  accordance  with the  then  current  rules of the  American
Arbitration  Association.  The expense of arbitration  shall be borne equally by
the terminated General Partner and the Fund.

                                   ARTICLE VII
                   ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS;
             TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS

     Section 7.1 Assignment of the Assignee Units to Investors

     A. Pursuant to Sections 3.2 and 7.1C hereof,  the Assignor  Limited Partner
shall  assign  to each  Investor  Assignee  Units  equal to the  number of Units
purchased by each Investor in the Offering.

     B. Except as provided in Section 7.1.A above,  the Assignor Limited Partner
may not  transfer  a Limited  Partnership  Interest  without  the prior  written
consent of the General  Partners.  The Assignor  Limited  Partner  shall have no
right to vote or consent  with  respect to Units owned by the  Assignor  Limited
Partner for its own account and such Units shall not be  considered  outstanding
Units for purposes of determining  whether the Majority Vote of the Investors or
the Consent of the Investors has occurred.  The Assignor Limited Partner, by the
execution of this Agreement,  acknowledges  and agrees that the Assignor Limited
Partners  management will have fiduciary  responsibility for the safekeeping and
use of all funds and assets of the  Investors,  whether  or not in the  Assignor
Limited Partners management's  possession or control, and that the management of
the Assignor Limited Partner will not employ, or permit another to employ,  such
funds or assets in any manner except for the exclusive  benefit of the Investor.
The Assignor Limited Partner agrees not to contract away the fiduciary duty owed
to the Investors by the Assignor Limited  Partner's  management under the common
law of agency.

     C. Except as set forth in Section 7.1G, the Assignor  Limited  Partner,  by
the  execution  of this  Agreement,  irrevocably  transfers  and  assigns to the
Investors all of the Assignor  Limited  Partner's  rights and interest in and to
the Assigned Limited Partnership Interests, as of the time that payment for such
Assigned Limited Partnership Interests is received by the Fund and such Assigned
Limited  Partnership  Interests are credited to the Assignor  Limited Partner on
the books and records of the Fund.  The rights and interest so  transferred  and
assigned shall include, without limitation, the following:

     (i) all rights to receive distributions of uninvested Capital Contributions
pursuant  to  Sec-  tions  3.2  and  3.3;

     (ii) all rights to receive cash distributions pursuant to Article IV;

     (iii) all rights in respect to  allocations  of Profit and Loss pursuant to
Article IV;

     (iv) all other  rights in  respect of  determinations  of  allocations  and
distributions pursuant to Article IV;

     (v) all rights to consent  to the  admission  of  successor  or  additional
General Partners pursu- ant to Sections 6.1 and 6.2;

     (vi) all rights to receive any proceeds of liquidation of the Fund pursuant
to Section 8.2;

     (vii) all  rights to  inspect  books and  records  and to  receive  reports
pursuant to Article X;

     (viii) all voting rights,  rights to attend or call meetings and other such
rights; and

     (ix) all rights which the Limited Partners have, or may have in the future,
under the Act.

     D. The General  Partners,  by the execution of this Agreement,  irrevocably
consent  to and  acknowledge  that (i) the  foregoing  transfer  and  assignment
pursuant to Section 7.1 by the Assignor

                                      A-28

<PAGE>

Limited Partner to the Investors of the Assignor  Limited  Partner's rights
and interest in the Assigned  Limited  Partnership  Interests is effective,  and
(ii) the Investors are intended to be and shall be third party  beneficiaries of
all rights and  privileges  of the  Assignor  Limited  Partner in respect of the
Assigned Limited Partnership Interests.  The General Partners covenant and agree
that, in accordance with the foregoing transfer and assignment, all the Assignor
Limited   Partner's  rights  and  privileges  in  respect  of  Assigned  Limited
Partnership  Interests  may be exercised  by the  Investors  including,  without
limitation, those cited in Section 7.l.

     E. In accordance with the transfer and assignment described in Section 7.1,
Investors  shall have the same rights that the Limited  Partners have under this
Agreement and under the Act.

     F. The  General  Partners  shall  amend  the  Certificate  to  reflect  the
crediting of the Assignor Limited Partner with the Capital Contributions made by
Investors  on a monthly  basis or at such other  intervals as may be required by
the Act.

     G.  Notwithstanding  the  assignment  of the Assigned  Limited  Partnership
Interests  referred to in this Section 7.1, the Assignor  Limited  Partner shall
retain legal title to and be and remain a Limited Partner of the Fund.

     Section 7.2 Transferability of Units

     A.  Transfers  or  assignments  of Units are  subject to the consent of the
General Partners.

     B. The General  Partners  shall  consent to a transfer of a Unit except the
General  Partners  shall not  consent if one or more of the  following  transfer
restrictions applies:

     (i) No sale or exchange  of any Units shall be made if the Units  sought to
be sold or  exchanged,  when  added to the  total  of all  other  Units  sold or
exchanged within a period of 12 consecutive months prior thereto,  would, in the
opinion of counsel  for the Fund,  result in the Fund being  considered  to have
terminated  within the meaning of Section 708 of the Code. The General  Partners
shall give  Notification  to all  Investors in the event that sales or exchanges
should be suspended for this reason.  All deferred  sales or exchanges  shall be
made (in chronological  order to the extent  practicable) as of the first day of
the fiscal year beginning after the end of any such 12-month period,  subject to
the provisions of this Article VII.

     (ii) No transfer or  assignment  of any Unit shall be made if a counsel for
the Fund is of the opinion that the particular  transfer or assignment  would be
in violation of any federal or state  securities  laws (including any investment
suitability  standards)  applicable  to the Fund or would  cause  the Fund to be
classified other than as a partnership for federal income tax purposes.

     (iii)  No  transfer  or  assignment  of any Unit  shall be made if,  in the
opinion of counsel to the Fund, such transfer would cause the Fund to be treated
as a "publicly traded partnership" under Sections 7704 and 469(k) of the Code.

     (iv) No  transfer  or  assignment  of Units  shall be made after  which any
transferor  or  transferee  would  hold (a) less  than 200  Units,  unless  such
transferor would own zero Units or (b) a number of Units not evenly divisible by
four.

     (v) No transfer or  assignment of any Unit shall be made if it would result
in the assets of the Fund being  treated  as "plan  assets" or the  transactions
contemplated hereunder to be prohibited transactions under ERISA or the Code.

     (vi) No transfer or assignment of a Unit shall be made to a foreign  person
under the Code or a minor or  incompetent  (unless such  transfer or  assignment
shall be made to a legal guardian on such person's behalf).

     (vii)  No  transfer  or  assignment  shall  be  made if  such  transfer  or
assignment  would result in the Fund being  disqualified  to  participate in any
government  program  involving the business of the Fund or in the opinion of the
General  Partners  would  otherwise   adversely  impact  upon  the  business  or
operations of the Fund.

                                      A-29

<PAGE>

     C. In  order  to  record a trade on its  books  and  records,  the Fund may
require such evidence of transfer or assignment  and authority of the transferor
or  assignor  (including  signature  guarantees),  an  opinion of counsel to the
effect that there has been no violation of federal or state  securities  laws in
the assignment or transfer, evidence of the transferee's suitability under state
securities  laws,  and the written  acceptance and adoption by the transferee of
the provisions of this  Agreement,  as the General  Partners may determine.  The
Administrative  General  Partner may charge a transfer  fee (not to exceed $100)
sufficient to cover all reasonable expenses connected with such transfer.

     D. In no event shall an Investor be  permitted  to transfer a fraction of a
Unit.

     Section  7.3  Death,  Bankruptcy  or  Adjudication  of  Incompetence  of an
Investor or a Limited Partner

     Upon  the  death  of  an  Investor  or a  Limited  Partner,  his  executor,
administrator,  or trustee, or, if he is adjudicated  incompetent or insane, his
committee,  guardian, or conservator, or, if he becomes bankrupt, the trustee or
receiver  of his  estate,  shall have all the rights of an Investor or a Limited
Partner  for the  purpose  of  settling  or  managing  his estate and shall have
whatever power the deceased or incompetent Investor or Limited Partner possessed
to assign  all or any part of his Units or  Interest.  The  death,  dissolution,
adjudication of incompetence,  or bankruptcy of an Investor or a Limited Partner
shall not dissolve the Fund.

     Section 7.4 Effective Date

     The Fund shall  recognize  the  transferee  of a Unit as an Investor on the
Fund's books and records on the first  business day of the next  calendar  month
after the month in which  the Fund  receives  all  necessary  documentation  and
consents required to effect the transfer of his Units.

     Section 7.5 Substitute Limited Partners

     Any  Investor  may elect to become a  Substitute  Limited  Partner upon (i)
signing a counterpart of this Agreement and any other  instrument or instruments
deemed necessary by General Partners,  including a Power of Attorney in favor of
the General  Partners as described in Section 12.l.A  hereof,  and (ii) paying a
fee  equal to the  actual  costs and  expenses  incurred  by the  Administrative
General Partner for legal and administrative costs and recording fees. Investors
who elect to  become  Substitute  Limited  Partners  will  receive  one  Limited
Partnership  Interest  for  each  Unit  they  convert  and  will  not be able to
re-exchange their Limited  Partnership  Interests for Units. The Capital Account
of the former Investor  attributable  to transferred  Units shall be credited to
the Capital Account of the Substitute  Limited Partner.  The Fund's  Certificate
will be amended no less often than quarterly,  if required by applicable law, to
reflect the Substitution of Limited Partners.

     Section 7.6 Retirement or Withdrawal of an Investor

     A. No Investor shall have the right to voluntarily  retire or withdraw from
the Fund unless the General  Partners  shall have  consented  to such  voluntary
retirement or withdrawal by an Investor. Upon the retirement or withdrawal of an
Investor:  (i) the  Interest of such  retiring  or  withdrawing  Investor  shall
thereafter belong to the Fund; (ii) such retiring or withdrawing  Investor shall
not be entitled to receive  distributions  with respect to any periods after the
time of such  retirement of  withdrawal;  and (iii) such retiring or withdrawing
Investor  shall not be  entitled to receive any amount for the fair value of his
Units as of the date of his retirement or withdrawal, other than as agreed to by
the General  Partners and the withdrawing  Investor.  The General Partners shall
not consent to the  voluntary  retirement  or  withdrawal  of an Investor if the
General  Partners receive an opinion of counsel to the Fund that such retirement
or withdrawal  would cause the Fund to be classified other than as a partnership
for federal  income tax  purposes,  or cause the Fund to  terminate  for federal
income tax purposes.

     B. At any time after the Termination Date of the Offering, the Fund may, in
its sole discretion,  in response to the request of an Investor,  repurchase any
or all of the Units of such  Investor upon mutually  agreeable  terms,  provided
that such repurchase does not materially  impair the capital or operation of the
Fund. The  determination to repurchase Units will be made in the sole discretion
of

                                      A-30

<PAGE>

the General  Partners.  The  determination  of the value of the repurchased
Units will be based upon, among other factors,  the current fair market value of
the Facilities and the Fund Property,  less all Fund debts and obligations.  The
Fund will not repurchase Units prior to the Termination Date of the Offering and
is not obligated to repurchase  Units at any time. Units acquired by the General
Partners and their  Affiliates  or by the Assignor  Limited  Partner will not be
eligible  for  repurchase  by the Fund.  Units  purchased by the Fund during any
month  shall be  deemed  canceled  effective  as of the  first  day of the month
following the effective date of such purchase.

                                  ARTICLE VIII
              DISSOLUTION, LIQUIDATION AND TERMINATION OF THE FUND

     Section 8.1 Events Causing Dissolution

     A. The Fund shall dissolve and its affairs shall be wound up upon the first
to occur of the following events:

     (i) the expiration of its term;

     (ii) the  withdrawal  of a General  Partner,  unless the Fund is  continued
pursuant to Sections 6.3B or 6.3C;

     (iii) the Sale of all or substantially  all Fund Property  (excepting (a) a
disposition thereof which, in the opinion of counsel to the Fund, qualifies,  in
whole or in part,  under  Section 1031 or Section 1033 of the Code or (b) a Sale
in which the Fund  receives  Purchase  Money  Financing,  in which case the Fund
shall dissolve upon receipt of the final payment thereunder);

     (iv)  the  election  by the  General  Partners,  with  the  Consent  of the
Investors, to dissolve the Fund;

     (v) by the  Majority  Vote of the  Investors  pursuant  to Section  5.3A to
dissolve  the  Fund;  or (vi) the  happening  of any  other  event  causing  the
dissolution of the Fund under applicable law.

     B. Dissolution of the Fund shall be effective on the day on which the event
occurs giving rise to the  dissolution.  A certificate of cancellation  shall be
filed under the Act upon the dissolution  and the  commencement of winding up of
the Fund;  provided,  however,  that the Fund shall not terminate until the Fund
Property has been  distributed as provided in Section 8.2.  Notwithstanding  the
dissolution of the Fund,  prior to the  termination of the Fund, the business of
the Fund and the affairs of the Partners, as such, shall continue to be governed
by this Agreement.

     Section 8.2 Liquidation

     A. As soon as  practical  after the  dissolution  of the Fund,  the General
Partners,  or if there are no  General  Partners,  any  Limited  Partner  or the
liquidating  trustee under the Act, as the case may be, shall give  Notification
to all the Limited  Partners and Investors of such fact and shall prepare a plan
as to whether and in what manner the Fund Property shall be  liquidated.  By the
Majority  Vote  of the  Investors,  the  assets  of  the  Fund,  subject  to its
liabilities  (and  the  establishment  of  reserves,  if  necessary,   for  such
liabilities),  may be  transferred  to a successor  Entity,  upon such terms and
conditions as are then agreed upon.

     B. Unless the Investors  agree to transfer the assets of the Fund,  subject
to its  liabilities,  to a  successor  Entity  pursuant  to Section  8.2A,  upon
dissolution  of the Fund,  the  General  Partners,  any  Limited  Partner or the
liquidating  trustee under the Act, as the case may be, shall liquidate the Fund
Property,  and apply and  distribute  the proceeds  thereof in  accordance  with
Section 4.4. A Partner or an  Affiliate  of a Partner may  purchase  such assets
with the Consent of the Investors.

     C. Notwithstanding the provisions of Section 8.2B, in the event the General
Partners,  any Limited Partner, or the liquidating trustee under the Act, as the
case may be, shall  determine  that an immediate sale of all or a portion of the
Fund Property would cause undue loss to the Partners and

                                      A-31

<PAGE>

     Investors,  the General Partners,  any Limited Partner,  or the liquidating
trustee  under the Act,  as the case may be, in order to avoid such  loss,  may,
after having  given  Notification  to all the  Investors  and Limited  Partners,
either defer  liquidation  of, and withhold from  distribution  for a reasonable
time,  any assets of the Fund, or distribute the assets in kind to a liquidating
trust to be held for the benefit of the Investors and Partners.

     Section 8.3 Capital Contribution Upon Dissolution Subject to the provisions
of Section 5.9 of this Agreement, each Investor and Partner shall look solely to
the assets of the Fund for all  distributions  with  respect to the Fund and his
Capital  Contribution and shall have no recourse (upon dissolution or otherwise)
against any Partner or Investor;  provided,  however,  that upon the dissolution
and  termination  of the  Fund,  the  General  Partners  will  make the  Capital
Contributions  referred to in Section  3.1.  All amounts so  contributed  by the
General  Partners shall be distributed  first to the Fund's  creditors  entitled
thereto,  and the balance to the  Investors  and Partners in  proportion  to the
positive  balances  in their  Capital  Accounts at the time of  dissolution  and
termination of the Fund.

                                   ARTICLE IX

             CERTAIN PAYMENTS TO THE GENERAL PARTNERS AND AFFILIATES

     Section  9.1  Reimbursement  of Certain  Costs and  Expenses of the General
Partners and Affiliates

     A.  Subject  to the  provisions  of  Article  V hereof,  the Fund  shall be
permitted to reimburse  the General  Partners for the actual cost to the General
Partners  or any of  their  Affiliates  of the  Fund's  operating  expenses.  In
determining  the actual cost to a General  Partner or an  Affiliate of a General
Partner of goods and materials and  administrative  services,  actual cost means
the actual cost to a General  Partner or an  Affiliate  of a General  Partner of
goods and  materials  used for or by the Fund and  obtained  from  entities  not
affiliated with a General Partner,  and actual cost of  administrative  services
means the pro rata cost of personnel  as if such  persons were  employees of the
Fund. The cost for administrative services to be reimbursed to a General Partner
or an Affiliate  shall be at the lower of the General  Partner's or  Affiliate's
actual  cost or the  amount  the Fund would be  required  to pay to  independent
parties for comparable  administrative services in the same geographic location.
The  General  Partners  shall use their best  efforts to cause all of the Fund's
expenses  to be  billed  directly  to  and  paid  by  the  Fund  to  the  extent
practicable.

     B.  Subject  to the  foregoing,  the Fund  shall  pay all  expenses  (which
expenses shall be billed directly to the Fund) of the Fund which may include but
are not limited to: (a) all costs of personnel  (excluding rent or depreciation,
utilities,  capital equipment, and other administrative items) employed full- or
part-time by the Fund and involved in the business of the Fund and allocated pro
rata to their administrative services performed on behalf of the Fund, including
Persons who may also be officers or employees  of the General  Partners or their
Affiliates  (other than Controlling  Persons);  (b) all costs of borrowed money,
taxes and assessments on Facilities and other taxes  applicable to the Fund; (c)
legal, audit, accounting,  brokerage and other fees; (d) printing, engraving and
other expenses and taxes incurred in connection with the issuance, distribution,
transfer,  registration  and recording of documents  evidencing  ownership of an
Interest or Unit or in  connection  with the business of the Fund;  (e) fees and
expenses  paid  to  independent  contractors,   mortgage  bankers,  brokers  and
servicers,  leasing agents,  consultants,  on-site  property  managers and other
property management personnel (other than Controlling Persons and other officers
of the General  Partners or their  Affiliates),  real estate brokers,  insurance
brokers and other  agents;  (f)  expenses in  connection  with the  disposition,
replacement, alteration, repair, remodeling, refurbishment, leasing, refinancing
and  operating  of  the   Facilities   (including  the  costs  and  expenses  of
foreclosures,  insurance premiums, real estate brokerage and leasing commissions
and of maintenance of such  Facilities);  (g) expenses of organizing,  revising,
amending,  converting,  modifying or  terminating  the Fund; and (h) the cost of
preparation and  dissemination of the  informational  material and documentation
relating to potential sale, or other  disposition of Facilities or in connection
with any meetings or votes if the Investors.

                                      A-32

<PAGE>

     C. Notwithstanding any other provision of this Agreement,  no reimbursement
shall be permitted  for services for which the General  Partners are entitled to
compensation by way of a separate fee.

     Section 9.2 Fees and Other Payments

     A. The Fund shall cause the  following  payments and fees to be paid to the
General Partners or their Affiliates:

     (i) to the Selling  Agent,  the Selling  Commissions  and the Due Diligence
Expense Reimbursement Fee.

     (ii) to the Administrative  General Partner,  the Offering and Organization
Expense Fee.,

     (iii) to the Administrative  General Partner,  the Acquisition Fees and the
prepaid terms and fees related to the  acquisition of the Facilities and paid by
the Administrative General Partner.

     (iv) to certain  Affiliates  of the  Development  General  Partner  and the
Administrative Part- ner, payments pursuant to the Partnership Interest Options,
the Existing  Partnership  Interest  Acquisition  Agreements and the Development
Partnership Interest Acquisition Agreements.

     (v) to the Nursing Center Manager on behalf of the Operating  Partnerships,
payments pursuant to the Management  Agreements,  provided that such payments do
not exceed the lesser of (a) the fees which are  competitive  for similar  types
and quality of services in the geographic  area of the Facility or (b) 6% of the
gross  revenues  from the Facility to which the  Management  Agreement  relates.
Included in such  management fee shall be bookkeeping  services and fees paid to
any party.

     (vi) to the Administrative General Partner, the Development General Partner
or their Affiliates, real estate brokerage commissions, payable upon the Sale of
any Facility,  provided that the General Partners or their  Affiliates  actually
render  real  estate  brokerage  services  in  connection  with such  Sale.  Any
commissions paid to the General Partners and their Affiliates will be limited to
one-half of the competitive real estate  commission for like properties  located
in the same  geographic area not to exceed 3% of the contract price for the Sale
of the Facility,  and will be  subordinated to the payment to Investors of their
Adjusted  Capital  Balance plus the unpaid  portion,  if any, of their Preferred
Return. If more than one of the General Partners or their Affiliates is involved
in rendering real estate brokerage  services to the Fund, the commission will be
divided between them commensurate with actual services rendered.

     (vii) to First Meridian Mortgage Corporation a Mortgage Placement Fee equal
to .5% of the financing  obtained to  facilitate  the  acquisition  of Operating
Partnership Interests.

     (viii) to the  Administrative  General  Partner a fee for 1988 equal to (i)
$12,500  if  the  Operating  Partnership  Interest  relating  to  Facility  I is
acquired,  (ii)  $25,000 if the  Operating  Partnership  Interests  relating  to
Facilities I and II are acquired,  (iii)  $37,500 if the  Operating  Partnership
Interest  relating to  Facilities  I, II and III are acquired or (iv) $50,000 if
the Operating  Partnership  Interests relating to all of the Existing Facilities
are acquired;  and after 1988, a fee equal to the greater of $75,000 per year or
 .5% of the Fund's  annual  revenues  for routine and  recurring  accounting  and
clerical  services,  communications,  services  and  reports to  Investors,  and
routine and recurring  reports made to regulatory  authorities.  B. The total of
the fees owed to the  General  Partners  and their  Affiliates,  as set forth in
subsection A. (i),  (ii) and (iii) above,  shall in no event exceed 16.6% of the
Gross Proceeds of the Offering.

                                      A-33

<PAGE>

                                    ARTICLE X

                    BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS

                         Section 10.1 Books and Records

     A. Unless otherwise  directed by the  Administrative  General Partner,  the
books and records of the Fund shall be maintained by the General Partners at the
Fund's principal place of business.  In all cases,  said books and records shall
be available for examination and copying by any Limited Partner, Investor or his
duly  authorized  representatives,  for  any  purpose  related  to  the  Limited
Partner's  or  Investor's  interest  as a Limited  Partner or  Investor,  at the
expense of such Limited  Partner or Investor,  at any and all reasonable  times.
The Fund shall keep at its principal place of business,  without limitation, the
following  records:  true and  full  information  regarding  the  status  of the
business  and  financial  condition  of  the  Fund;   -promptly  after  becoming
available,  a copy of the Fund's federal, state and local income tax returns for
each year;  a current  list of the names and last known  business,  residence or
mailing addresses of each Partner and Investor; a copy of this Agreement and the
Certificate  and all amendments  thereto;  and other  information  regarding the
affairs of the Fund as is just and reasonable. The current list of the names and
last known business, residence or mailing addresses of each Partner and Investor
shall be mailed to any Investor  upon  payment of a  reasonable  charge for copy
work.

     B. The Fund  shall  keep its  books  and  records  in  accordance  with the
accounting methods followed for federal income tax purposes, which shall reflect
all Fund  transactions  and shall be  appropriate  and  adequate  for the Fund's
business. The Fund's taxable year shall be a calendar year.

     Section 10.2 Bank Accounts

     A.  The  General  Partners  shall  have  fiduciary  responsibility  for the
safekeeping and use of an funds and assets of the Fund,  whether or not in their
immediate  possession  or control.  The General  Partners  shall not employ,  or
permit  any other  Person to employ,  such  funds in any  manner  except for the
benefit of the Fund.

     B. The bank  accounts  of the Fund  shall  be  maintained  in such  banking
institutions as the General Partners shall determine,  and withdrawals  shall be
made only in the regular  course of Fund  business on the signature of a General
Partner or such other  signature  or  signatures  as the  General  Partners  may
determine.  All deposits and other funds may be deposited in interest bearing or
non-interest  bearing accounts  guaranteed by federal  authorities,  invested in
short-term United States Government or municipal obligations,  or deposited with
a banking institution selected by the General Partners.

                          Section 10.3 Reports

     A. No later than 75 days after the end of each calendar  year,  the General
Partners will furnish each Person who was an Investor or Limited  Partner at any
time  during the fiscal  year with all tax  information  relating  to the Fund's
performance for the preceding  calendar year that is required to be set forth in
the Investors and Limited Partner's federal and state income tax return.

     B. Within 60 days after the end of each of the first three fiscal  quarters
of each  fiscal  year of the Fund,  the General  Partners  will  furnish to each
Person  who was an  Investor  or Limited  Partner at any time  during the fiscal
quarter  then ended,  a report  setting  forth  information  with respect to the
progress of the Fund's  business,  which report shall include:  (i) an unaudited
balance  sheet of the  Fund;  (ii) an  unaudited  statement  of  income  for the
quarter;  (iii) an  unaudited  cash  flow  statement  for the  quarter;  (iv) an
unaudited  statement  setting forth the services  rendered to, and fees received
from, the Fund by any Sponsor;  and (v) other pertinent  information  concerning
the Fund and its activities during the quarter.

                                      A-34

<PAGE>

     The various  reports  required  pursuant to this Section 10.3.B may be sent
earlier than or separately  from any of the other reports  required  pursuant to
this Section 10.3.B, and the information  required to be contained in any of the
reports  required  pursuant to this Section 10.3.B may be contained in more than
one report.

     C. Within 120 days after the end of each fiscal year, the General  Partners
will  furnish an annual  report to each  Person who was a Limited  Partner or an
Investor as of the last business day of the fiscal year then ended.  Such annual
report will include:

     (i) a balance sheet as of the end of the Fund's fiscal year,  statements of
income,  Partners'  equity and  changes in  financial  position,  which shall be
prepared  in  accordance  with  generally  accepted  accounting  principles  and
accompanied by an auditor's report containing an opinion of the Accountants;

     (ii)  the  breakdown  of any  Fund  costs  reimbursed  to a  Sponsor  and a
statement  setting  forth in detail the services  rendered to, and fees received
from,  the Fund by any Sponsor as  verified by a review of the time  records of,
and the specific nature of the work performed by, individual employees, the cost
of whose services were  reimbursed  (and within the scope of the annual audit by
the  Accountants  shall be the obligation to verify the allocations of the costs
reimbursed to a General Partner or Affiliate);

     (iii) a cash flow statement; and

     (iv) a report of the  activities  of the Fund during the fiscal  year.  The
annual report shall also set forth distributions to the Investors for the period
covered thereby and shall separately  identify  distributions  from (a) Net Cash
Flow during the period,  (b) Net Cash Flow during a prior  period which had been
held as  reserves,  (c) Net  Proceeds  of Sale or  Refinancing,  and (d) Working
Capital Reserves.

     D. Within 45 days after the end of each  fiscal  quarter in which a Sale or
Refinancing  occurs,  the General  Partners shall send to each Person who was an
Investor as of the close of business on the first business day of the month that
includes the date of occurrence of the Sale or  Refinancing,  a report as to the
nature of the Sale or Refinancing  and as to the Profit or Loss arising from the
Sale or Refinancing.

     E. The General  Partners  will  prepare  and timely  file with  appropriate
federal and state  regulatory  authorities all reports required to be filed with
such entities under  then-applicable  laws, rules and regulations.  Such reports
shall  be  prepared  on the  accounting  or  reporting  basis  required  by such
regulatory  authorities.  Upon request, copies of such reports will be furnished
to any  Investor or Limited  Partner for any purpose  reasonably  related to the
Investor's or Limited Partner's interest as an Investor or a Limited Partner. In
the event that any regulatory authority  promulgates rules or amendments thereto
that would permit a reduction in any of the reporting  requirements to which the
Fund is subject under this  Agreement at the time of the execution  hereof,  the
Fund may cease to  prepare  and file any such  reports in  accordance  with such
rules or amendments.

     F. The Administrative General Partner will maintain, (i) for a period of at
least four (4) years, a record of the  information  obtained to indicate that an
Investor has met the suitability standards set forth in the Prospectus; and (ii)
for a period of at least five (5) years,  records of the appraisals  made of the
Properties,  which  appraisal  records  shall be available  for  inspection  and
copying by any Investor or Limited Partner for any purpose reasonably related to
the  Investor's  or  Limited  Partner's  interest  as an  Investor  or a Limited
Partner.

     Section 10.4 Federal Tax Elections

     The  Fund,  in the  sole  discretion  of the  General  Partners,  may  make
elections for federal tax purposes as follows:

     (i) In case of a transfer of a Unit,  the Fund,  in the sole  discretion of
the General  Partners,  may timely elect pursuant to Section 754 of the Code (or
corresponding  provisions  of future law) and pursuant to similar  provisions of
applicable  state or local income tax laws, to adjust the basis of the assets of
the Fund.


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<PAGE>


     (ii) The General Partners may elect accelerated  depreciation methods under
the Code, or may elect  straight-line  depreciation  over a period as long as 40
years if, in their sole  discretion,  the  determination  of the  percentage  of
tax-exempt Investors becomes too cumbersome.

     (iii) All other  elections  required  or  permitted  to be made by the Fund
under the Code shall be made by the General  Partners in such manner as will, in
their sole opinion,  be most  advantageous  to a Majority of the Investors.  The
Fund shall, to the extent permitted by applicable law and regulations,  elect to
treat as an expense for federal income tax purposes all amount's. incurred by it
for real estate taxes,  interest and other charges which may, in accordance with
applicable law and regulations, be considered as expenses.

                                   ARTICLE XI

                              MEETINGS OF INVESTORS

     Section I 1.1 Calling Meetings

     Meetings  of the  Investors  for any  purpose  may be called by the General
Partners and shall be called by the General  Partners  upon receipt of a request
in writing  signed by  Investors  having in the  aggregate  more than 10% of the
outstanding  Units.  Upon receipt of a written request stating the purpose(s) of
the meeting,  the General  Partners  shall provide all Investors  within IO days
after  receipt of such request with notice as  described  in Section  11.2.  The
meeting shall be held at a time and place convenient to the Investors.

     Section 11.2 Notice, Procedure

     Notice of any meeting  shall be given  either  personally  or by  certified
mail,  not  less  than 15 days  nor  more  than 60 days  before  the date of the
meeting, to each Investor at his record mailing address.  The notice shall be in
writing,  and shall state the place, date, hour, and purpose of the meeting, and
shall indicate that it is being issued at or by the direction of the Partners or
Investors  calling the  meeting.  If a meeting is  adjourned  to another time or
place,  and if any  announcement  of the adjournment of time or place is made at
the meeting,  it shall not be necessary to give notice of the adjourned meeting.
The  presence  in  person  or by proxy of the  holders  of more  than 50% of the
outstanding  Units shall  constitute a quorum at all meetings of the  Investors;
provided,  however, that if there is no quorum present, holders of a majority in
interest of the Investors  present or  represented  may adjourn the meeting from
time to time without further notice until a quorum is obtained. No notice of the
time, place or purpose of any meeting of Investors need be given to any Investor
who attends in person or is present by proxy (except when an Investor  attends a
meeting for the express  purpose of objecting at the beginning of the meeting to
the  transaction  of any business on the ground that the meeting is not lawfully
called or  convened),  or to any  Investor  entitled to notice who, in a writing
executed and filed with the records of the meeting,  either  before or after the
time of the meeting, waives the notice requirement.

     Section 11.3 Right to Vote

     For the  purpose  of  determining  the  Investors  entitled  to vote at any
meeting of the Fund, the General Partner or the Investors requesting the meeting
may fix a date,  in  advance,  as the  record  date  for  the  determination  of
Investors  entitled  to vote.  This date shall be not more than 50 days nor less
than 10 days before any meeting.

     Section 11.4 Proxies, Rules

     Each  Investor may  authorize any person or persons to act for him by proxy
in all  matters in which an Investor  is  entitled  to  participate,  whether by
waiving notice of any meeting,  or voting or participating  at a meeting.  Every
proxy must be signed by the Investor or his attorney-in-fact.  No proxy shall be
valid after the expiration of 11 months from the date thereof  unless  otherwise
provided

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<PAGE>

     in the  proxy.  Every  proxy  shall be  revocable  at the  pleasure  of the
Investor  executing it. At each meeting of Investors the General  Partners shall
appoint officers and adopt rules as they deem appropriate for the conduct of the
meeting.

                                   ARTICLE XII

                               GENERAL PROVISIONS

     Section   12.1   Appointment   of   Administrative   General   Partner   as
Attorney-in-Fact

     A. Each Limited Partner and Investor hereunder hereby irrevocably  appoints
and empowers the Administrative  General Partner his attorney-in-fact to consent
to or  ratify  any act  listed  in  Subsections  5.4A(i)  through  (xix) of this
Agreement after the Consent of the Investors  thereto has been obtained,  and to
execute,  acknowledge,  swear to and deliver all agreements and  instruments and
file all  documents  requisite  to  carrying  out the  intentions  and  purposes
contemplated in this Agreement, including, without limitation, the execution and
delivery of this Agreement and all amendments hereto, the filing of all business
certificates  and necessary  certificates of limited  partnership and amendments
thereto  from  time to time in  accordance  with  all  applicable  laws  and any
certificates  of  cancellation.  This power of attorney  shall be deemed coupled
with an  interest,  and shall not be affected by the  subsequent  disability  or
incapacity of the principal.

     B.  The   appointment  by  all  Limited   Partners  and  Investors  of  the
Administrative General Partner as attorney-in-fact shall be deemed to be a power
coupled  with an  interest  and shall  survive  the  assignment  by any  Limited
Partners or Investors of the whole or any part of his  Interests or Units in the
Fund.

     C. The power of attorney  granted by this Section 12.1 shall be governed by
the laws of the State of Delaware.

     Section 12.2 Waiver of Partition

     Each  Partner  and  Investor,   on  behalf  of  himself,   his  successors,
representatives,  heirs and assigns  hereby waives any right of partition or any
right to take any other action which otherwise might be available to him for the
purpose of severing his relationship with the Fund or his interest in the assets
held by the Fund from the interest of the other Partners or Investors.

     Section 12.3 Notification

     Any Notification,  in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner or Investor,  to the address of
the Partner or Investor  set forth in the books and records of the Fund,  and if
to the Fund, to the principal place of business of the Fund set forth in Section
2.2 (unless Notification of a change of the principal office is given), the date
of registry  thereof or the date of the  certification  thereof being deemed the
date  of  receipt  of  Notification;   provided,   however,   that  any  written
communication sent to a Partner or Investor or to the Fund and actually received
by such Person shall constitute Notification for all purposes of this Agreement.

     Section 12.4 Word Meanings

     In this Agreement,  the singular shall include the plural and the masculine
gender shall include the feminine and neuter and vice versa,  unless the context
otherwise requires.

     Section 12.5 Binding Provisions

     The covenants and  agreements  contained  herein shall be binding upon, and
inure to the benefit of, the heirs,  personal  representatives,  successors  and
assigns of the respective parties hereto.

     Section 12.6 Applicable Law

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

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<PAGE>

     Section 12.7 Counterparts

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose  signature  appears
thereon, and all of which shall together constitute one and the same instrument.
This  Agreement  shall become binding upon the date hereof.  Each  Additional or
Successor General Partner shall become a signatory hereof by signing such number
of counterparts of this Agreement and such other instrument or instruments,  and
in such manner as the General Partners shall determine, and by so signing, shall
be deemed to have  adopted and to have agreed to be bound by all the  provisions
of this Agreement;  provided, however, that no such counterpart shall be binding
until it shall have been signed by the Administrative General Partner.

     Section 12.8  Separability  of Provisions

     Each provision of this Agreement shall be considered separable,  and if for
any reason any  provision or provisions  hereof are  determined to be invalid or
contrary  to any  existing or future law,  such  invalidly  shall not impair the
operation of or affect those portions of this Agreement which are valid.

     Section 12.9 Paragraph Titles

     Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.

     Section 12.10 Entire Agreement

     This Agreement and the exhibits and documents referred to herein constitute
the entire  understanding and agreement among the parties hereto with respect to
the  subject  matter  hereof,  and  supersede  all  prior  and   contemporaneous
agreements and  understandings,  inducements or conditions,  express or implied,
oral or written, except as herein contained.  This Agreement may not be modified
or amended other than by an agreement in writing.

     Section 12.11 Amendments

     A. In addition to the amendments  otherwise  authorized herein,  amendments
may be made to this Agreement from time to time by the General Partners with the
Consent of the  Investors;  provided,  however,  that without the consent of the
Partners or Investors to be adversely affected by the amendment,  this Agreement
may not be amended so as to (i) convert an  Investor's  interest  into a General
Partner's  interest;  (ii) modify the limited  liability of an  Investor;  (iii)
alter the interest of a Partner or Investor in Net Cash Flow, Profit or Loss, or
Net  Proceeds of Sale or  Refinancing;  (iv)  increase the amount of the Capital
Contributions  required  to  be  paid  by  the  Investors;  or  (v)  extend  the
termination date specified in Section 2.4, except as provided in Section 12.11B.

     B. In addition to the amendments  otherwise  authorized herein,  amendments
may be made to this Agreement from time to time by the General Partners, without
the consent of any of the Investors,  (i) to add to the duties or obligations of
the General  Partners  or  surrender  any right or power  granted to the General
Partners herein,  for the benefit of the Investors;  (ii) to cure any ambiguity,
to correct or supplement any provision herein which may be inconsistent with any
other provision  herein, or to make any other provisions with respect to matters
or questions  arising under this Agreement which will not be  inconsistent  with
the provisions of this  Agreement;  (iii) to delete or add any provision of this
Agreement  required  to be deleted or added by the Staff of the  Securities  and
Exchange   Commission  or  other  federal  agency  or  by  a  state   securities
commissioner  or  similar  official  and  deemed  by  the  commission,   agency,
commissioner,  or official to be for the benefit or protection of the Investors;
(iv) to take any  actions  necessary  to cause  the  assets  of the Fund to come
within the exclusions from the definition of "plan assets"  contained in Section
2550.40lb-1  of  Title 29 of the Code of  Federal  Regulations;  and (v) to give
effect to any action permitted pursuant to Section 5.2; provided,  however, that
no  amendment  shall be  adopted  pursuant  to this  Section  12.2.B  unless its
adoption  (1) is for the  benefit  of or not  adverse to the,  interests  of the
Investors; (2) is consistent with Section 5.2;

                                      A-38

<PAGE>

3) does not affect the  distribution  of Net Cash Flow or Net  Proceeds of
Sale or Refinancing or the allocation of Profit or Loss among the Investors as a
class and the  General  Partners  as a class,  except as  provided in clause (y)
below;  and (4) does not affect the limited  liability  of the  Investors or the
status of the Fund as a partnership for federal income tax purposes. In addition
to the amendments  otherwise  authorized herein,  amendments may be made to this
Agreement (x) prior to or in connection  with the initial closing of the sale of
Units  pursuant to the Offering,  so long as purchasers  are given notice of the
amendment  prior to the closing,  and (y) to amend  provisions  of Article IV of
this  Agreement   relating  to  the   allocations  of  Profit  or  Loss  and  to
distributions of Net Cash Flow or Net Proceeds of Sale or Refinancing  among the
Partners  and  Investors  if the  Fund is  advised  at any  time  by the  Fund's
Accountants  and  counsel  that the  allocations  provided in Article IV of this
Agreement  are unlikely to be respected  for federal  income tax  purposes.  The
General  Partners  are  empowered  to  amend  the  distribution  and  allocation
provisions  of Article IV pursuant to Section  12.11B(y)  to the minimum  extent
necessary in accordance with the advice of the Fund's Accountants and counsel to
effect the plan of  distribution  of Net Cash Flow and Net  Proceeds  of Sale or
Refinancing,  and,  consistent  therewith,  the  allocations  of Profit and Loss
provided in this  Agreement.  New  allocations  made by the General  Partners in
reliance upon the advice of the Fund's  Accountants  and counsel shall be deemed
to be made pursuant to the fiduciary  obligation of the General  Partners to the
Fund and the Investors, and no such new allocations shall give rise to any claim
or cause of action by any  Investor.  This Section 12.11 shall be subject to the
provisions of Section 5.9 of this Agreement.

     C. If this  Agreement  is amended as a result of adding or  substituting  a
Limited Partner or increasing the investment of a Limited Partner, the amendment
shall be signed by the General  Partners and by the Person to be  substituted or
added, or the Limited  Partner  increasing his investment in the Fund, and, if a
Limited Partner is to be substituted,  by the assigning Limited Partner. If this
Agreement  is  amended to  reflect  the  designation  of an  additional  General
Partner,  the amendment  shall be signed by the other General Partner or General
Partners and by the additional General Partner.  If this Agreement is amended to
reflect the  withdrawal  of a General  Partner  when the business of the Fund is
being  continued,  the  amendment  shall be  signed by the  withdrawing  General
Partner and by the remaining or successor General Partner or General Partners.

     D. In  making  any  amendments,  there  shall be  prepared  and  filed  for
recordation by the General Partners all documents and  certificates  required to
be  prepared  and  filed  under  the  Act  and  under  the  laws  of  the  other
jurisdictions under the laws of which the Fund is then formed or qualified.

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

                                GENERAL PARTNERS:

   ATTEST:                                   MERIDIAN HEALTHCARE
                                                  INVESTMENTS, INC.
                                             (the Development General Partner)

                                             By:                        (SEAL)


   ATTEST:                                  BROWN HEALTHCARE, INC.
                                            (the Administrative General Partner)

                                            By:                         (SEAL)


                                      A-39

<PAGE>

                         SUBORDINATED LIMITED PARTNERS:

   ATTEST:                                  MERIDIAN HEALTHCARE
                                                 INVESTMENTS, INC.


                                            By:                       (SEAL)

                                            REALTY ASSOCIATES 1988 LIMITED
                                                        PARTNERSHIP

                                            By: RESIDUAL INVESTMENT
                                                   ASSOCIATES, A MARYLAND
                                                   LIMITED PARTNERSHIP,
                                                   General Partner


   ATTEST:                                  By: A.B. RESIDUAL, INC.,
                                                   General Partner

                                            By:                       (SEAL)


                            ASSIGNOR LIMITED PARTNER:

   ATTEST:                                  BROWN HEALTHCARE HOLDING
                                                   CO., INC.

                                            By:                       (SEAL)






                                      A-40