EXHIBIT 3.5


















                              AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
                          DATED AS OF OCTOBER-10, 1986
                            AMENDED DECEMBER 12, 1988

















<PAGE>


                              AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       of
                 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP

                                TABLE OF CONTENTS


                                                                            PAGE

ARTICLE 1-DEFINITIONS                                                         1

ARTICLE 2-THE LIMITED PARTNERSHIP                                             8
     2.1   Formation of the Partnership                                       8
     2.2   Partnership Name                                                   8
     2.3   Business and Purposes of the Partnership                           8
     2.4   Principal Place of Business                                        8
     2.5   Term of the Partnership                                            8
     2.6   Execution of Documents                                             8
     2.7   Organizational Limited Partner                                     9
     2.8   Agent for Service of Process                                       9

ARTICLE 3-GENERAL OPERATING PROVISIONS                                        9
     3.1   General                                                            9
     3.2   Borrowing Limitations                                              9
     3.3   Reinvestment of Cash Available From Operations and Cash
           Available From Sale or Refinancing                                 9
     3.4   Joint Ventures                                                    10
     3.5   Participation in Aircraft Investment with Affiliates              10
     3.6   Partnership Expenses                                              10

ARTICLE 4-THE GENERAL PARTNER                                                11
     4.1   Management Power                                                  11
     4.2   Restrictions on Authority of the General Partner                  14
     4.3   Compensation Plan                                                 14
     4.4   Liability of the General Partner                                  14
     4.5   Similar Activities of the General Partner and Presentation of
           Opportunities to the Partnership                                  14
     4.6   Activities of Officers and Directors                              15
     4.7   Indemnification of the General Partner and its Affiliates         15
     4.8   Other Matters Concerning the General Partner                      16
     4.9   Agreements with the General Partner or a Related Person           17
     4.10  Subcontracting by General Partner                                 18
     4.11  Conveyances                                                       18
     4.12  Election to Be Governed by Successor or Different Limited
           Partnership Law                                                   18
     4.13 Minimum Net Worth of the General Partner                           18

ARTICLE 5-COMPENSATION AND REIMBURSEMENT OF EXPENSES TO THE
          GENERAL  PARTNER AND ITS AFFILIATES                                18
     5.1   Acquisition Fee                                                   18
     5.2   Management Fee                                                    19
     5.3   Distributions and Allocations                                     19
     5.4   Disposition or Remarketing Fee                                    19
     5.5   Fees Paid to Third Parties                                        19
     5.6   Expenses of the General Partner                                   19
     5.7   Reimbursement for Sums Advanced to the Partnership                19
     5.8   Additional Services to the Partnership                            20
     5.9   Fees Payable on Cessation as the General Partner                  20


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                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE 6-THE LIMITED  PARTNERS AND ASSIGNEES                                20
     6.1   Limited Liability                                                 20
     6.2   Restrictions on Limited Partners and Assignees                    20
     6.3   Outside Activities                                                20
     6.4   No Withdrawal of Contributions                                    20
     6.5   Return of Capital                                                 20
     6.6   Death, Incompetency, or Bankruptcy of a Limited Partner or
           Assignee                                                          20

ARTICLE 7-MEETINGS AND VOTING                                                21
     7.1   Meetings                                                          21
     7.2   Notice of Meeting                                                 21
     7.3   Record Date                                                       21
     7.4   Adjournment                                                       21
     7.5   Waiver of Notice; Consent to Meeting; Approval of Minutes         22
     7.6   Quorum                                                            22
     7.7   Conduct of Meeting                                                22
     7.8   Action Without a Meeting                                          22
     7.9   Voting Rights                                                     23
     7.10  Voting Rights Conditional                                         23

ARTICLE 8-CAPITAL CONTRIBUTIONS, TRANSFER TO UNDERWRITERS, AND CAPITAL
          ACCOUNTS                                                           24
     8.1   Capital Contribution of the General Partner                       24
     8.2   Capital Contribution of the Organizational Limited Partner        24
     8.3   Sale of Units to  Underwriters                                    24
     8.4   Purchase  of Units or  Securities  by the General Partner or
           its  Affiliates                                                   24
     8.5   Purchase of Units by Affiliate of PSA                             25
     8.6   Units Not Assessable                                              25
     8.7   No Interest on Capital Contribution                               25
     8.8   Creditors' Interest in the Partnership                            25
     8.9   Nature of Interests                                               25
     8.10  Sale of Additional Interests                                      25
     8.11  No Preemptive Rights                                              26
     8.12  Capital Accounts                                                  26
     8.13  Purchase or Sale of Units                                         28
     8.14  Registration Rights of the General Partner                        28
     8.15  Changes in Outstanding Units                                      29

ARTICLE 9-TAX ALLOCATION OF INCOME AND LOSSES                                29
     9.1   Apportionment of Net Income, Net Loss, and Distributions          29
     9.2   Allocations for Capital Account Purposes                          29
     9.3   Allocations for Tax Purposes                                      30
     9.4   Tax Elections                                                     31

ARTICLE 10-DISTRIBUTIONS                                                     32
     10.1  Distributions for 1986                                            32
     10.2  Distributions of Cash Available From Operations                   32
     10.3  Distributions of Cash Available From Sale or Refinancing          32
     10.4  Distributions of Cash From Other Sources                          32
     10.5  Distributions of Partnership Assets                               32
     10.6  Liquidating Distributions                                         33
     10.7  Tax Withholding                                                   33


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<PAGE>


                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE 11-BOOKS, RECORDS, ACCOUNTS, AND REPORTS                             33
     11.1  Books and Records                                                 33
     11.2  Limited Partners' Rights Regarding Books, Records, and Tax
           Information                                                       34
     11.3  Accounting Basis and Fiscal Year 35                               34
     11.4  Reports                                                           34
     11.5  Tax Matters Partner                                               35
     11.6  Bank Accounts                                                     35
     11.7  Confidentiality                                                   35

ARTICLE 12-ISSUANCE OF CERTIFICATES                                          35
     12.1  Issuance of Certificates                                          35
     12.2  Lost, Stolen, or Destroyed Certificates                           36
     12.3  Maintenance of Transfer Records                                   36
     12.4  Record Unit Holder                                                36
     12.5  Withdrawal of Certificates                                        36
     12.6  Legends                                                           37

ARTICLE 13-TRANSFER OF INTERESTS                                             37
     13.1  Transfer in General                                               37
     13.2  Transfer of Interests of the General Partner                      37
     13.3  Transfer of Units                                                 37
     13.4  Transfer of Depositary Units                                      37
     13.5  Depositary Arrangements                                           39
     13.6  Restrictions on Transfer, Non-United States Citizens              39
     13.7  General Partner's Right to Purchase Units                         40

ARTICLE 14-ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED
           PARTNERS                                                          41
     14.1  Admission of Substituted Limited Partners                         41
     14.2  Admission of Additional Limited Partners                          42
     14.3  No Action Necessary by Unitholders                                42

ARTICLE 15-CHANGES IN THE GENERAL PARTNER                                    42
     15.1  General Partner Ceasing to be the General Partner                 42
     15.2  Withdrawal or Removal of the General Partner                      43
     15.4  Rights on Removal or Withdrawal                                   43
     15.5  Liability on Removal or Withdrawal                                44
     15.6  Successor and Predecessor General Partner                         44
     15.7    Interest of Departing General Partner and Successor             44

ARTICLE 16-DISSOLUTION, WINDING UP, AND LIQUIDATION                          45
     16.1  Dissolution                                                       45
     16.2  Continuation of the Business of the Partnership                   45
     16.3  Authority to Wind Up                                              45
     16.4  Accounting                                                        46
     16.5  Winding Up and Liquidation                                        46
     16.6  No Recourse Against the General Partner                           46
     16.7  Claim of Limited Partners and Assignees                           46
     16.8  General Partner's Obligation to Make Up Negative Capital
           Account                                                           46

ARTICLE 17-POWER OF ATTORNEY                                                 47


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                                TABLE OF CONTENTS

                                                                            PAGE



ARTICLE 18-AMENDMENTS TO PARTNERSHIP DOCUMENTS                               48
     18.1  Amendments  by the  General  Partner                              48
     18.2  Amendment  Procedures                                             49
     18.3  Restricted Amendments                                             49
     18.4  Amendments Needing Consent.of the General Partner                 50
     18.5  Amendments to Certificate of Limited Partnership                  50
     18.6  Amendment Regarding New General Partner                           50

ARTICLE 19-MISCELLANEOUS PROVISIONS                                          50
     19.1  Notices                                                           50
     19.2  Choice of Venue and Law                                           51
     19.3  Article and Section Headings                                      51
     19.4  Sole Agreement                                                    51
     19.5  Force Majeure                                                     51
     19.6  Remedies Cumulative                                               51
     19.7  Waiver                                                            51
     19.8  Waiver of Action for Partition                                    51
     19.9  Assignability                                                     51
     19.10 Gender and Number                                                 51
     19.11 Further Action                                                    52
     19.12 Creditors                                                         52
     19.13 Construction                                                      52
     19.14 Severability                                                      52
     19.15 Survival                                                          52
     19.16 Execution in Counterparts                                         52

Exhibit 1-Certificate for Limited Partnership Units


                                       iv


<PAGE>


                              AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP


     This Amended and  Restated  Agreement  of Limited  Partnership  dated as of
October  10,  1986 is made and  entered  into by and among  Airlease  Management
Services,  Inc.,  a Delaware  corporation,  as general  partner,  United  States
Airlease Holding,  Inc., as the  Organizational  Limited Partner,  and all other
parties  who shall  become  partners  of this  limited  partnership  as provided
herein.

     WHEREAS,  the Partners heretofore have entered into an Agreement of Limited
Partnership dated July 8, 1986; and

     WHEREAS, the Partners desire to amend and restate such Agreement of Limited
Partnership in its entirety as hereinafter set forth;

     NOW,  THEREFORE,  for and in  consideration  of the  foregoing,  and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:

                                    ARTICLE 1

                                   DEFINITIONS

     Unless the context  otherwise  specifies or requires,  the terms defined in
this  Article 1 shall,  for the  purposes of this  Agreement,  have the meanings
herein specified.  These terms shall supersede and replace any other definitions
contained in the California Act. Unless otherwise  specified,  all references in
this  Agreement  to  Articles  or  Sections  are to Articles or Sections of this
Agreement.

     ACQUISITION  FEE:  The fee paid by or on behalf of the  Partnership  to the
General Partner or its Affiliates as set forth in Section 5.1.

     ADDITIONAL LIMITED PARTNER:  A Person admitted to the Partnership  pursuant
to Section 14.2 as a Limited Partner.

     ADJUSTED  PROPERTY:  Any  property  the  Carrying  Value of which  has been
adjusted pursuant to Section 8.12(D) (i).

     AFFILIATE:  Any Person that directly or indirectly controls,  is controlled
by, or is under  common  control  with the Person in  question.  As used in this
definition of  Affiliate,  the term control  means the  possession,  directly or
indirectly,  of the power to direct or cause the direction of the management and
policies  of a  Person,  whether  through  ownership  of voting  securities,  by
contract or otherwise.

     AGREED  VALUE:  The  fair  market  value  of any  Contributed  Property  as
determined by the General Partner using such  reasonable  method of valuation as
may be adopted  by the  General  Partner.  The  General  Partner  shall,  in its
discretion,  use such method as it deems  reasonable and appropriate to allocate
the aggregate  Agreed Value of the  Contributed  Properties  transferred  to the
Partnership in a single or integrated  transaction among each separate property.
The Agreed Value of any Contributed  Property shall reflect any adjustments made
pursuant to Sections 8.12 (B) (iii) and 8.12(C).

     AGREEMENT This Amended and Restated Agreement of Limited Partnership as the
same may be amended from time to time.

     AIRCRAFT:  Commercial  aircraft,  spare or  separate  engines,  and related
Rotable Parts. "Aircraft" includes any beneficial interest in an Aircraft.

     AIRCRAFT COST: The total consideration  (which, for purposes of calculating
the  Acquisition  Fee,  shall  exclude  the  Acquisition  Fee) paid  directly or
indirectly  in  connection  with the  purchase of an  Aircraft,  whether paid to
sellers or other persons, either in cash, by way of Units or promissory notes or
by way of assuming or taking subject to any liens or mortgages  encumbering such
Aircraft.


                                       1


<PAGE>


     AIRLEASE:  United States  Airlease,  Inc., a California  corporation and an
Affiliate of the General  Partner and any successor to United  States  Airlease,
Inc. by merger or  consolidation  or by sale or transfer of all or substantially
all of the assets of United States Airlease, Inc.

     AIRLEASE MANAGEMENT SERVICES,  INC.: Airlease Management Services,  Inc., a
Delaware corporation, and any successor to Airlease Management Services, Inc. by
merger or consolidation  or by sale or transfer of all or  substantially  all of
the assets of Airlease Management Services, Inc.

     ASSIGNEE:  A Person to whom one or more Units or Depositary Units have been
transferred,  by  assignment of a Depositary  Receipt or otherwise,  in a manner
permitted under this Agreement, but who has not been admitted to the Partnership
as a Substituted  Limited Partner with respect to 'such Units. The rights of any
such Person in the  Partnership  with respect to Units for which such Person has
not been admitted to the  Partnership as a Substituted  Limited Partner shall be
(i) limited to the rights and obligations  appurtenant to such Units to share in
the allocations and  distributions  of the  Partnership,  including  liquidating
distributions of the Partnership,  and (ii) except as expressly provided herein,
otherwise  subject to the limitations  under the California Act on the rights of
an assignee who has not become a substituted limited partner.

     BOOK-TAX  DISPARITIES:  The differences between a Partner's Capital Account
balance,  as  maintained  pursuant to Section  8.12,  and such  balance had the'
Capital  Account been  maintained  strictly in  accordance  with tax  accounting
principles  (such  disparities  reflecting the differences  between the Carrying
Value of either Contributed Properties or Adjusted Properties,  as adjusted from
time to time, and the adjusted basis thereof for Federal income tax purposes).

     CALIFORNIA ACT: The California Revised Limited  Partnership Act, as amended
and in effect from time to time, and any successor statute thereto.

     CAPITAL  ACCOUNT:  The  capital  account  maintained  for each  Partner and
Assignee pursuant to Section 8.11.

     CAPITAL  CONTRIBUTION:  Any cash or  Contributed  Property  which a Partner
contributes  or is deemed to have  contributed  to the  Partnership  pursuant to
Article 8. .

     CAPITAL  EXPENDITURES:  Expenditures for the acquisition of assets having a
useful life to the Partnership of more than one year.

     CARRYING  VALUE:  (a) With respect to a  Contributed  Property,  the Agreed
Value of such property reduced (but not below zero) by all depreciation and cost
recovery  deductions  charged to the  Partners'  Capital  Accounts  pursuant  to
Section 8.12(A) with respect to such property, and (b) with respect to any OTHER
PROPERTY,  THE adjusted  basis of such property for Federal income tax purposes,
as of the time of  determination.  The Carrying  Value of any property  shall be
adjusted from time to time in accordance with Sections 8.12(C) and 8.12(D),  and
to reflect changes,  additions,  or other  adjustments to the Carrying Value for
dispositions,  acquisitions,  or improvements of Partnership  assets,  as deemed
necessary, or appropriate by the General Partner.

     CASH AVAILABLE FROM OPERATIONS:  Net Revenues of the Partnership,  less (i)
principal and interest on Partnership  liabilities,  (ii) funds used for capital
improvements or replacements, (iii) funds and reserves for working capital, debt
refinancing,  contingencies,  and other purposes deemed reasonably  necessary by
the General Partner,  and (iv) Casualty  Proceeds used, in the discretion of the
General Partner, to acquire additional Aircraft.

     CASH  AVAILABLE FROM SALE OR  REFINANCING:  The proceeds,  including  Sales
Proceeds, received by the Partnership in connection with a sale, refinancing, or
casualty of  Aircraft,  after (a) the  payment of all costs and  expenses of any
kind or nature  incurred  by the  Partnership  in  connection  with  such  sale.
refinancing, or casualty, (b) the utilization of any such proceeds in connection
with the discharge of debts and other  obligations of the Partnership  deemed by
the General  Partner to be advisable to be discharged  with the proceeds of such
sale,  refinancing,  or casualty,  and (c) the  retention of such  proceeds or a
portion thereof in connection with the creation of or addition to any reserves


                                        2


<PAGE>


established by the General Partner, in its sole discretion. "Cash Available From
Sale or  Refinancing"  does not  include  any  interest  payable on  installment
obligations  received  by the  Partnership  upon  such a sale,  refinancing,  or
casualty.

     CASUALTY  PROCEEDS:  Recoveries  under  insurance  policies  and  other net
receipts representing a recovery for loss or destruction of Aircraft.

     CERTIFICATE:   A  non-negotiable  certificate  issued  by  the  Partnership
evidencing  ownership of one or more Units  substantially in the form of Exhibit
1.

     CERTIFICATE OF LIMITED PARTNERSHIP:  The certificate of limited partnership
for the Partnership filed pursuant to the California Act, as the certificate may
be amended from time to time.

     CLOSING DATE: The date or dates on which the Units in the Initial Offering
(including any Units sold pursuant to the Underwriters'  over-allotment  option)
are issued and sold.

     CODE: The Internal Revenue Code of 1954, as amended and in effect from time
to time.  References  in this  Agreement  to the Code or to sections of the Code
shall include any successor statutes or sections.

     CONTRIBUTED PROPERTY: Each Contributing Partner's interest in each property
or other consideration, but excluding cash and cash equivalents,  contributed to
the  Partnership  by such  Contributing  Partner (or deemed  contributed  to the
Partnership upon termination  thereof pursuant to Section 708 of the Code). Once
the Carrying  Value of a  Contributed  Property is adjusted  pursuant to Section
8.12(D) (i), such property shall no longer constitute a Contributed Property for
purposes  of Section  9.2(B) but shall be deemed an Adjusted  Property  for such
purposes.

     CONTRIBUTING  PARTNER:  Each Partner or Assignee contributing (or deemed to
have contributed upon termination of the Partnership  pursuant to Section 708 of
the Code) Contributed Property to the Partnership.

     DEPARTING GENERAL PARTNER:  A General Partner,  as of the effective date of
any withdrawal or removal of such General Partner pursuant to Section 15.2, or a
General Partner who has otherwise ceased to be a General Partner.

     DEPOSITARY:  Manufacturers Hanover Trust Company, or any successor to it as
depositary under the Depositay  Agreement or any other Person appointed to serve
as depositary.

     DEPOSITARY AGREEMENT: That agreement so designated,  among the Partnership,
the Depositary,  the General Partner,  and the holders of Depositary Receipts as
it may be amended or supplemented from time to time.

     DEPOSITARY RECEIPT: A depositary  receipt,  executed and delivered by or on
behalf of the Depositary in accordance with the Depositary Agreement, evidencing
ownership of one or more Depositary Units.

     DEPOSITARY UNIT: A depositary unit  representing a Unit on deposit with the
Depositary pursuant to the Depositary Agreement.

     DISPOSITION  OR  REMARKETING  FEE: A fee payable by the  Partnership to the
General  Partner or an Affiliate  thereof on the  disposition or remarketing for
lease of an Aircraft, payable as set forth in Section 5.4.

     FAA Federal Aviation Administration.

     FAA ACT: The Federal Aviation Act of 1958, as amended.

     FAIR MARKET VALUE:  The fair market value of an asset or group of assets as
determined  by an  independent  third  party  appraiser  chosen  by the  General
Partner.


                                       3


<PAGE>


     FINAL DETERMINATION:  A final adjudication regarding subject Federal income
tax issues or a final  administrative  determination of such issues agreed to by
the General Partner.

     GENERAL PARTNER:  Airlease  Management  Services,  Inc., in its capacity as
general  partner of the  Partnership,  and any successor or  additional  general
partner of the Partnership.

     GENERAL PARTNER CAPITAL  ACCOUNT:  That Capital Account  maintained for the
General Partner with respect to the interest of the General Partner as a general
partner of the Partnership pursuant to Section 8.11.

     INITIAL  UNIT  ISSUE  PRICE:  That  price  specified  in  the  Underwriting
Agreement as the price at which a Unit WILL be purchased by the  Underwriters in
the Initial Offering.

     INITIAL UNIT  OFFERING  PRICE:  That price  specified  in the  Underwriting
Agreement as the price at. which a Unit will be offered by the  Underwriters  to
the public in the Initial Offering.

     INITIAL LIMITED PARTNERS: The Underwriters.

     INITIAL  OFFERING.  The initial public offering of the Depositary Units. as
more fully described in the  Registration  Statement,  including the sale of any
Units pursuant to the exercise of any over-allotment option. .

     ISSUE PRICE: The price at which a Unit is purchased from the Partnership.

     LIMITED PARTNER CAPITAL ACCOUNT:  That Capital Account  maintained for each
Limited Partner or Assignee with respect to such Limited Partner's or Assignee's
Units pursuant to Section 8.12.

     LIMITED PARTNERS:  The Organizational  Limited Partner, the Initial Limited
Partners,  and the holders of Units who have been admitted to the Partnership as
Substituted  Limited  Partners  or  as  Additional  Limited  Partners.  "Limited
Partner" means one of the Limited Partners.

     MAJORITY  INTEREST:  The  interest  of Limited  Partners  of record who are
Limited  Partners  (rather than  Assignees) with respect to more than 50% of the
total  number of all  outstanding  Units and  Depositary  Units  held by Limited
Partners (as Limited  Partners rather than as Assignees),  including the General
Partner and its Affiliates to the extent they own Units or Depositary Units.

     MANAGEMENT  FEE:  The fee paid to the General  Partner  pursuant to Section
5.2.

     NASDAQ: The National Association of Securities Dealers Automated Quotations
System.

     NATIONAL  SECURITIES  EXCHANGE:  AN exchange registered with the Securities
and Exchange  Commission  under Section 6(a) of the  Securities  Exchange Act of
1934.

     NET AGREED VALUE: (a) In the case of any Contributed  Property,  the Agreed
Value of such property or other  consideration  reduced by any  indebtedness  or
liabilities either assumed by the Partnership upon such contribution or to which
such property is subject when  contributed,  and (b) in the case of any property
currently  distributed  to a  Partner  or  distributed  in  liquidation  of  the
Partnership  pursuant to Section 16.5, the Partnership's  Carrying Value of such
property at the time such property is  distributed  reduced by any  indebtedness
either assumed by such Partner upon such  distribution or to which such property
is subject at the time of distribution.

     NET INCOME and NET LOSS: The net income and net loss, respectively,  of the
Partnership  calculated  in  accordance  with  accounting  methods  followed for
Federal income tax purposes.

     NET REVENUES:  The funds provided from  Partnership  operations  (excluding
cash from  sales or  refinancing  of  Aircraft  but  including  that  portion of
Casualty Proceeds representing the present value, calculated at the rate used by
the  Partnership  to recognize  income in  accordance  with  generally  accepted
accounting principles,  of the remaining rent due under the lease),  interest on
the Partnership's cash and any short-term investments as well as interest on any
carryback  financing  held in connection  with the sale of  Partnership  assets,
without   deduction  for  payment  of  interest  or  principal  on   Partnership
liabilities and without deduction for non-cash expenses (such as depreciation or


                                        4


<PAGE>


amortization),  but after  deducting  funds  used to pay  Partnership  operating
expenses, any Management Fees, and the fee payable to the General Partner or its
Affiliates for remarketing for lease an Aircraft as provided in Section 5.4. Net
Revenues do not include loan proceeds,  Sales Proceeds, or Capital Contributions
to the Partnership.

     NAAF: North American Aircraft Finance Corporation, an Affiliate of PSA.

     ORGANIZATIONAL LIMITED PARTNER: U.S. Holding.

     PARTNER:  A General Partner or a Limited Partner;  and "Partners" means the
General Partner and all Limited Partners.

     PARTNERSHIP:  The limited  partnership  created by this  Agreement  and any
successor  partnership  continuing  the business of the  Partnership  which is a
reformation or reconstitution of a partnership governed by this Agreement.

     PARTNERSHIP INTEREST: The interest of a Person in the Partnership.

     PARTNERSHIP ASSET: Any and all assets,  real or personal,  now or hereafter
owned by the  Partnership  or in or to which the  Partnership  has any interest,
right, or claim.

     PERSON: An individual,  partnership,  joint venture,  estate,  association,
corporation, trust company, trust, or other entity.

     PRESCRIBED  ASSET  VALUE:  As of any  date of  determination,  that  amount
determined  by  dividing  (a) an amount  equal to the  product  of (i) the total
number of outstanding Units  (immediately prior to an issuance of Units pursuant
to Section  8.10,  if such  issuance  triggered an asset  valuation  pursuant to
Section 8.12(D) (i)) times (ii) (1) in the case of a valuation  occasioned by an
issuance of Units  pursuant to Section  8.10,  the Issue Price as of the date of
issuance or (2) in the case of a valuation  occasioned by a current distribution
or a  deemed  distribution  resulting  from a  constructive  termination  of the
Partnership  pursuant to Section 708 of the Code,  the Unit Price as of the date
of such actual or deemed distribution, by (b) 99%.

     PSA TRANSACTION:  The transaction  whereby the Partnership through a trust,
has purchased Aircraft from and leased them back to, Pacific Southwest Airlines,
a California  corporation,  as more  particularly  described in the Registration
Statement.

PURCHASE AGENT: The purchase agent - designated by the General  Partner,  or any
     successor specified by the General
Partner.

     PURCHASE DATE: The date  determined by the General  Partner as the date for
purchase of all  outstanding  Units (except Units of the General  Partner or its
Affiliates)  -pursuant  to Section  13.7,  as  specified  in the notice  that is
furnished to holders of Units pursuant to Section 13.7(B).

     PURCHASE  FUNDS:  An amount in cash equal to the aggregate  purchase  price
(determined in accordance with Section 13.7) of all Units subject to purchase by
the General  Partner or its Affiliate on the Purchase  Date in  accordance  with
Section 13.7.

     RECAPTURE  INCOME:  Any  income  or  gain  recognized  by  the  Partnership
(computed  without regard to any  adjustment  required by Section 734 or Section
743 of the Code)  treated as  ordinary  income for Federal  income tax  purposes
pursuant to any provision of the Code converting capital gain to ordinary income
as a result of prior deductions.

     RECORD  DATE:  The  date  established  by  the  General  Partner,   in  its
discretion, for determining (a) the identity of Persons entitled to notice of or
to vote at any meeting of the  Partnership or entitled to vote by ballot or give
consent to  Partnership  action in  writing  without a meeting  or  entitled  to
exercise  rights in respect of any other lawful  action,  or (b) the identity of
Persons.  entitled to receive any report or distribution from the Partnership as
a Partner or Assignee.


                                        5


<PAGE>


     RECORD UNITHOLDER. As applied to the Limited Partners, the Persons shown as
Limited  Partners on the records of the  Partnership as of the close of business
on a  particular  day; as applied to a Depositary  Receipt,  the Person in whose
name the  Depositary  Receipt is registered on the books of the Depositary as of
the close of business on a particular business day; and as applied to the holder
of a Unit not deposited with the Depositary,  the record holder of such Units as
reflected on the records of the Partnership.

     REGISTRATION  STATEMENT:  The  Registration  Statement  on  Form  S-1  (NO.
33-7985) filed by the  Partnership  with the Securities and Exchange  Commission
under  the  Securities  Act of 1933 to  register  the  offering  and sale of the
Depositary  Units in the  Initial  Offering,  as it may be amended  from time to
time.

     RELATED ENTITY:  U.S. Leasing and any Person (i) as to which U.S.  Leasing,
directly  or  indirectly,  has the  power to  exercise  in excess of 50`0 of the
voting  power  with  respect  to   acquisitions   or   dispositions   of  assets
(notwithstanding the fact that any such acquisition or disposition is subject to
the approval of more than 50% of the voting  power) or owns in excess of SO%o of
the equity  interest and (II) which is organized and has its principal  place of
business in the United States.

     RELATED PERSON:  A General  Partner,  any partner,  officer,  director,  or
Affiliate of a General Partner,  or any Person in which any of the foregoing has
a material financial interest.

     RESIDENT ALIEN: A "resident  alien" as now or hereafter  defined in the FAA
Act, or any successor statute,  or in regulations  adopted pursuant to said Act,
or pursuant to any successor statute.

     RESIDUAL GAIN or RESIDUAL  LOSS:  Any net gain or net loss, as the case may
be, of the Partnership recognized for Federal income tax purposes resulting from
a sale,  exchange,  or other  disposition of a Contributed  Property or Adjusted
Property,  to the extent such net gain or net loss is not allocated  pursuant to
Section 9.3(B) to eliminate Book-Tax Disparities.

     ROTABLE PARTS: An item that can be  economically  restored to a serviceable
condition and in the normal course of operation is repeatedly  rehabilitated  to
its fully  serviceable  condition  over a period  approximating  the life of the
flight equipment to which it is related.

     SALE OR DISPOSITION: The sale or other disposition of Aircraft.

     SALES PROCEEDS:  The total consideration paid directly or indirectly to the
Partnership in connection with the sale of Aircraft,  whether paid in cash or by
way of assuming or taking  subject to any liens or  mortgages  encumbering  such
Aircraft;  and, as  received,  principal  payments  in respect of any  carryback
financing held in connection with such sale. "Sales Proceeds" shall also include
that portion of Casualty  Proceeds not representing the present value of prepaid
rent.

     SERVICE: The Internal Revenue Service.

     SUBSTITUTED LIMITED PARTNER: A Person who is admitted to the Partnership as
a Limited Partner pursuant to this Agreement in place of and with all the rights
of a Limited Partner pursuant to Section 14.1.

     TOTAL  AIRCRAFT  COST:  The cost of acquiring all the Aircraft owned by the
Partnership  at the  tire  such  calculation  is  made,  including  commissions,
expenses,  legal and accounting  fees,  Acquisition  Fees. all other expenses in
connection with the acquisitions, and the cost of the Aircraft.

     TRANSFER AGENT: The Depositary or any bank, trust company,  or other Person
appointed  by the  General  Partner  to act as  transfer  agent  for  Depositary
Receipts.

     TRANSFER  APPLICATION:   An  application  and  agreement  for  transfer  of
Depositary Units in the form set forth on the back of the Depositary  Receipt or
in a form substantially to the same effect in a separate  instrument by which an
Assignee  (or his  broker,  dealer,  or  nominee  holder  acting on his  behalf)
requests admission to the Partnership as a Substituted  Limited Partner,  agrees
to be bound by the terms and  conditions of this  Agreement  and the  Depositary
Agreement, grants a power of attorney


                                        6


<PAGE>


to the General  Partner  pursuant to Article 17, and  represents and warrants to
the Partnership that he is a United States Citizen or Resident Alien.

     US. HOLDING: United States Airlease Holding, Inc., a California corporation
and an Affiliate of the General Partner.

     US.  LEASING:  United  States  Leasing  International,  Inc.,  a California
corporation and an Affiliate of the General Partner.

     UNDERWRITERS: Those underwriting firms listed in the Underwriting Agreement
or an  exhibit  or  schedule  thereto  which  agree to  purchase  Units from the
Partnership.

     UNDERWRITING  AGREEMENT:  The  agreement  to be  entered  into prior to the
Closing Date among the General Partner, U.S. Leasing, Airlease, the Partnership,
and the  Underwriters  with respect to the purchase of Units by the Underwriters
in the Initial Offering.

     UNITED STATES CITIZEN: A "citizen of the United States" as now or hereafter
defined in the FAA Act, or any  successor  statute,  or in  regulations  adopted
pursuant to said Act, or pursuant to any such successor statute.

     UNITS:  Those  units  of  limited  partners'  interest  in the  Partnership
acquired or issued pursuant to this Agreement.

Unitholden  Each owner of Units who is either a Limited  Partner  (including the
Organizational Limited Partner) or an Assignee.

     UNIT PRICE OF A UNIT OR A DEPOSITARY UNIT: As of any date of determination,
(a) if such Unit or Depositary Unit is one of a class of Depositary Units listed
or admitted  to trading on a National  Securities  Exchange,  the average of the
last  reported sale prices per  Depositary  Unit regular way or, in case no such
reported sale takes place regular way, the average of the arithmetic mean of the
last  reported bid and asked prices per  Depositary  Unit, in either case on the
principal National Securities Exchange on which such Depositary Units are listed
or admitted to trading, for the five trading days immediately preceding the date
of  determination;  (b)' if such  Unit or  Depositary  Unit is not of a class of
Depositary Units listed or admitted to trading on a National Securities Exchange
but is of a class quoted by NASDAQ, the average of the last reported sale prices
per  Depositary  Unit quoted by NASDAQ or, in case no such  reported  sale takes
place on any such day or in case last  reported  sale  prices  are not quoted by
NASDAQ,  the average of the arithmetic  mean of the closing bid and asked prices
per Depositary Unit, for the five trading days  immediately  preceding such date
of determination, as furnished by the National Quotation Bureau Incorporated, or
such other  nationally  recognized  quotation  service as may be selected by the
General  Partner for such purpose,  if said Bureau is not at the time furnishing
quotations;  or (c) if  such  Unit  or  Depositary  Unit  is not of a  class  of
Depositary Units listed for trading on a National  Securities Exchange or quoted
by NASDAQ, an amount equal to the fair market value of such Unit as of such date
of  determination,  as  determined by the General  Partner using any  reasonable
method of valuation it may select. For purposes of this definition,  a Unit WILL
be deemed to be one of a class of  Depositary  Units if the  holder of such Unit
may  obtain a  Depositary  Unit by  depositing  such  Unit  with the  Depositary
pursuant to the Depositary Agreement.

     UNREALIZED GAIN: As of any date of  determination,  the excess,  if any, of
the fair market value of any  Partnership  Asset (as  determined  under  Section
8.12(D)) as of such date of determination  over the Carrying Value of such asset
as of such date of determination (prior to any adjustment to be made pursuant to
Section 8.12(D) as of such date).

     UNREALIZED LOSS: As of any date of  determination,  the excess,  if any, of
the Carrying  Value of any  Partnership  Asset as of such date of  determination
(prior to any adjustment to be made pursuant to Section 8.12(D) as of such date)
over the fair  market  value  of such  property  (as  determined  under  Section
8.12(D)) as of such date of determination.


                                       7


<PAGE>


                                    ARTICLE 2

                             THE LIMITED PARTNERSHIP


     2.1   FORMATION   OF  THE   PARTNERSHIP.   The  General   Partner  and  the
Organizational  Limited  Partner  have  formed  the  Partnership  as  a  limited
partnership organized under the California Act.

     2.2  PARTNERSHIP  NAME. The name of the  Partnership  is "Airlease  Ltd., A
California Limited Partnership." The Partnership may conduct business under such
other name or names as the General Partner may from time to time deem necessary,
appropriate,  or  advisable,  including  the name of the  General  Partner.  The
General Partner in its sole discretion may change the name of the Partnership at
any time and from time to time.  The General  Partner  and the Limited  Partners
hereto shall  promptly  execute,  and the General  Partner shall file and record
with proper  offices in each  jurisdiction  in which the  Partnership  does,  or
elects to do, business,  such certificates or other statements or instruments as
are  required by the  limited  partnership  statute,  fictitious  name  statute,
assumed  name  statute,   or  any  other  similar  statute  in  effect  in  such
jurisdiction  in  order  to  conduct  the  Partnership  business  therein  as  a
partnership in which the limited partners have limited liability.

     2.3 BUSINESS AND PURPOSES OF THE PARTNERSHIP. The. primary purpose of the
Partnership  is to acquire,  own,  operate,  manage,  finance,  lease,  and sell
Aircraft and interests  therein,  either directly or by way of joint ventures or
partnerships,  'either  in its own  name or in the  name or names of one or more
nominees  of the  Partnership  or one or more  trustees  of a trust of which the
Partnership is a beneficiary.  In addition,  the  Partnership  may engage in any
other  business  or do any and all  acts  and  things  which  may be  necessary,
incidental,  or convenient to carry on the Partnership  business and purposes as
specified  in this  paragraph.  For  purposes of this  Agreement,  any  Aircraft
acquired  and held by one or more  nominees or  trustees  for the benefit of the
Partnership  shall be  deemed to have  been  acquired  by and to be owned by the
Partnership  itself.  The Partnership  shall be empowered to do any and all acts
and  things  necessary,   appropriate,  proper,  advisable,  incidental  to,  or
convenient for the business and purposes described herein and for the protection
or benefit of the Partnership.

     2.4 PRINCIPAL  PLACE OF BUSINESS.  The  principal  place of business of the
Partnership shall be at 2988 Campus Drive, San Mateo,  California 94403, but the
General  Partner  may  substitute  or  establish  such other  place or places of
business of the  Partnership  (within or without the State of  California) as it
may, from time to time, deem necessary or appropriate;  provided,  however, that
the General Partner shall give the  Unitholders  notice in writing of any change
of address  of the  principal  place of  business  of the  Partnership  and,  in
connection  therewith,  shall amend the  Certificate  of Limited  Partnership in
accordance with applicable requirements of law.

     2.5 TERM OF THE  PARTNERSHIP.  The Partnership  commenced on June 18, 1986,
the date that the  Certificate  of Limited  Partnership  was filed in accordance
with the provisions of the California Act, and shall continue until December 31,
2036, or until the earlier  termination of the  Partnership  in accordance  with
Article 16.

     2.6 EXECUTION OF DOCUMENTS.  The General Partner,  on its own behalf and as
attorney-in-fact  for the other Partners and Assignees  pursuant to the power of
attorney granted in Article 17, shall execute,  acknowledge, and file or deliver
all  certificates  of limited  partnership,  amended or  restated  certificates,
instruments,  or other documents and  counterparts  thereof and make all filings
and  recordings  and perform all other acts as shall be necessary to comply with
the  laws of the  State  of  California  for  the  formation,  continuation,  or
reformation  of  the  Partnership,  for  the  continued  good  standing  of  the
Partnership,  and, when appropriate, for the termination of the Partnership. The
General  Partner  shall also  execute  such  certificates,  amended or  restated
certificates,  and  other  documents  conforming  hereto  and  do  such  filing,
recording,  publishing,  and other acts as may be appropriate to comply with the
requirements of law for the formation, continuation, reformation, qualification,
and/or  operation of a limited  partnership  (or as a  partnership  in which the
limited  partners  have  limited  liability)  in  all  jurisdictions  where  the
Partnership may wish to do business, which shall be accomplished prior to


                                        8


<PAGE>


doing  business  in any such  jurisdiction  if deemed  necessary  by the General
Partner for the maintenance of such limited liability.

     2.7  ORGANIZATIONAL  LIMITED  PARTNER.  In order to create the  Partnership
under the California  Act, the  Partnership  has  heretofore  accepted a capital
contribution in the amount of $10 from the Organizational Limited Partner for an
interest as a Limited Partner. Any allocations,  interest, or other profit which
may have  resulted  from the  investment or other use of such amount paid by the
Organizational  Limited  Partner to the  Partnership  prior to admittance of the
Initial Limited Partners shall be allocated 99% to the General Partner and 1% to
the Organizational  Limited Partner. The interest acquired by the Organizational
Limited  Partner  pursuant  to this  Section 2.7 is not  transferable  except by
operation of law.

     2.8 AGENT FOR SERVICE OF PROCESS.  The General  Partner shall select one or
more  Persons  to act as the  registered  agent for  service  of  process on the
Partnership.  The  initial  agent for  service of process  is Peter  Mezey,  615
Battery Street, San Francisco, California 94111.


                                    ARTICLE 3

                          GENERAL OPERATING PROVISIONS


     3.1  GENERAL.  The  Partnership  shall adhere to the  operating  provisions
contained in this Article 3, unless otherwise approved by a Majority Interest.

     3.2 BORROWING LIMITATIONS.

     (A) The Partnership  shall not borrow funds or assume  financing unless one
of the following applies:

          (1) Immediately  after giving effect to the borrowing or assumption of
     financing  and the purchase of the related  assets,  the total  Partnership
     indebtedness  as  reflected in its  accounting  records at the date of such
     proposed  borrowing  or  assumption  of  financing  is less than 50% of the
     higher  of (i)  Total  Aircraft  Cost  or (ii)  Fair  Market  Value  of the
     Partnership's  Aircraft;  however,  borrowings and assumption of financings
     may exceed  such 50%  limitation  for a period of up to 120 days so long as
     the General  Partner  uses its best efforts to reduce the  indebtedness  to
     comply with said 50% limitation within such 120-day period; or

          (2) The borrowed  funds are  necessary to prevent  foreclosure  on any
     Partnership Asset.

     (B) The  Partnership  may  borrow  funds  from the  General  Partner or its
Affiliates, subject to the limitations contained in Section 4.1(t).

     3.3  REINVESTMENT OF CASH AVAILABLE FROM OPERATIONS AND CASH AVAILABLE FROM
SALE OR REFINANCING.

     (A) (1)  During the year ended  December  31,  1986,  Cash  Available  From
Operations  in excess of the  amount  required  to be  distributed  pursuant  to
Section 10.1 shall be retained by the  Partnership  and used to establish a fund
for the purchase of  additional  Aircraft or other  purposes  determined  by the
General Partner.

          (2) During the year ended  December  31,  1987,  Cash  Available  From
     Operations in excess of the amount distributed  pursuant to Section 10.2(A)
     shall be retained by the  Partnership  and used to establish a fund for the
     purchase of additional Aircraft or other purposes determined by the General
     Partner.

          (3) After December 31, 1987, all Cash Available From Operations  shall
     be distributed pursuant to Section 10.2(B).

     (B) (1) Through  December 31, 2004, the  Partnership  may retain for use in
its business, any Cash Available From Sale or Refinancing remaining after making
the distribution required by Section 10.3(A).


                                       9


<PAGE>


     (2) After  December 31, 2004,  all Cash  Available From Sale or Refinancing
shall be distributed  pursuant to Section  10.3(C)  provided that if the General
Partner  determines that it would be in the  Partnership's  best interest,  Cash
Available From Sale or Refinancing may be used to repay indebtedness.

     3.4 JOINT  VENTURES.  The  Partnership  may invest in partnerships or joint
ventures  which  own or are  organized  to  acquire  Aircraft  with any  Person,
including any Person which is an Affiliate of the General Partner,  on terms and
conditions determined in the sole discretion of the General Partner.

     3.5 PARTICIPATION IN AIRCRAFT INVESTMENT WITH AFFILIATES.

     (A) So long as Airlease Management Services, Inc. or another Related Entity
is  the  General  Partner,  the  Partnership  may  only  make  Aircraft  leasing
investments offered to it in accordance with this Section.

     (B) Until September 30, 1991, the General Partner and Airlease hereby agree
to offer the  Partnership the right to acquire a 50%  participation  interest in
all  Aircraft  leasing  investments  to be made by any Related  Entity where the
aggregate  Aircraft  Cost in such  investment  is greater than S10 million.  The
Partnership  shall acquire such interest  subject to. the  determination  by the
General Partner that the investment is suitable for the  Partnership.  If, after
allocating an investment in accordance with the first two sentences  above,  the
total investment made by Related Entities  (including  through their interest in
the Partnership  either as a General Partner or a Limited  Partner) would exceed
U.S.  Leasing's   then-existing  credit  policy  regarding  maximum  permissible
investment  for a single  lessee,  the General  Partner and Airlease shall offer
and, subject to a determination of suitability,  the Partnership shall accept an
additional  participation  interest in an amount  necessary  to reduce the total
investment  by Related  Entities to an amount in compliance  with US.  Leasing's
credit  policy.  Any offer  required to be made by this  subsection  (i) is only
required  to be made at the time of the  commitment  (but may be made at a later
time in the sole  discretion  of the General  Partner or Airlease) to enter into
the  transaction  and (ii) must be accepted by the Partnership at the time. that
the  offer  is  made.  Notwithstanding  anything  in this  paragraph  (B) to the
contrary,  if the  Aircraft  leasing  investment  to be made by  Airlease or any
Related  Entity is a  leveraged  lease,  as defined in  Statement  of  Financial
Accounting  Standards No. 13, then Airlease may, in its  discretion,  decline to
offer the Partnership a participation interest in such investment.

     (C) After  September  30,  1991,  neither the General  Partner nor Airlease
shall  be  under  any  obligation  to  offer  the   Partnership  any  investment
opportunities.  However,  the General Partner and Airlease may continue to offer
investment  opportunities to the Partnership,  and the Partnership  shall accept
opportunities  deemed  suitable by the  General  Partner,  provided  one or more
Related  Entities makes at least 20% (including the interest in the  Partnership
then  owned by the  General  Partner  and all  Related  Entities)  of the  total
investment made by Related Entities and the Partnership in such transactions.

     (D) Notwithstanding  anything in paragraphs (A), (B) or (C) of this Section
3.5 to the contrary,  the Partnership may make Aircraft  leasing  investments in
which Related Entities do not participate (i) where the investment  committee of
the board of directors of U.S.  Leasing  determines that such  investment  would
cause US.  Leasing or the  affiliated  group  with  which it files  consolidated
federal income tax returns to forego current  utilization of foreign tax credits
or would  increase their foreign  assets,  or (ii) where the investment is in an
Aircraft which is subject to a tax benefit  transfer lease under the safe harbor
lease rules enacted under the Economic  Recovery Tax Act of 1981, or (iii) where
the Aircraft  investment is made by the Partnership  after or in anticipation of
the  disposition of the  Partnership's  interest in another  Aircraft in which a
Related Entity does not or did not have an interest,  and the board of directors
of the General Partner  determines that such new Aircraft  investment is for the
purpose of replacing the Partnership's interest in such other Aircraft.


                                       10


<PAGE>


     (E) For  purposes of this Section 35, a 5090  participation  interest in an
Aircraft  leasing  investment  by the  Partnership  and a Related  Entity  shall
include,  in the case of two Similar  Aircraft,  the  acquisition of one Similar
Aircraft by the  Partnership and one Similar  Aircraft by a Related  Entity.  As
used herein, a Similar Aircraft shall mean substantially similar aircraft leased
to the same lessee pursuant to substantially  similar leases and acquired by the
Partnership or a Related Entity at a  substantially  Similar  Aircraft Cost (the
difference not to exceed 59'0 of the lesser Aircraft Cost), all as determined by
the General Partner at the time of acquisition. .

     3.6 PARTNERSHIP ERPENSES.

     (A) The General  Partner  shall be  responsible  and shall pay for only its
expenses  incurred  (i) in  connection  with  certain  services  it  performs as
described in Sections  5.1.  5.2, and 5.4 for which it receives  fees  described
therein,  other than  reimbursements  for which it may be entitled to under said
sections,  and (ii) for overhead and salary  expenses of employees in connection
with the Initial Offering.

     (B)  Except  as set  forth in  Section  3.6(A),  the  Partnership  shall be
responsible and shall pay for all fees, costs, and expenses arising out of or in
connection  With  (i)  the   organization  of  the  Partnership   (ii)  the  PSA
Transaction;  (iii) the  qualification  of the Partnership to do business in any
state determined by the General Partner,  (iv) the registration or qualification
of the Depositary Units fog sale by the Partnership under applicable Federal and
state  securities  laws in  connection  with  the  Initial  Offering  or  future
offerings;  (v) the offering,  sale, and  distribution  of the Depositary  Unit:
pursuant to the Initial  Offering or any future  offerings;  (vi) the listing of
the Depositary Receipts on a National Securities  Exchange;  (vii) the planning,
preparation,  management,  and operation of the  Partnership,  including but not
limited to fees,  costs,  and expenses in connection with the purchase  holding,
operation,  financing,  refinancing,  and sale of Aircraft  or joint  venture or
partnership  interest  therein;  (viii)  fees and  reimbursements  to which  the
General Partner and its Affiliates are entitled


                                      10-A


<PAGE>


under this  Agreement;  and (ix) any and all other  items  arising  out of or in
connection with the business or activities of the Partnership.


                                    ARTICLE 4

                               THE GENERAL PARTNER


     4.1 MANAGEMENT POWER. Subject to Sections 7.9 and 18.2, the General Partner
shall have full, exclusive and complete  discretion,  power and authority in the
management  and  control  of the  business  of the  Partnership,  shall make all
decisions  affecting the business of the Partnership,  and may do or cause to be
done  any and all acts it deems  necessary  or  appropriate  to  accomplish  the
purposes of the  Partnership.  Any Person dealing with the General Partner shall
not be required to  determine  or inquire  into the  authority  and power of the
General Partner to bind the Partnership  and to execute,  acknowledge,  deliver,
and perform obligations under any and all documents. By way of illustration, but
not by way of  limitation,  such matters  shall  include the right,  power,  and
authority of the General Partner,  in its sole discretion,  without any approval
from Unitholders, and at the expense of the Partnership:

     (a) To cause the Partnership to enter into and perform the PSA Transaction:

     (b) To cause the Partnership to acquire, own, operate,  lease (as lessee or
lessor or both), develop, improve,  maintain,  finance, hold, control, exchange,
trade,  sell,  pledge,  convey in trust or otherwise  hypothecate  or dispose of
Aircraft,  appurtenances  thereof  and  personal  or  mixed  property  connected
therewith,   upon  such  terms  and  for  such  consideration  (including  cash,
securities,  Units,  Partnership  Interests,  and other property) as the General
Partner deems necessary or appropriate;

     (c) Subject to Section 3.2, to borrow money, to obtain credit, or to assume
debt in such amounts, on such terms and conditions and at such rates of interest
as  the  General   Partner  deems   appropriate,   from  banks,   other  lending
institutions, or any other Person, including the Partners and Assignees (subject
to Section  4.1(t)),  for any  purpose of the  Partnership,  including,  without
limitation,   any  loan   incurred  for  the  purpose  of  making  one  or  more
distributions to any or all Partners and Assignees,  including any distributions
which are,  in whole or in part,  a return of  Capital  Contributions;  and,  in
connection with such loans to mortgage, pledge, assign, or otherwise encumber or
alienate any or all of the Partnership  Assets,  including any income therefrom,
to secure or provide for the  repayment  thereof.  As between any lender and the
Partnership,  it shall be conclusively  presumed that the proceeds of such loans
are to be and  WILL be used  for the  purposes  authorized  herein  and that the
General  Partner  has the full power and  authority  to borrow such money and to
obtain such credit;

     (d) To place  record title to, or the right to use,  Partnership  Assets in
the name or names of one or more nominees or trustees for any purpose convenient
or beneficial to the Partnership;

     (e) To cause the  Partnership  to  employ  employees,  agents,  independent
contractors,.brokers,  attorneys,  accountants and other Persons,  including the
general  Partner and its  Affiliates,  and  employees  thereof,  to perform such
services for the Partnership as the General Partner may designate, on such terms
and for such compensation as the General Partner shall determine, and to dismiss
such persons from employment,  provided that compensation of the General Partner
and its  Affiliates  for the services set forth in Article 5 shall be limited to
the amounts set forth in said Article 5; , .

     (f) To  prepare  or cause to be  prepared  reports,  statements,  and other
relevant information for distribution to Unitholders;

     (g) To select the Partnership's accounting year;


                                       11


<PAGE>


     (h) To determine the appropriate accounting method or methods to be used by
the Partnership;

     (i) To cause the Partnership to offer and sell Units and other  Partnership
Interests   (whether  or  not  senior  to  the  Units)  to  the  public  through
underwriters or broker-dealers and to employ personnel,  agents, and dealers for
such purpose;

     (j) Subject to Article 18, to amend this Agreement;

     (k) To require in any or all Partnership contracts that the General Partner
shall not have any personal  liability  thereon and that the Person  contracting
with the  Partnership  is to look  solely to the  Partnership  or its assets for
satisfaction;

     (1) To execute, acknowledge, and deliver any and all instruments, on behalf
of the Partnership or otherwise, which it shall deem necessary or appropriate to
effectuate the right,  power, and authority of the General Partner,  and to take
all such  action in  connection  therewith  as it shall in its  discretion  deem
necessary or appropriate;

     (m) Subject to Section 3.3, to cause the  Partnership to reinvest or make a
commitment to reinvest all or any portion of Cash Available From  Operations and
Cash Available From Sale or Refinancing in additional Aircraft;

     (n) To purchase  Aircraft and delivery  positions in its own name or in the
name of a  nominee,  a trust,  or  otherwise  (and  assume  loans in  connection
therewith) and temporarily  hold title thereto,  for the purpose of facilitating
the  acquisition of such Aircraft,  the borrowing of money,  or the obtaining of
financing by the. Partnership,  or the completion of manufacture of the Aircraft
or for any other purpose related to the business of the Partnership;

     (o) To cause the Partnership to purchase  Aircraft from the General Partner
or its  Affiliates,  so long as the  price  payable  by the  Partnership  to the
General  Partner or any of its  Affiliates  for an Aircraft  does not exceed the
Fair Market Value of the Aircraft,  provided that if such purchase occurs within
three months of the  acquisition  of the Aircraft by the General  Partner or its
Affiliate,  the price to the Partnership  shall be the price paid by the General
Partner or its Affiliates plus any related costs and holding expenses;

     (p) To cause the Partnership to sell Aircraft to the General Partner or its
Affiliates on terms and conditions determined by the General Partner, so long as
the price  payable for such  Aircraft is at least equal to the Fair Market Value
of such Aircraft;

     (q) To prepare,  file,  and publish any and all  instruments  or  documents
necessary to enable the Partnership to transact  business or otherwise to exist,
operate,  and be recognized as a limited  partnership in  jurisdictions  outside
California;

     (r) To cause the  Partnership  to endeavor  to maintain a cash  reserve for
working capital, debt financing,  normal repairs,  replacements,  contingencies,
and other purposes deemed reasonably necessary by the General Partner,

     (s) To cause the Partnership to invest in partnerships or joint ventures;

     (t) To make, and to permit its Affiliates to make, loans to the Partnership
on terms which do not exceed the points,  charges,  and interest  which would be
charged by  unrelated  lenders on  comparable  loans for the same purpose in the
same locality,  provided  that, in no event will the  Partnership be required to
pay interest on any such loan at an annual rate  greater than that  permitted by
law;

     (u) To apply proceeds of any Sale or Disposition of any  Partnership  Asset
to payment of liabilities of the  Partnership and to pay,  collect,  compromise,
arbitrate, or otherwise adjust any and all other claims or demands of or against
the  Partnership  or to hold such  proceeds  against the  payment of  contingent
liabilities, known or unknown;


                                      12 -


<PAGE>


     (v) To purchase and maintain liability,  indemnity, and any other insurance
(including,  without limitation, errors and omissions insurance and insurance to
cover the  obligations  of the  Partnership  under Section  4.7),  sufficient to
protect  the  Partnership,   the  General  Partner,  its  officers,   directors,
employees,  agents,  and Affiliates from those liabilities and hazards which may
be insured  against in the conduct of the business and in the  management of the
business and affairs of the Partnership;

     (w) To invest funds of the  Partnership  in  interest-bearing  accounts and
short-term  investments  including,  without  limitation,   obligations  of  the
Federal,  state,  and  local  governments  and  their  agencies,   mutual  funds
(including   money  market  funds),   time  deposits,   commercial   paper,  and
certificates of deposit of commercial banks,  savings banks, or savings and loan
associations;  provided that the General  Partner shall use its best efforts not
to  invest  Partnership  funds in such a manner  that  the  Partnership  will be
considered to be holding  itself out as being engaged  primarily in the business
of investing,  reinvesting,  or trading in securities or be deemed thereby to be
an investment company under the Investment Company Act of 1940;

     (x) To make or revoke any  election on behalf of the  Partnership  as is or
may be permitted under the Code (including,  but not limited to, elections under
Section 754 of the Code and elections  relating to tax benefit  transfer leases)
or under the  taxing  statute  or rule of any state,  local,  foreign,  or other
jurisdiction,  and to  supervise  the  preparation  and  filing  of all  tax and
information returns which the Partnership may be required to file;

     (y) To collect all rents and other charges from lessees of the  Partnership
Assets in which case the General  Partner shall have full power and authority to
request,  demand,  collect,  receive,  and  receipt for all such rents and other
charges,  to institute legal  proceedings in the name of the Partnership for the
collection  thereof and for the  dispossession  of any Person  from  Partnership
Assets,  to  settle  or  compromise  all such  legal  proceedings  and any other
disputes  with  respect  to such  rents and  other  charges,  and to incur  such
expenses in connection  therewith as the General  Partner shall  determine to be
necessary or appropriate, which expenses may include, but not be limited to, the
costs of counsel for any such matter;

     (z) To cause to be disbursed the amount required to be paid pursuant to any
indebtedness of the Partnership;

     (aa)  To  pay,  extend,  renew,  modify,  adjust,  submit  to  arbitration,
prosecute,  defend, or compromise,  upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation,  suit, liability, cause
of  action,  or  claim,  including  taxes,  either  in favor of or  against  the
Partnership;

     (bb) To register,  qualify,  list,  or report,  or cause to be  registered,
qualified,  listed,  or  reported,  this  Agreement  or Units  issued  hereunder
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, any
other securities laws of the United States,  the securities laws of any state of
the  United  States,  the laws of any other  jurisdiction,  with any  securities
exchange,  or  pursuant  to  an  automated  quotation  system  of  a  registered
securities association, as the General Partner deems appropriate;

     (cc) To distribute money or Partnership Assets to Partners and Assignees in
accordance  with  Article  10,  regardless  of  the  source  of  such  money  or
Partnership  Assets,  including,  without  limitation,  money  borrowed  by  the
Partnership or by the General Partner on behalf of the Partnership;

     (dd) To  cause  the  Partnership  to  issue  Units  and  other  Partnership
Interests  in  exchange  for  Aircraft  or  for  joint  venture  or  partnership
interests;

     (ee) To form operating partnerships wherein the Partnership is a partner;

     (ff) To sell  any and all  Partnership  Assets.  on  terms  and  conditions
determined by the General  Partner,  unless such sale is of all or substantially
all of the Partnership Assets and is made


                                       13


<PAGE>


with a view to the dissolution,  discontinuation,  or material alteration of the
business of the  Partnership  (which sale  requires  the  approval of a Majority
Interest pursuant to Section 7.9 (A) (2) );

     (gg) To possess and exercise any additional  rights and powers of a general
partner under the partnership laws of California (including, without limitation,
the  California  Act)  and  any  other   applicable  laws,  to  the  extent  not
inconsistent with this Agreement; and

     (hh) In general,  to exercise in full all of the powers of the  Partnership
and to do any and all acts and  conduct all  proceedings  and execute all rights
and privileges,  contracts, and agreements of any kind whatsoever,  although not
specifically  mentioned in this Agreement,  that the General Partner in its sole
and absolute  discretion may deem necessary or appropriate to the conduct of the
business  and  affairs of the  Partnership  or to carry out the  purposes of the
Partnership.  The expression of any power or authority of the General Partner in
this  Agreement  shall  not in any way  limit  or  exclude  any  other  power or
authority which is not specifically or expressly set forth in this Agreement.

     4.2  RESTRICTIONS  ON  AUTHORITY OF THE GENERAL  PARTNER.  Anything in this
Agreement
to the contrary notwithstanding, the General Partner shall have no authority to:

     (A) Take any  action on any matter  with  respect  to which  approval  of a
Majority  Interest  (or  any  applicable  greater  percentage)  is  specifically
required under this Agreement without such approval having occurred;

     (B) Cause the Partnership to commit those acts prohibited by Article 3; or

     (C) Cause the  Partnership  to make  loans to the  General  Partner  or its
Affiliates.

     4.3  COMPENSATION  PLAN.  The General  Partner may  establish and carry out
pension,  profitsharing,  bonus,  purchase,  option,  savings,  thrift and other
retirement,  incentive and benefit plans, trusts and provisions for employees of
the  General  Partner or the  Partnership,  and any  director  or officer of the
General Partner and any such plans, trusts, and provisions which provide for the
issuance of Units or any other  securities of the  Partnership  need not require
the approval of any  Unitholder.  The General Partner may, to the fullest extent
permitted by law, indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans,  trusts, or provisions,  including  without  limitation
health insurance,  medical and dental  reimbursement,  life insurance,  accident
insurance,  and disability  insurance and, as provided in Section 4.7, liability
insurance.  Any costs and  expenses of plans,  trusts,  or  provisions  shall be
allocated  to the  General  Partner  or the  Partnership  to the  extent  of the
benefits to employees of the General Partner or the Partnership, respectively.

     4.4  LIABILITY OF THE GENERAL  PARTNER.  The General  Partner shall only be
liable  to  the  Partnership  and  the  Unitholders  for  actual  fraud,   gross
negligence,  or willful or wanton  misconduct,  but neither the General Partner,
nor its Affiliates, nor any of the directors,  offcers,  employees, or agents of
the General Partner or its Affiliates  shall be liable to either the Partnership
or any Limited  Partner or to Persons who have acquired a Partnership  Interest,
whether as  Assignees  or  otherwise,  for errors in judgment or for any acts or
omissions that do not constitute actual fraud,  gross negligence,  or willful or
wanton misconduct. In all transactions for or with the Partnership,  the General
Partner  shall act in good  faith  and in a manner  which  the  General  Partner
believes to be in, or not opposed to, the best interests of the Partnership.

     4.5  SIMILAR  ACTIVITIES  OF  THE  GENERAL  PARTNER  ARID  PRESENTATION  OF
OPPORTUNITIES TO THE PARTNERSHIP.

     (A) Except as  provided  in  Section  3.5,  any  Affiliate  of the  General
Partner, and any director,  officer,  employee, and agent of the General Partner
and its  Affiliates  shall be entitled to and may have  business  interests  and
engage in business  activities in addition to those relating to the Partnership,
may engage in the acquisition,  ownership, management,  operation,  development,
leasing,  and disposition of Aircraft and other equipment and any other business
and  activities,   including   business   interests  and  activities  in  direct
competition with the Partnership, for their own account and for the account of

                                       14


<PAGE>


others, without having or incurring any obligation to offer any interest in such
assets, business or activities to the Partnership, or any Unitholder, and no
other provision of this Agreement shall be deemed to prohibit any such Person
from conducting such other business and activities. Neither the Partnership nor
any of the Unitholders shall have any rights by virtue of this Agreement or the
relationship created hereby in any business ventures of any Affiliate of the
General Partner or any director, officer, employee, or agent of the General
Partner or an Affiliate of the General Partner.,

     (B) So long as  Airlease  Management  Services,  Inc.  remains  the General
Partner,  it shall not engage in any business activity other than those relating
to its interest in or position as General Partner of the Partnership.

     (C) Except as may be provided in Section 3.5,  the General  Partner and its
Affiliates and the directors, officers, employees, agents, and Affiliates of the
General  Partner  and its  Affiliates  shall  not  have  any  obligation  to the
Partnership or the Unitholders to make investment opportunities available to the
Partnership or to any other parties whether or not such  opportunities  would be
suitable for investment by the Partnership.

     4.6 ACTIVITIES OF OFFICERS AND DIRECTORS. Any officers and directors of the
General  Partner  shall have the right to be otherwise  employed by an entity or
entities other than the Partnership on a part-time or full-time basis, except as
determined by the General  Partner.  Nothing herein shall prevent any officer or
director of the General  Partner  from  becoming a Limited  Partner or Assignee,
whereupon  such  Person  shall be entitled to all rights and shall be subject to
all  obligations  relating  to the Units and shall as to such  Units be deemed a
Limited Partner or Assignee, as applicable.

     4.7 INDEMNIFICATION OF THE GENERAL FARMER AND ITS AFFILIATES.

     (A) The Partnership  shall indemnify and hold harmless the General Partner,
its  Affiliates,  and all  Officers,  directors,  employees,  and  agents of the
General  Partner and its Affiliates  (individually,  an  "Indemnitee")  from and
against any and all losses, claims, demands, costs, damages, liabilities,  joint
and   several,   expenses  of  any  nature   (including   attorneys'   fees  and
disbursements),  judgments,  fines, settlements,  and other amounts arising from
any and all claims, demands,  actions,  suits, or proceedings,  civil, criminal,
administrative  or  investigative,  in which the Indemnitee may be involved,  or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the  Initial  Offering,  any  other  offering  of Units or  interests  of the
Partnership, or the business of the Partnership,  including, without limitation,
liabilities  under the Federal and state securities laws,  regardless of whether
the Indemnitee  continues to be a General Partner, an Affiliate,  or an officer,
director, employee, or agent of a General Partner or of an Affiliate at the time
any such liability or expense is paid or incurred,  if (i) the Indemnitee  acted
in good faith and in a manner he or it believed to be in, or not opposed to, the
interests of the Partnership,  and, with respect to any criminal proceeding, had
no  reasonable  cause to believe his or its conduct was  unlawful,  and (ii) the
Indemnitee's  conduct did not  constitute  actual fraud,  gross  negligence,  or
willful or wanton misconduct. The termination of any action, suit, or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendre, or
its equivalent,  shall not, in and of itself,  create a presumption or otherwise
constitute  evidence  that the  Indemnitee  acted in a manner  contrary  to that
specified in (i) or (ii) above.

     (B) Expenses  incurred by an  Indemnitee  in defending  any claim,  demand,
action,  suit,  o:  proceeding  subject to this Section 4.7 shall,  from time to
time,  be advanced by the  Partnership  prior to the final  disposition  of such
claim, demand, action, suit, or proceeding upon receipt by the Partnership of an
undertaking  by or on behalf of the  Indemnitee to repay such amount if it shall
be determined  that such Person is not entitled to be  indemnified as authorized
in this Section 4.7.

     (C) The  indemnification  provided by this Section 4.7 shall be in addition
to any  other  rights  to which  those  indemnified  may be  entitled  under any
agreement,  vote of the  Partners,  as a matter of law or equity,  or otherwise,
both as to an action in the  Indemnitee's  capacity as the General  Partner,  an
Affiliate thereof, or as an officer, director, employee, or agent of the General
Partner or an Affiliate  thereof,  and as to an action in another capacity,  and
shall continue as to an Indemnitee who has ceased


                                       15


<PAGE>


to  serve  in such  capacity  and  shall  inure  to the  benefit  of the  heirs,
successors, assigns, and administrators of the Indemnitee.

     (D) The  Partnership  may purchase and maintain  insurance on behalf of the
General  Partner and such other Persons as the General  Partner shall  determine
against  any  liability  that may be  asserted  against or  expense  that may be
incurred  by such Person in  connection  with the  Initial  Offering,  any other
offering  of Units or  interests  of the  Partnership,  and the  business of the
Partnership,  regardless  of  whether  the  Partnership  would have the power to
indemnify  such Person  against  such  liability  under the  provisions  of this
Agreement.

     (E) For purposes of this Section  4.7, the  Partnership  shall be deemed to
have  requested an Indemnitee to serve as fiduciary of an employee  benefit plan
whenever the  performance  by it of its duties to the  Partnership  also imposes
duties on, or otherwise  involves services by, it to the plan or participants or
beneficiaries  of the plan;  excise taxes assessed on an Indemnitee with respect
to an employee  benefit plan pursuant to applicable  law shall be deemed "fines"
within the meaning of  paragraph  (A) of this  Section  4.7; and action taken or
omitted by the  Indemnitee  with  respect  to an  employee  benefit  plan in the
performance of the Indemnitee's  duties for a purpose reasonably believed by the
Indemnitee to be in the interest of the  participants  and  beneficiaries of the
plan shall be deemed to be for a purpose  which is in, or not,  opposed  to, the
best interests of the Partnership.

     (F) Except as set forth in the next  sentence  below,  any  indemnification
hereunder shall be satisfied  solely out of the assets of the  Partnership.  The
Unitholders  shall  not be  subject  to  personal  liability  by reason of these
indemnification  provisions;  provided,  however,  that to the  extent  that any
Unitholder or former  Unitholder  shall recover from any  Indemnitee  any amount
that  is  subject  to  indemnification  hereunder,  such  Unitholder  or  former
Unitholder shall have personal liability to the Partnership and the.  Indemnitee
under this Section 4.7 for reimbursement to the extent of such amount.

     (G) An Indemnitee shall not be denied  indemnification  in whole or in part
under this Section 4.7 by reason of the fact that the Indemnitee had an interest
in the  transaction  with  respect to which the  indemnification  applies if the
transaction was otherwise permitted by the terms of this Agreement.

     (H)  The  provisions  of this  Section  4.7  are  for  the  benefit  of the
Indemnitees  and shall not be deemed to create  any  rights  for the  benefit of
other Persons.

     4.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER.

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

     (B) The General Partner may execute any of its powers or perform any of its
duties either directly or by or through agents,  including,  without limitation,
any Related Person.  The General Partner may consult with counsel,  accountants,
appraisers,  management  consultants,  investment bankers, and other consultants
and advisers  selected by it (who may serve as such for the  Partnership  or any
Related  Person) and any opinion of such Person as to matters  which the General
Partner believes to be within its professional or expert competence  (including,
without  limitation,  any opinion of legal  counsel that the  Partnership  would
likely  prevail  with  respect  to  any  matter)  shall  be  full  and  complete
authorization  and  protection  in respect to any action  taken or  suffered  or
omitted by the General  Partner  hereunder in good faith and in accordance  with
that opinion.  The General  Partner shall not be responsible for the misconduct,
negligence,  acts,  or  omissions  of  any  such  Person  and  shall  assume  no
obligations in connection therewith other than the obligation to use due care in
the selection of such Persons.

     (C) Any and all fees,  commissions,  compensation,  and other consideration
received by the General Partner or a partner, director, officer, agent,
employee, or Affiliate of the General Partner


                                       16


<PAGE>


 permitted hereunder shall be the exclusive property of the recipient, in which
 the Partnership shall have no right or claim.

     4.9 AGREEMENTS WITH THE GENERAL PARTNER OR A RELATED PERSON.

     (A) Subject to the  provisions  of this  Section 4.9 and Section  5.8,  the
General  Partner  and any  Related  Person  may  deal  with the  Partnership  in
connection with carrying out the business of the Partnership or otherwise, as an
independent  contractor  or as an agent for others,  and may  receive  from such
others or from the  Partnership  profits,  compensation,  commissions,  or other
amounts  which the  General  Partner in good  faith  believes  to be  reasonable
without having to account to the Partnership therefore.

     (B) The  satisfaction  of any one of the  following  conditions  shall be a
complete and absolute defense to any claim of invalidity or for damages or other
relief with respect to any agreement,  act, matter,  or transaction  between the
Partnership and the General Partner or a Related Person based upon the fact that
the General Partner or Related Person is a party thereto and shall  constitute a
determination  that the agreement,  act,  matter,  or  transaction  was fair and
reasonable to and in the best interests of the Partnership:

           (1) The material facts as to the agreement, act, matter, or
     transaction and as to the, relationship or interest of the General Partner
     or Related Person are fully disclosed or known to (a) any directors (or
     Persons in a similar role with respect to an entity other than a
     corporation) of the General Partner who are not interested in the agreement
     or transaction (other than by virtue of their ownership of capital stock of
     an Affiliate of the General Partner), including any directors who are
     members of a committee organized to evaluate transactions in which any
     party has an actual or potential conflict of interest (the "Audit
     Committee") and a majority of such directors of the General Partner
     affirmatively vote in good faith to authorize, approve, or ratify the
     agreement, act, matter, or transaction or (b) the Audit Committee and a
     majority of the directors who are members of the Audit Committee
     affirmatively vote in good faith to authorize, approve, or ratify the
     agreement, act, matter, or transaction; or

           (2) The material facts as to the agreement, act, matter, or
      transaction and as to the relationship or interest of the General Partner
      or Related Person are fully disclosed or known to the Limited Partners and
      such agreement, act, matter, or transaction is specifically authorized,
      approved, or ratified by a Majority Interest (excluding for purposes of
      computing the outstanding Units and the Units eligible to vote all Units
      held by the General Partner or Related Persons); or

           (3) The agreement, act, matter, or transaction is fair and reasonable
      to the Partnership at the time it is authorized, approved, or ratified by
      the General Partner.

      The Audit Committee will be composed on and after the Closing Date of
individuals who are directors but not officers or employees of the General
Partner or any Affiliate of the General Partner.

      (C) The failure of the Partnership to submit any agreement, act, matter,
or transaction under Section 4.9 (B) (1) or Section 4.9 (B) (2) shall not create
any presumption or inference or otherwise be considered evidence that the
agreement, act, matter, or transaction was not fair and reasonable to and in the
best interests of the Partnership.

      (D) Each of the Unitholders by acceptance of the Units hereby approves,
ratifies, and confirms the execution, delivery, and performance of all
agreements, acts, matters, or transactions described in the prospectus contained
in the Registration Statement and authorizes, ratifies, and confirms such
execution, delivery, and performance by the General Partner on behalf of the
Partnership, without any further act, approval, or vote of the Unitholders or
the Partnership. Any action taken by the General Partner pursuant to the terms
of any such agreement or with respect to any such matter or transaction shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Unitholders under this Agreement or under
applicable law.


                                       17


<PAGE>


     4.10 SUBCONTRACTING BY GENERAL PARTNER. The General Partner may subcontract
to third parties  (including  Affiliates) a portion or all of the services to be
rendered by it with respect to any particular  Aircraft or the administration of
the Partnership;  provided,  however,  that (i) the General Partner shall at all
times  remain  responsible  for the overall  management  of the Aircraft and the
Partnership  and  (ii)  the  Partnership  shall  not  be  required  to  pay  for
duplicative services, except as may be provided in Section 5.5.

     4.11  CONVEYANCES.  The General Partner has the express authority to convey
title to any Partnership  Asset by a conveyance  executed by the General Partner
alone on behalf of the Partnership.

     4.12 ELECTION TO BE GOVERNED BY SUCCESSOR OR DIFFERENT LIMITED  PARTNERSHIP
LAW.  The General  Partner may, in its sole  discretion  and without any vote or
concurrence  of any  Persons,  elect for the  Partnership  to be governed by any
statutes  adopted to succeed or replace the  California Act on or after the date
any part of such  successor or  replacement  statute takes effect and to procure
any permits,  orders,  or approvals of any governmental  authority in connection
with such an  election.  In  addition,  the  General  Partner  may,  in its sole
discretion,  and  without  the vote or  consent  of any  Persons,  elect for the
Partnership to be reorganized as a limited partnership governed by and under the
laws of a  jurisdiction  other than  California  so long as it has  received  an
opinion of counsel that such transaction will not result in a termination of the
Partnership for tax purposes so as to adversely affect Unitholders.

     4.13 MINIMUM NET WORTH OF THE GENERAL  PARTNER.  The General  Partner shall
use its best  efforts to have at all times a net worth at least equal to (a) the
amounts  sufficient to meet all net worth  requirements of (i) the Code and (ii)
the Service for issuing advance rulings regarding the status of a partnership as
such for Federal  income tax  purposes,  as currently in effect and as hereafter
amended to assure that the Partnership will be classified for Federal income tax
purposes as a partnership and not as .an association taxable as a corporation or
(b) an amount  determined by counsel to the General Partner  sufficient for such
counsel to render an opinion that the Partnership will be taxed as a partnership
and not as an  association  taxable  as a  corporation  for  Federal  income tax
purposes.  Such net worth requirement may be satisfied,  in whole or in part, by
the provision to the General  Partner by its parent  corporation of non-interest
bearing demand notes of such parent  corporation.  The General  Partner will not
distribute  dividends  to its  stockholders  during  any  period  in  which  the
Partnership  is, or is  expected to be, in material  financial  difficulty.  The
General  Partner will hold its interest in the  Partnership for its own account,
and will not agree to act as a nominee or agent for Limited Partners in a manner
that would adversely affect the federal income tax treatment of the Partnership.


                                    ARTICLE 5

                   COMPENSATION AND REIMBURSEMENT OF EXPENSES
                    TO THE GENERAL PARTNER AND ITS AFFILIATES


     5.1 ACQUISITION FEE. The Partnership shall pay to the General Partner or an
Affiliate  thereof  an  Acquisition  Fee  for  each  Aircraft  acquired  by  the
Partnership,  including  but not  limited to the  Aircraft  involved  in the PSA
Transaction,  payable upon its acquisition by the Partnership,  as follows: 11h%
of the Aircraft  Cost for the first $50 million of each  transaction,  and 1% of
the Aircraft  Cost for the balance over $50 million.  However,  in the event the
Partnership  purchases  for cash (but not Units) an  Aircraft  from the  General
Partner or its Affiliates, the Acquisition Fee shall be based on the cost of the
Aircraft to the General  Partner or Affiliate,  and not the Aircraft Cost to the
Partnership.  The  Acquisition  Fee shall  compensate  the  General  Partner for
seeking out and evaluating  investment  opportunities,  negotiating  the initial
lease, and performing  functions  otherwise necessary to consummate the purchase
and initial lease of Aircraft. In addition,  the Partnership shall reimburse the
General  Partner  for direct  out-of-pocket  expenses  in  connection  with such
activities.


                                       18


<PAGE>


     5.2 MANAGEMENT FEE.

     (A) The  Partnership  shall pay a  Management  Fee to the General  Partner,
payable  monthly,  equal to '/, of 1% per annum of the  Partnership's  net worth
(total assets less total  liabilities  calculated in accordance  with  generally
accepted  accounting  principles) as of the beginning of each month,  plus 1% of
Net Revenues for such month.  Said Management Fee shall be for certain  Aircraft
management  services as follows:  lease management;  collection of lease income;
leasing-related  services;  payment of  operating  expenses;  periodic  physical
inspections;  servicing indebtedness secured by Aircraft; general supervision of
lessees to assure  that they are  properly  utilizing  and  operating  Aircraft;
arranging  maintenance  and  related  services  with  respect to  Aircraft;  and
supervising,  monitoring;  and reviewing services performed by others in respect
of Aircraft.  In addition,  the Partnership  shall reimburse the General Partner
for direct out-of-pocket expenses in connection with such activities.

     (B) At the time of each monthly  payment of the  Management  Fee, if in the
judgment  of  the  General  Partner  and  assuming  that  all  contracts  of the
Partnership  are fully  performed,  Cash Available From  Operations  will not be
sufficient during calendar year 1986 or 1987 to make an annualized  distribution
of $2.16 per Unit,  up to an  aggregate  of $375,000 of the  Management  Fee for
calendar  years 1986 and 1987 shall not be payable to the  General  Partner  and
shall be deferred until such year as the General Partner believes, assuming that
all contracts are fully performed,  that there will be sufficient Cash Available
From  Operations  to make a $2.16 per Unit  distribution  after  payment of such
deferred  Management  Fee. If it is later  determined  during any such year that
Cash  Available  From  Operations,  assuming  that all  contracts had been fully
performed, would not have been sufficient to make a $2.16 per Unit distribution,
the General  Partner  shall return that portion of the deferred  Management  Fee
which has been paid.  The Management Fee for each calendar year after 1987 shall
be payable regardless of the amount of Cash Available From Operations.

     5.3 DISTRIBUTIONS AND ALLOCATIONS. The General Partner shall be entitled to
the distributions and allocations allocated to the General Partner in Articles 9
and 10.

     5.4 DISPOSITION OR REMARKETING FEE. The Partnership shall pay a Disposition
or Remarketing  Fee to the General  Partner or an Affiliate  thereof as the case
may be, of (i) 5% of the Sales Proceeds of the Aircraft  payable upon receipt by
the  Partnership  of  proceeds  of the sale or a casualty  loss,  (ii) 4% of the
rental payments when received of an Aircraft  re-leased (except rentals pursuant
to  fixed-price  lease  renewals  agreed  to at the time the  original  lease is
executed),  payable  upon receipt of each rental  payment.  The  Disposition  or
Remarketing  Fee shall  compensate  the  General  Partner  for  seeking  out and
evaluating sale or re-lease  opportunities,  negotiating  such sale or re-lease,
and  performing  functions  otherwise  necessary in connection  with the sale or
re-lease of Aircraft.  In addition,  the Partnership  will reimburse the General
Partner for direct out-of-pocket expenses in connection with such activities.

     5.5 FEES PAID TO THIRD PARTIES.  The fees payable to the General Partner or
its Affiliates pursuant to Sections 5.1 and 5.4 shall not be reduced by any fees
or expenses paid by the  Partnership to parties not affiliated  with the General
Partner in connection with the transactions enumerated in such Sections.

     5.6  EXPENSES  OF THE  GENERAL  PARTNER.  The  Partnership  shall  pay  all
expenses,   disbursements,   advances,   salaries,  general  and  administrative
expenses, and other costs, incurred by the General Partner or its Affiliates and
arising out of or in connection with the conduct of Partnership business,  other
than as set forth in Section 3.6(A),  as determined in good faith by the General
Partner.  The Partnership shall also reimburse the General Partner director fees
paid to directors of the General  Partner who are not otherwise  affiliated with
the General  Partner or its  Affiliates.  The General Partner and its Affiliates
shall be promptly reimbursed by the Partnership for any such items.

     5.7 REIMBURSEMENT FOR SUMS ADVANCED TO THE PARTNERSHIP.  To the extent that
the General Partner or its Affiliates have advanced funds to the Partnership for
direct out-of-pocket expenses in connection with the Partnership's  organization
and the Initial Offering, the General Partner or its Affiliates shall be


                                       19


<PAGE>


 entitled to reimbursement of such funds, without interest, payable upon
 consummation of the Initial Offering. To the extent that the General Partner or
 its Affiliates otherwise advances or loans money to the Partnership, interest
 and charges thereon shall be payable pursuant to Section 4.1(t).

     5.8 ADDITIONAL  SERVICES TO THE  PARTNERSHIP.  The General  Partner and its
Affiliates  shall have the right to render any other services to the Partnership
deemed necessary or appropriate by the General Partner,  and to receive payments
and fees  from the  Partnership  in  connection  therewith  not to  exceed  that
customarily received by third parties for similar services.

     5.9 FEES  PAYABLE ON  CESSATION  AS THE  GENERAL  PARTNER.  If the  General
Partner ceases to be a general partner of the Partnership,  any fee, commission,
or  reimbursement  of  expenses  payable  according  to the  provisions  of this
Agreement  which  is  then  accrued,  but  not yet  paid,  shall  be paid by the
Partnership to the General Partner or, if appropriate,  an Affiliate thereof, in
cash, within 60 days after the date of its cessation as the General Partner.


                                    ARTICLE 6

                       THE LIMITED PARTNERS AND ASSIGNEES


     6.1 LIMITED LIABILITY. Except to the extent required by California law, the
liability of each  Unitholder (in the capacity as a Unitholder)  for the losses,
debts,  and obligations of the Partnership  shall be limited to the Unitholder's
Capital  Contribution and the Unitholder's share of any undistributed  assets of
the  Partnership.  Any  obligation to return  distributions  and to pay interest
shall be the sole obligation of the Unitholders and not of the General Partner.

     6.2 RESTRICTIONS ON LIMITED PARTNERS ARID ASSIGNEES.

     (A) No Unitholder  shall  participate as such in the management and control
of the business of the Partnership or transact any business for the Partnership,
unless such  Unitholder  is also a General  Partner or other Person  employed or
engaged to transact  any such  business by or on behalf of a General  Partner or
the  Partnership.  The  transaction  of any such  business  by any  such  Person
employed  or  engaged  to do so by or on behalf of the  General  Partner  or the
Partnership  shall not affect,  impair,  or  eliminate  the  limitations  on the
liability of the Unitholder under this Agreement or applicable law.

     (B) No Unitholder shall have the power to represent,  sign for, or bind the
General  Partner or the  Partnership,  unless such  Unitholder is also a general
partner of the  Partnership or other Person given such power in a capacity other
than as a Unitholder by the General Partner.

     6.3  OUTSIDE  ACTIVITIES.  A  Unitholder  shall be entitled to and may have
business  interests.  and engage in  business  activities  in  addition to those
relating to the  Partnership,  including  business  interests and  activities in
direct competition with the Partnership.  Neither the Partnership nor any of the
Unitholders shall have any rights by virtue of this Agreement in any independent
business ventures of any other Unitholder.

     6.4 NO WITHDRAWAL OF  CONTRIBUTIONS.  No Unitholder shall have the right to
withdraw the Unitholder's Capital Contribution to the Partnership.

     6.5 RETURN OF CAPITAL.  There is no agreement for, nor time set for, return
of any  contribution  of any  Unitholder.  To the  extent  funds  are  available
therefore,  the  General  Partner  may  return  said  contributions  out of Cash
Available From Operations or out of Cash Available From Sale or Refinancing, and
to the extent of available  funds, the General Partner shall return said capital
at ' termination of the Partnership, as hereinafter set forth.

     6.6 DEATH, INCOMPETENCY, OR BANKRUPTCY OF A LIMITED PARTNER OR ASSIGNEE.
The death, adjudication of incompetency, or bankruptcy of a Unitholder shall not
dissolve the Partnership. If a Unitholder who is an individual dies or a court
of competent jurisdiction adjudges the Unitholder to be incompetent to manage
the Unitholder's property, the Unitholder's executor, administrator, guardian,
conservator, or other legal representative may exercise all the Unitholder's
rights for the purposes of


                                       20


<PAGE>


settling the Unitholder's estate or administering the Unitholder's property. The
executor, administrator, guardian, conservator, or other legal representative,
as applicable, of the deceased, incompetent or bankrupt Unitholder shall
nevertheless continue to be liable for all of the Unitholder' s obligations as a
Unitholder.


                                    ARTICLE 7

                               MEETINGS AND VOTING


     7.1 MEETINGS. Meetings of the Limited Partners may be called by the General
Partner or by Limited Partners owning (as Limited Partners and not as Assignees)
at least 10% of the Units and Depositary  Units.  Any Limited  Partner calling a
meeting shall specify the number of Units and  Depositary  Units as to which the
Limited  Partner  is  exercising  the right to call a  meeting,  and only  those
specified  Units and  Depositary  Units  shall be  counted  for the  purpose  of
determining whether the required 10% standard of the preceding sentence has been
met.  Limited  Partners may call a meeting only as to matters on which they have
the right to vote.  Limited  Partners  shall call a meeting by delivering to the
General  Partner one or more calls in writing  stating that the signing  Persons
wish to call a meeting and  indicating  the purposes for which the meeting is to
be called.  Action at the meeting shall be limited to those matters specified in
the call of the meeting.  Within 60 days after  receipt of such call,  or within
such a greater time as may be reasonably necessary for the Partnership to comply
with  any  statutes,   rules,   regulations,   listing  agreements,  or  similar
requirements  governing the holding of a meeting or the  solicitation of proxies
for use at such a  meeting,  the  General  Partner  shall  send a notice  of the
meeting to the  Limited  Partners  either  directly  or  indirectly  through the
Depositary.  A  meeting  shall be held at a time  and  place  determined  by the
General  Partner  on the date not less than 10 nor more  than 60 days  after the
mailing of notice of the meeting. Partners may vote either in person or by proxy
at any  meeting.  Each  Limited  Partner  shall  have one vote for each  Unit or
Depositary Unit as to which he has been admitted to the Partnership as a Limited
Partner. No matter shall be voted upon by Limited Partners at any meeting of the
Limited Partners or consented to by the Limited Partners unless the requirements
of Section 7.10 shall be satisfied as to such matter.

     7.2 NOTICE OF MEETING.  Notice of a meeting called  pursuant to Section 7.1
and any report  shall be given  either  personally  or by mail or other means of
written  communication,  addressed  to the Partner at the address of the Partner
appearing on the books of the  Partnership or  Depositary.  The notice or report
shall be deemed to have been  given at the time  when  delivered  personally  or
deposited  in the  mail or sent by  other  means of  written  communication.  An
affidavit or certificate  of mailing of any notice or report in accordance  with
the  provisions  of this Article 7,  executed by the General  Partner,  transfer
agent,  registrar of Depositary  Units, or mailing  organization  shall be prima
facie evidence of the giving of notice. If any notice or report addressed to the
Partner at the address of the .Partner appearing on the books of the Partnership
is returned to the  Partnership  by the United States Postal  Service  marked to
indicate  that the United  States  Postal  Service is unable to deliver it, said
notice or report and any  subsequent  notices or reports shall be deemed to have
been duly given without further mailing if they are available for the Partner at
the principal  executive office of the Partnership for a period of one year from
the date of the giving of the notice or report to all other Partners.

     7.3 RECORD DATE. For purposes of determining the Limited Partners  entitled
to notice or to vote at a meeting of the Limited  Partners  or to give  consents
without a meeting as provided  in Section  7.8,  the  General  Partner may set a
Record  Date which  shall be not less than 10 days nor more than 60 days  before
the date of the  meeting  (unless  such  requirement  conflicts  with any  rule,
regulation,  guideline,  or  requirement  of any  securities  exchange or market
system on which the Depositary  Units are listed for trading,  in which case the
rule,  regulation,  guideline,  or requirement of such securities  exchange.  or
market system shall govern).

     7.4  ADJOURNMENT.  When a meeting is  adjourned  to another  time or place,
notice need not be given of the  adjourned  meeting,  and a new Record Date need
not be fixed,  if the time and place  thereof  are  announced  at the meeting at
which the adjournment is taken unless such adjournment


                                       21


<PAGE>


 shall be for more than 45 days. At the adjourned meeting the Partnership may
 transact any business which might have been permitted to be transacted at the
 original meeting. If the adjournment is for more than 45 days, or if a new
 Record Date is fixed for the adjourned meeting, a notice of the adjourned
 meeting shall be given in accordance with this Article 7.

     7.5 WAIVER OF NOTICE; CONSENT TO MEETING; APPROVAL OF MINUTES. The
transactions of any meeting of Limited Partners, however called and noticed, and
wherever held, are as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the Limited Partners entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. All
waivers, consents, and approvals shall be filed with the Partnership records or
made a part of the minutes of the meeting. Attendance of a Limited Partner at a
meeting shall constitute a waiver of notice of the meeting, except when the
Limited Partner objects, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened; and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the objection is expressly made at the meeting.

     7.6 QUORUM. A Majority Interest represented in person or by proxy shall
     constitute a quorum at a meeting of Limited Partners. At any meeting of the
limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of a Majority. Interest shall be deemed to
constitute the act of all Limited Partners unless a higher percentage is
required with respect to such action under the provisions of this Agreement. The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough Limited Partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the requisite percentage of
interests of limited Partners specified in this Agreement. In the absence of a
quorum, any meeting of limited Partners may be adjourned from time to time by
the vote of a majority of the Units and Depositary Units represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 7.1.

     7.7 CONDUCT OF MEETING. The General Partner shall have full power and
authority concerning the manner of conducting any meeting of limited Partners or
the solicitation of written consents, including without limitation the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 7.10, the conduct of voting, the
validity and effect of any proxies, the appointment of proxies and inspectors of
votes, the revocation of written consents and the determination of any
controversies, votes, or challenges arising in connection with or during the
meeting or written consents. The General Partner shall designate a Person to
serve as chairman of the meeting and shall further designate a Person to take
the minutes of the meeting, in either case including, without limitation, a
partner, director, or officer of a General Partner. All minutes shall be kept
with the records of the Partnership maintained by the General Partner.
Depositary Units evidenced by Depositary Receipts held in nominee or street name
accounts will be voted by the broker (or other nominee) pursuant to instructions
from the Limited Partner.

     7.8 Action Without a Meeting. Any action that may be taken at a meeting of
the Limited Partners may be taken without a meeting if a consent in writing
setting forth the action so taken is proposed by the General Partner and signed
by Limited Partners owning not less than the minimum percentage of interests
that would be necessary to authorize or take such action at a meeting at which
all the Limited Partners were present and voted. Prompt notice of the taking of
action without a meeting shall be given to the limited Partners who have not
consented in writing. The General Partner may specify that any written ballot
submitted to limited Partners for the purpose of taking any action without a
meeting shall be returned to the Partnership within the time, not less than 20
days. specified by the General Partner. If a ballot returned to the Partnership
does not vote all of the Units or Depositary Units held by the Limited Partner,
the Partnership shall be deemed to have failed to


                                       22


<PAGE>


receive a ballot for the Units or Depositary Units which were not voted. The
procedures for action without a meeting set forth in this Section 7.8 shall be
in lieu of those contained in the California Act.

     7.9 VOTING RIGHTS.

     (A) Subject to Section 7.10,  the Limited  Partners shall have the right to
take the following actions upon the approval of at least a Majority Interest:

               (1) Amendment of this Agreement, subject to Article 18;

               (2) Dissolution,  discontinuation,  or material alteration of the
          business,   or  sale  of  substantially  all  of  the  assets  of  the
          Partnership  with a view to the  foregoing,  if elected by the General
          Partner pursuant to Section 16.1(B);

               (3)  Approval or  disapproval  of any merger,  consolidation,  or
          combination of the business  operations of the Partnership  with those
          of any other Person (except any merger, consolidation,  or combination
          affected solely to reorganize the Partnership as a limited partnership
          governed by and under the laws of a jurisdiction other than California
          pursuant to the discretion of the General Partner contained in Section
          4.12);

               (4)  When  the  Partnership  would  otherwise  dissolve  and  its
          business  would not  otherwise be  continued  pursuant to the terms of
          this  Agreement,  the election to continue the Partnership or election
          of a new General Partner to continue the business of the  Partnership,
          unless a unanimous vote is required pursuant to Section 7.9(C);

               (5)  Approval  or  disapproval  of any  matter  submitted  to the
          Limited Partners pursuant to Section 4.9;

               (6) Except as  provided  in  Article  15,  election  of a General
          Partner; and

               (7) As  expressly  provided in  Sections  3.1,  8.4(A),  13.2(A),
          15.1(C), 16.2 and 16.3.

     (B)  The  General  Partner  may be  removed  as a  general  partner  of the
Partnership  upon the approval of Limited  Partners holding (as Limited Partners
and not as Assignees)  6635% of the outstanding  Units and Depositary Units upon
the terms set forth in Section 15.2(B).

     (C) Approval of all Limited Partners shall be required for the admission of
a General  Partner or the election to continue  the business of the  Partnership
after  the  General  Partner  ceases  to be a  General  Partner  (other  than by
removal)-where there is no remaining General Partner.

     (D) Limited Partners shall have no other voting rights, notwithstanding the
provisions of the California Act.

     (E) The General Partner and its Affiliates shall have the right to vote any
Units and Depositary  Units held by them with respect to any matter submitted to
the Partners.

     7.10 VOTING RIGHTS CONDITIONAL.  The voting rights set forth in Section 7.9
shall not be exercised unless the Partnership  shall have received the favorable
written opinion of counsel  acceptable to the General Partner to the effect that
the  exercise of such right and the action  proposed to be taken with respect to
any particular  matter (1) shall not cause the Limited  Partners to be deemed to
be taking part in the  management and control of the business and affairs of the
Partnership  so as to  subject  the  Limited  Partners  to  unlimited  liability
therefor,  (2) will not cause the  Partnership  to be treated as an  association
taxable as a corporation  for Federal income tax purposes  (except upon approval
pursuant  to  Section  18.3(B)),  and (3) is  otherwise  permissible  under  the
California Act.


                                       23


<PAGE>


                                    ARTICLE 8

                CAPITAL CONTRIBUTIONS, TRANSFER TO UNDERWRITERS,
                              AND CAPITAL ACCOUNTS


     8.1 CAPITAL  CONTRIBUTION  OF THE GENERAL  PARTNER.  Concurrently  with the
execution of the original limited partnership agreement of the Partnership,  the
General  Partner made a capital  contribution in ,the amount of Nine Hundred and
Ninety  Dollars  ($990) in cash.  Upon a closing of the Initial  Offering on the
Closing  Date,  the General  Partner  shall  further  contribute in cash or cash
equivalents  a sum so that  its  total  capital  contribution  equals  1% of all
contributions  to the Partnership  (including  contributions  as a result of the
exercise  of  the  over-allotment   option  set  forth  in  Section  8.3(B)  and
contributions by U.S.  Holding pursuant to Section 8.4(A)).  The General Partner
shall not be required to  contribute  any  additional  sums to the  Partnership,
except pursuant to Section 16.8.

     8.2  CAPITAL   CONTRIBUTION   OF  THE   ORGANIZATIONAL   LIMITED   PARTNER.
Concurrently with the execution of the original limited partnership agreement of
the Partnership,  the Organizational Limited Partner made a Capital Contribution
in the amount of Ten Dollars ($10) in cash and received one Unit.

     8.3 SALE OF UNITS TO UNDERWRITERS.

     (A) INITIAL PUBLIC OFFERING.  Pursuant to the Underwriting  Agreement,  the
Underwriters shall purchase Units from the Partnership at the Initial Unit Issue
Price in connection  with the Initial  Offering,  as more fully described in the
Registration  Statement.  Concurrently with the closing of the Initial Offering,
each  Underwriter,  as an  Initial  Limited  Partner,  shall  contribute  to the
Partnership, in exchange for that number of Units designated in the Underwriting
Agreement to be purchased by each such Underwriter, cash in an amount designated
in the Underwriting Agreement.

     (B) OVER-ALLOTMENT  OPTION. In the event that the Underwriters exercise the
option  granted  to  them  in the  Underwriting  Agreement  to  acquire  certain
additional Units, in addition to Units purchased  pursuant to Section 8.3(A), to
cover over-allotments,  the Underwriters shall contribute to the Partnership, in
exchange for that number of Units to be purchased by such Underwriters  pursuant
to the exercise of such option, cash in an amount designated in the Underwriting
Agreement  pursuant  to the  exercise  of  such  option.  For  purposes  of this
Agreement  all Units issued  pursuant to this Section  8.3(B) or Section  8.4(A)
shall be deemed issued  concurrently on the Closing Date irrespective of whether
or not the issuance actually occurs on the Closing Date.

     8.4  PURCHASE  OF  UNITS  OR  SECURITIES  BY  THE  GENERAL  PARTNER  OR ITS
AFFILIATES.

     (A)  Simultaneously  with a closing of the Initial  Offering,  U.S. Holding
shall  purchase  from the  Partnership  1,025,000  Units,  at an amount per Unit
acquired equal to the Initial Unit Issue Price. Without the prior approval of at
least a  Majority  Interest,  U.S.  Holding  may not  sell  (except  to  Related
Entities)  Units  representing  20% of the total Units  outstanding  immediately
after completion of the Initial  Offering  (including the Units sold to NAAF and
U.S.  Holding)  for at least  five  years,  and so long as  Airlease  Management
Services, Inc. or a Related Entity is a general partner of the Partnership, U.S.
Holding  (or  Related  Entities)  must  retain  at  least  25%  of  such  Units.
Notwithstanding the foregoing,  the Units may be transferred to Related Entities
of the General Partner.

(B) The General Partner and any Affiliate of the General Partner may acquire
Partnership Interests in addition to those acquired by any of those Persons on
the Closing Date, in the Initial Offering or at any time subsequent thereto, and
shall be entitled to exercise all rights of a Limited Partner or Assignee, as
applicable, relating to such interests.

     (C) The General  Partner or an Affiliate  thereof shall be treated the same
as all other Limited  Partners or Assignees with respect to any Units  purchased
by them. The Capital  Contribution  of each Unit  purchased  pursuant to Section
8.4(A) shall be deemed to be the Initial Unit Issue Price.

     (D) The General  Partner or its Affiliates  may contribute  property to the
Partnership,  from time to time, in exchange for Units or Partnership  Interests
provided the Units or Partnership Interests


                                       24


<PAGE>


received in such exchange have a market value not greater than the then Fair
Market Value of the contributed property.

     8.5 PURCHASE OF UNITS BY AFFILIATE OF PSA.

     (A)  Simultaneously  with the first closing of the Initial  Offering,  NAAF
shall  contribute to the  Partnership,  in exchange for 600,000 Units, an amount
per Unit acquired equal to the Initial Unit Issue Price.

     (B) NAAF  shall  be  treated  the same as all  other  Limited  Partners  or
Assignees  with respect to Units  purchased by it. The Capital  Contribution  of
each Unit purchased pursuant to Section 8.5(A) shall be deemed to be the Initial
Unit Issue Price.

     (C) The other terms of the purchase by NAAF,  including  but not limited to
registration  rights granted to NAAF, shall be set forth in an agreement between
the Partnership and NAAF,  containing such terms,  conditions,  representations,
and warranties as determined in the sole discretion of the General Partner.

     8.6  UNITS  NOT  ASSESSABLE.   Units  shall  not  be  assessable,  and  the
Unitholders shall not be required to make any additional Capital Contribution. '

     8.7 NO  INTEREST  ON CAPITAL  CONTRIBUTION.  Unitholders  shall not receive
interest on or with respect to all or any part of their Capital  Contribution or
on the balances in their Capital Accounts.

     8.8 CREDITORS' INTEREST IN THE PARTNERSHIP. No creditor who makes a loan to
the Partnership shall have or acquire at any time as a result of making the loan
any direct or indirect  interest  in the  profits,  capital,  or property of the
Partnership other than as a creditor, unless otherwise specifically provided for
in the loan documentation. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Partnership.

     8.9 NATURE OF INTERESTS.  All property  owned by the  Partnership,  whether
real or  personal,  tangible or  intangible,  shall be deemed to be owned by the
Partnership  as an  entity,  and none of the  Unitholders  shall have any direct
ownership of such property.

8.10 SALE OF ADDITIONAL INTERESTS.

     (A) In order to raise additional capital, to acquire additional Aircraft or
other assets, to redeem or retire Partnership debt, or for any other Partnership
purpose,  the General  Partner is  authorized  to cause to be issued  additional
Units or Partnership Interests from time to time to the General Partner, Limited
Partners,  or to other Persons and to admit such Persons as  Additional  Limited
Partners or security holders in the Partnership.  Subject to Section 8.4(D), the
General  Partner  shall have sole and complete  discretion  in  determining  the
consideration  and terms and conditions  with respect to any future  issuance of
Units or any other interests of the Partnership.  The General Partner shall have
the power,  in its sole  discretion,  without any further consent or approval of
any Persons,  to amend this Agreement to cause the Partnership to issue Units or
Partnership  Interests from time to time in one or more classes,  or one or more
series of such classes for such  consideration  and on such terms and conditions
as the General  Partner in good faith  determines to be in the best interests of
the  Partnership,  which classes or series shall have such rights,  preferences,
privileges,  and  restrictions  as shall be fixed by the General  Partner in the
exercise of its sole discretion, including, without limitation, matters relating
to (i) the allocation of items of Partnership income, gain, loss, deduction, and
credit to each such  class or  series of Units or  interests;  (ii) the right of
each  such  class  or  series  of  Units or  interests  to share in  Partnership
distributions;  (iii)  the  rights  of each  such  class or  series  of Units or
interests upon dissolution and liquidation of the Partnership; (iv) the price at
which and the terms and conditions, if any, upon which each such class or series
of Units or interests may be redeemed by the Partnership;  (v) the rate at which
and the terms and  conditions  upon  which each such class or series of Units or
interests may be converted into another class or series of Units or interests of
the  Partnership,  if any  such  class  or  series  is  convertible  into  other
securities of the  Partnership;  (vi) the terms and  conditions  upon which each
such class or series of Units or interests may be issued, deposited with the


                                       25


<PAGE>


Depositary, evidenced by Depositary Receipts, and assigned or transferred; and
(vii) the right of each such class or series of Units or interests to vote on
Partnership matters, including matters relating to the relative rights,
preferences, privileges, and restrictions of each such class or series. The
General Partner is also authorized to cause the issuance of any other type of
security (including, without limitation, secured and unsecured debt obligations
of the Partnership, debt obligations of the Partnership convertible into any
class or series of Units or interests that may be issued by the Partnership, or
options, rights, warrants, or appreciation rights relating to any class or
series of Units or interests, any such debt obligations, or any combination of
any of the foregoing) from time to time to Partners or other Persons on terms
and conditions established in the sole discretion of the General Partner.

     (B) The General  Partner  shall do all things  necessary to comply with the
California Act, the Code or other applicable law, statute, rule, regulation,  or
guideline of any Federal,  state or other governmental  agency or any securities
exchange on which the Depositary  Units or other  securities of the  Partnership
are listed for trading, and is authorized to do all things it deems necessary or
advisable in connection with any such future issuance.

     8.11 NO PREEMPTIVE  RIGHTS. No Partner or Assignee,  except pursuant to any
future Units or securities  issued by the  Partnership  pursuant to Section 8.10
that specifically provide therefore, shall have any preemptive, preferential, or
other right - including,  without  limitation,  with  respect to (i)  additional
Capital Contributions to the Partnership,  (ii) the issuance or sale of Units or
other Partnership Interests,  (iii) the issuance of any obligation,  evidence of
indebtedness,  or other interest of or in the  Partnership  convertible  into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase,
or subscribe to, any Units,  (iv) the issuance of any right of subscription  to,
or right to receive, any warrant or option for the purchase of any Units, or (v)
the issuance or, sale of any other  securities that may be issued or sold by the
Partnership.

     8.12 CAPITAL ACCOUNTS.

     (A) The  Partnership  shall  maintain for each  Partner a separate  Capital
Account in accordance with the rules of Treasury  Regulation  Section 1.704-1(b)
(2) (iv).  Such Capital Account shall be increased by (i) the cash amount or Net
Agreed  Value  of  all  Capital  Contributions  made  by  such  Partner  to  the
Partnership  pursuant to this Agreement and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section  8.12(B)  and  allocated  to such  Partner  pursuant  to Section 9.2 and
decreased  by (iii) the cash amount or Net Agreed Value of all actual and deemed
distributions  of  cash  or  property  made to  such  Partner  pursuant  to this
Agreement  and (iv) all items of  Partnership  deduction  and loss  computed  in
accordance  with  Section  8.12(B) and  allocated  to such  Partner  pursuant to
Section 9.2.

     (B) For  purposes  of  computing  the amount of any item of  income,  gain,
     deduction,  or loss to be reflected in the Partners' Capital Accounts,  the
determination, recognition and classification of any such item shall be the same
as its  determination,  recognition  and  classification  for Federal income tax
purposes (including any method of depreciation,  cost recovery,  or amortization
used for this purpose); provided that:

          (i) In accordance with the requirements of Section 704(c) of the Code,
     any  deductions  for   depreciation,   cost   recovery,   or   amortization
     attributable  to a  Contributed  Property  shall  be  determined  as if the
     adjusted  basis  of  such  property  on the  date  it was  acquired  by the
     Partnership  was  equal  to the  Agreed  Value  of such  property.  Upon an
     adjustment  pursuant to Section  8.12(D) (i) to the  Carrying  Value of any
     Partnership   property   subject  to   depreciation,   cost  recovery,   or
     amortization, any further deductions for such depreciation,  cost recovery,
     or amortization attributable to such property shall be determined as if the
     adjusted  basis of such  property was equal to the  Carrying  Value of such
     property immediately following such adjustment.

                                       26


<PAGE>


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

          (iii) If the  Partnership's  adjusted  basis in a depreciable  or cost
     recovery  property is reduced for Federal  income tax purposes  pursuant to
     Section 48 (q) (1) or 48 (q) (3) of the Code,  the amount of such reduction
     shall,   solely  for  purposes  hereof,  be  deemed  to  be  an  additional
     depreciation or cost recovery deduction in the year such property is placed
     in service and shall be allocated  among the  Partners  pursuant to Section
     9.2. Any  restoration  of such basis  pursuant to Section 48 (q) (2) of the
     Code shall be  allocated  in the same  manner to the  Partners to whom such
     deemed deduction was allocated (or their successors in interest).

          (iv)  All fees and  other  expenses  incurred  by the  Partnership  to
     promote the sale of (or to sell) a Partnership Interest that can neither be
     deducted nor amortized under Section 709 of the Code shall, for purposes of
     Capital Account  maintenance,  be treated as an item of deduction and shall
     be allocated among the Partners pursuant to Section 9.2.

          (v) The computation of all items of income,  gain, loss, and deduction
     shall be made without  regard to any election under Section 754 of the Code
     which may be made by the  Partnership  and, as to those items  described in
     Section  705 (a) (1) (B) or  Section  705 (a) (2) (B) of the Code,  without
     regard to the fact that such items are not  includable  in gross  income or
     are neither  currently  deductible nor capitalizable for Federal income tax
     purposes.

     (C) Generally,  a transferee of a Partnership  Interest will succeed to the
Capital Account relating to the Partnership  Interest  transferred.  However, if
the transfer causes a termination of the  Partnership  under Section 708 (b) (1)
(B) of the  Code,  the  Partnership  properties  shall be  deemed  to have  been
distributed  in liquidation  of the  Partnership to the Partners  (including the
transferee of a Partnership  Interest) and deemed recontributed by such Partners
and  transferees  in  reconstitution  of the  Partnership.  In such  event,  the
Carrying  Values of the  Partnership  properties  shall be adjusted  immediately
prior to such deemed  distribution  pursuant to Section  8.12 (D) (ii) (and such
adjusted  Carrying Values shall  constitute the Agreed Values of such properties
upon this deemed  contribution to the  reconstituted  Partnership).  The Capital
Accounts of such  reconstituted  Partnership  shall be  maintained in accordance
with the principles of this Section 8.12.

     (D) (i) Consistent  with Treasury  Regulation  Section  1.704-1(b) (2) (iv)
(f),  upon an  issuance of  additional  Units for cash or  Contributed  Property
pursuant to Section 8.10, the Capital  Accounts of all Partners and the Carrying
Values of all Partnership properties shall,  immediately prior to such issuance,
be  adjusted  (consistent  with the  provisions  hereof)  upward or  downward to
reflect any Unrealized Gain or Unrealized Loss  attributable to each Partnership
property (as if such Unrealized Gain or Unrealized Loss had been recognized upon
an actual sale of each such property,  immediately  prior to such issuance,  and
had been allocated to the Partners,  at such rime,  pursuant to Section 9.2). In
determining  such Unrealized Gain or Unrealized  Loss, the aggregate fair market
value of Partnership  properties as of any date of determination  shall be equal
to the sum of (1) the Prescribed  Asset Value as of such date and (2) the amount
of any outstanding Partnership  indebtedness,  as of such date of determination,
as determined in the discretion of the General  Partner.  The Carrying Values of
the  respective  Partnership  properties  shall be adjusted  according  to their
relative  fair market  values as  determined  by the General  Partner using such
method as it deems appropriate.

          (ii) In addition,  in  accordance  with  Treasury  Regulation  Section
     1.704-1(b)  (2)  (iv)  (e),  immediately  prior  to the  actual  or  deemed
     distribution  of any  Partnership  property,  the  Capital  Accounts of all
     Partners  and the  Carrying  Values of all  Partnership  properties  shall,
     immediately prior to any such  distribution,  be adjusted  (consistent with
     the provisions hereof) upward or downward to reflect any Unrealized Gain or
     Unrealized  Loss  attributable  to each  Partnership  property  (as if such
     Unrealized  Gain or Unrealized Loss had been recognized upon an actual sale
     of each  property,  immediately  prior to such  distribution,  and had been
     allocated to the Partners, at such time, pursuant to Section 9.2). In


                                       27


<PAGE>


     determining  such  Unrealized  Gain or Unrealized  Loss, the aggregate fair
     market  value of  Partnership  properties  as of any date of  determination
     shall (1) in the case of a current  distribution  or a deemed  distribution
     occurring  as a result of a  termination  of the  Partnership  pursuant  to
     Section  708 of the Code,  be  determined  in the same  manner  provided in
     Section  8.12 (D) (i),  or (2) in the  case of a  liquidating  distribution
     pursuant to Section 16.5,  be determined by the General  Partner using such
     reasonable methods of valuation as it may adopt.

     8.13 PURCHASE OR SALE OF UNITS.  The General  Partner may, on behalf of and
for the account of the  Partnership,  purchase  or  otherwise  acquire  Units or
Depositary  Units and,  following any such purchase or acquisition,  may sell or
otherwise  dispose of such Units and Depositary  Units. So long as such Units or
Depositary Units shall be held by or on behalf of the Partnership, such Units or
Depositary Units shall not be considered outstanding for any purpose.

     8.14 REGISTRATION RIGHTS OF THE GENERAL PARTNER.

     (A)  DEMAND  RIGHTS.  In the  event  that  (i) the  General  Partner  or an
Affiliate  thereof holds Units or securities of the Partnership which it desires
to sell and (ii) Rule 144 of the  Securities  Act of 1933 (or any successor rule
or regulation  to Rule 144) is not  available to enable such General  Partner or
Affiliate to dispose of the number of Units or  securities it desires to sell at
the time and in the manner  that it desires to do so,  then upon the  request of
the General  Partner or  Affiliate at any time  between  September  30, 1991 and
September 30, 1996, the Partnership  shall file with the Securities and Exchange
Commission as promptly as practicable  after  receiving such request,  and shall
use its best  efforts to cause to become  effective,  a  registration  statement
under  the  Securities  Act of  1933 on the  appropriate  form  registering  the
offering  and  sale of the  number  of  Units  or  securities  specified  by the
requesting   General   Partner  or  Affiliate.   In  connection  with  any  such
registration pursuant to the preceding sentence,  the Partnership promptly shall
prepare and file such  documents  as may be necessary to register or qualify the
Units or securities  subject to such  registration and under the securities laws
of such states as the General Partner or Affiliate  shall request,  and shall do
any and all other acts and things that may  reasonably be necessary or advisable
to enable the General  Partner or Affiliate to  consummate a public sale of such
Units or securities in such states.  Notwithstanding the foregoing,  in no event
shall the Partnership be required to effect a registration relating to the Units
or securities  pursuant to this Section 8.14 (A) more  frequently  than twice in
any calendar year. Any  registration  statement  filed pursuant  hereto shall be
continued  in  effect  for a  period  of not  less  than 90 days  following  its
effective date. All costs,  fees; and expenses of such registration and offering
shall be borne by the  seller.  U.S.  Holding  or its  transferee  shall have an
additional  demand  registration  right,  at any time after October 10, 1987, to
cause the  Partnership to register and offer an amount of Units equal to (i) the
number of Units purchased  pursuant to Section 8.4 (A) less (ii) an amount equal
to 20% of the  total  Units  outstanding  immediately  after  completion  of the
Initial Offering (including the Units sold to NAAF and U.S. Holding). All costs,
expenses,  and  fees of such  registration  and  offering  shall be borne by the
seller.  Alternatively,  U.S.  Holding or its  transferee  may at any time after
October 10, 1987  piggyback  the number of Units  computed  under the  preceding
sentence on to a  registration  statement  and offering by the  Partnership,  in
which case U.S.  Holding or its transferee shall only be liable for its directly
incremental  portion of the  registration  fee, blue sky fees, and  underwriting
discounts and commissions attributable to its Units.

     (B)  PIGGYBACK  RIGHTS.  If at any  time  between  September  30,  1991 and
September 30, 1996 the Partnership shall register any of its securities for sale
under the Securities Act of 1933, the Partnership, at the request of the General
Partner or its Affiliates,  shall include in such  registration (and any related
qualification  under state  securities  laws) all or any portion of the Units or
securities of the  Partnership  held by the General  Partner or its  Affiliates.
However, if the managing underwriter of the offering reasonably  determines that
marketing  factors  require a limitation  or exclusion of the number of Units or
securities to be sold, the managing  underwriter may reasonably limit or exclude
the Units or securities of the General  Partner or its Affiliates to be included
in such  registration.  All costs,  fees, and expenses of such  registration and
offering shall be borne by the Partnership,  except that the seller of the Units
shall  be  liable  for  its  directly  allocable   incremental  portion  of  the
registration fee, blue sky


                                       28


<PAGE>


fees, and underwriting discounts and commissions with respect to the Units or
securities piggybacked on to the Partnership's registration.

     (C) INDEMNIFICATION.  In the event of any registration under the Securities
Act of 1933 of any Units or securities  pursuant to this Section 8.14,  then, in
addition to and not in limitation of the Partnership's  obligation under Section
4.7, the  Partnership  shall indemnify and hold harmless the General Partner and
its Affiliates and any underwriter  engaged in connection with any  registration
referred to in this Section 8.14,  and each other  person,  if any, who controls
any such underwriter  within the meaning of the Securities Act of 1933,  against
any losses, claims, demands,  actions, causes of action,  assessments,  damages,
liabilities  (joint  or  several),  costs,  and  expenses  (including,   without
limitation,   interest,   penalties,   and   reasonable   attorneys'   fees  and
disbursements),  resulting  to,  imposed  upon,  or incurred by any  indemnified
person,  directly or  indirectly,  under the Securities Act of 1933 or otherwise
(hereinafter  referred to in this Section 8.14(C) as a "claim" and in the plural
as "claims"), based upon, arising out of, or resulting from any untrue statement
or alleged untrue  statement of any material fact contained in any  registration
statement  under  which  any  Units or  securities  were  registered  under  the
Securities  Act of  1933  or  any  state  securities  laws,  in any  preliminary
prospectus (if used prior to the effective date of such registration statement),
or in any summary or final prospectus or in any amendment or supplement  thereto
(if used during the period the Partnership is required to keep the  registration
statement  in effect),  or arising out of,  based upon,  or  resulting  from the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements  made therein in light of the
circumstances under which they were made not misleading; provided, however, that
the Partnership shall not be liable to the extent that any such claim arises out
of, is based  upon,  or  results  from an untrue  statement  or  alleged  untrue
statement or omission or alleged omission made in such  registration  statement,
such preliminary,  summary, or final prospectus, or such amendment or supplement
in reliance upon and in conformity with written  information with respect to the
indemnified  Person  furnished  to  the  Partnership  by or on  behalf  of  such
indemnified Person specifically for use in the preparation thereof.

     (D)  SURVIVAL.  The rights  provided in this Section 8.14 shall survive any
cessation of the General Partner as a general partner of the Partnership.

     (E) TRANSFER. The rights in this Section 8.14 are fully transferable by the
General Partner or its Affiliates to any assignee of Units or securities so long
as at least 250,000 Units are assigned to such assignee.

     8.15 CHANGES IN  OUTSTANDING  UNITS.  The General  Partner is authorized to
effect any Unit split or recombination or declare and pay pro rata distributions
of Units to the Unitholders.


                                    ARTICLE 9

                       TAX ALLOCATION OF INCOME AND LOSSES


     9.1  APPORTIONMENT OF NET INCOME,  NET LOSS, AND  DISTRIBUTIONS.  Except as
otherwise   provided  in  this  Article  9,  Net  Income,  Net  Loss,  and  cash
distributions  shall be  allocated at the close of each month and the portion of
Net Income, Net Loss, and cash  distributions  allocated to Unitholders for such
month  shall be  apportioned  among the  Unitholders  in  accordance  with their
respective  Partnership Interests on the first day of such month, without regard
to  Capital  Accounts  or the  number of days  during  such month a Person was a
Unitholder.

     9.2 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.

     (A) For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among  themselves,  except as otherwise  provided in this
Section  9.2,  each item of income,  gain and loss and  deduction  (computed  in
accordance  with Section  8.12(B)) shall be allocated 99% to the Unitholders and
1% to the General Partner.


                                       29


<PAGE>


     (B) If any Partner unexpectedly receives any adjustments,  allocations,  or
distributions described in Treasury Regulations Sections 1.704-1(b) (2) (ii) (d)
(4),  1.704-1(b)  (2) (ii)  (d) (5),  or  1.7041(b)  (2) (ii) (d) (6),  items of
Partnership  income and gain shall be specially  allocated to such Partner in an
amount and manner  sufficient  to  eliminate  a deficit in its  Capital  Account
created  by  such  adjustments,  allocations  or  distributions  as  quickly  as
possible.  This Section  9.2(B) is intended to  constitute  a "qualified  income
offset" within the meaning of Treasury Regulation Section 1.7041(d)(3).

     (C) If, and to the extent that,  any Partner is deemed to recognize  income
as a result of any transaction between such Partner and the Partnership pursuant
to Sections 482, 483,  1272-1274,  or 7872 of the Code, or any similar provision
now or hereafter in effect, any corresponding resulting loss or deduction of the
Partnership shall be allocated to the Partner who was charged with such income.

     (D) If  there  is a net  decrease  in  partnership  minimum  gain  during a
partnership taxable year, all Partners with a deficit Capital Account balance at
the end of such year  (determined  as provided in  Treasury  Regulation  Section
1.704-1(b) (4) (iv) (e)) will be allocated,  before any other  allocation  under
this  Section  9.2,  items of income and gain for such year in the amount and in
the  proportions  needed to eliminate such deficits as quickly as possible.  For
purposes of this  Section  9.2(D),  "partnership  minimum  gain" has the meaning
ascribed . to it in Treasury  Regulation  Section  1.7041(b) (iv) (c), i.e., the
amount of gain (of whatever  character),  if any,  that would be realized by the
Partnership if it disposed of (in a taxable  transaction) each Partnership asset
subject to a nonrecourse  liability in full satisfaction  thereof.  This Section
9.2(D) is intended to comply with Treasury  Regulation  Section  1.704-1(b)  (4)
(iv)  and  is  to be  interpreted  to  comply  with  the  requirements  of  such
regulation.

     (E) To preserve  uniformity of Units,  the General  Partner shall have sole
discretion in conjunction with Section 9.3(E) (y) to make special allocations of
income or deduction.  The General Partner may make such allocations only if they
would not have a material adverse effect on the limited Partners and if they are
reasonably consistent with, and reasonably supportable under, the Code.

     9.3 ALLOCATIONS FOR TAX PURPOSES.

     (A) For Federal income tax purposes,  except as otherwise  provided in this
Section  9.3,  each item of income,  gain,  loss,  deduction,  and credit of the
Partnership  shall be  allocated  among the  Partners in the same manner as such
items are allocated for capital account purposes under Section 9.2.

     (B) In the case of a Contributed Property or an Adjusted Property, items of
income,  gain, loss,  depreciation,  and cost recovery  deductions  attributable
thereto shall be allocated for Federal income tax purposes among the Partners as
follows:

          (i) In the  case  of a  Contributed  Property,  such  items  shall  be
     allocated  among the  Partners  in a manner  that  takes into  account  the
     variation  between the Agreed Value of such property and its adjusted basis
     at  the  time  of   contribution   in  attempting  to  eliminate   Book-Tax
     Disparities.  Except as  otherwise  provided  in Section  9.2(B) and 9.2(D)
     above,  any  item of  Residual  Gain or  Residual  Loss  attributable  to a
     Contributed  Property  shall be allocated  among the Partners in accordance
     with Section 9.2(A).

          (ii) In the case of an Adjusted Property,  such items shall (a) first,
     be allocated among the Partners in a manner  consistent with the principles
     of Section 704(c) of the Code to take into account the  Unrealized  Gain or
     Unrealized Loss  attributable to such property and the allocations  thereof
     pursuant  to  Section  8.12(D)  (i) in  attempting  to  eliminate  Book-Tax
     Disparities,  and (b) second,  in the event such property was  originally a
     Contributed   Property,  be  allocated  among  the  Partners  in  a  manner
     consistent  with the first  sentence of paragraph (B) (i) above.  Except as
     otherwise  provided  in  Sections  9.2(B)  and 9.2(D)  above,  any items of
     Residual Gain or Residual Loss  attributable to an Adjusted  Property shall
     be allocated among the Partners in accordance with Section 9.2(A).

     (C) To the extent of any Recapture  Income resulting from the sale or other
taxable  disposition  of a Partnership  Asset,  the amount of any gain from such
disposition allocated to (or recognized by) a


                                       30


<PAGE>


Partner (or its successor in interest) for Federal income tax purposes pursuant
to the above provisions shall be deemed to be Recapture Income to the extent
such Partner has been allocated or has claimed any deduction directly or
indirectly giving rise to the treatment of such gain as Recapture Income.

     (D)  All  items  of  income,  gain,  loss,  deduction,  credit,  and  basis
allocation  recognized by the  Partnership  for Federal  income tax purposes and
allocated  to the Partners in  accordance  with the  provisions  hereof shall be
determined  without  regard to any election  under Section 754 of the Code which
may be made by the Partnership;  provided, however, such allocations, once made,
shall be  adjusted  as  necessary  or  appropriate  to take into  account  those
adjustments   permitted  by  Sections  734  and  743  of  the  Code  and,  where
appropriate,   to  provide  only  Partners   recognizing   gain  on  Partnership
distributions  covered by Section  734 of the Code with the  Federal  income tax
benefits  attributable  to the increased basis in Partnership  Assets  resulting
from any election under Section 754 of the Code.

     (E) It is intended that the  allocations  prescribed in Sections 9.3(B) (i)
and (ii)  constitute.  allocations  for  Federal  income tax  purposes  that are
consistent  with  Section  704 of the Code and comply  with any  limitations  or
restrictions therein, to the extent reasonably possible without causing Units to
lack  uniform  characteristics  for  Federal  income tax  purposes.  To preserve
uniformity of Units, the General Partner shall have sole discretion to (x) adopt
such  conventions  as  it  deems   appropriate  in  determining  the  amount  of
depreciation  and cost  recovery  deductions;  (y) make special  allocations  of
income  or  deduction  and  (z)  amend  the  provisions  of  this-.Agreement  as
appropriate (a) to reflect the proposal or promulgation of Treasury  Regulations
under Section 704(c) of the Code, or (b) otherwise to preserve the uniformity of
Units  issued or sold from time to time.  The  General  Partner  may adopt  such
conventions,  make such allocations and amend this Agreement as provided in this
Section  9.3(E)  only if they  would not have a material  adverse  effect on the
Limited  Partners and if such  allocations are reasonably  consistent  with, and
reasonably supportable under, the Code.

     (F) Each item of Partnership  income,  gain,  loss,  deduction,  and credit
attributable to a transferred Partnership Interest shall, for Federal income tax
purposes,  be  determined  on a monthly  basis (or other  basis,  as required or
permitted by Section 706 of the Code) and shall be allocated to the Partners and
Assignees as of the close of business on the day  preceding the first day of the
month in which the transfer is recognized by the Partnership; provided, however,
that gain or loss on a sale or other disposition of all or a substantial portion
of the  assets  of the  Partnership  shall be  allocated  to the  holder  of the
Partnership Interest on the date of sale. The General Partner may revise, alter,
or  otherwise  modify  such  methods  of  determination  and  allocation  as  it
determines  necessary,  to the extent  permitted  by Section 706 of the Code and
regulations or rulings promulgated thereunder.

     (G)  PROVISIONAL  ALLOCATION.  In the event that any amount  claimed by the
Partnership to constitute a deductible  expense, an amount chargeable to capital
or a reduction  in an amount  realized is treated as a payment made to a Partner
in his capacity as a member of the  Partnership  for income tax purposes,  gross
income (as defined in Section 61 of the Code) of the Partnership  shall first be
allocated to such payment and no deductions shall be allocated thereto.

     9.4 TAX ELECTIONS.

     (A) Except as otherwise  provided herein, the General Partner shall, in its
sole  discretion,  determine  whether to make any available  election  under the
Code. The General  Partner shall, in the  Partnership's  1988 tax year, make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder to cause the basis of  Partnership  Assets to be adjusted for Federal
income tax purposes as provided by Sections  734 and 743 of the Code.  In making
Section 754  elections,  the General  Partner is authorized to make  simplifying
assumptions for computational  purposes,  in its sole discretion.  Such election
may also be made, in the General  Partner's  discretion,  for the  reconstituted
Partnership  upon any termination of the Partnership  pursuant to Section 708 of
the Code.  The General  Partner  shall elect %,to  deduct  expenses  incurred in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.


                                       31


<PAGE>


     (B) The General  Partner,  the  Underwriters,  and any Limited  Partner and
Assignees.  by  agreeing  to the  terms  of this  Agreement  hereby  elect to be
governed by the  provisions of Section  732(d) of the Code upon a termination of
the Partnership  pursuant to Section 708 of the Code if the General Partner,  in
its  absolute  discretion,  deems such  election to be advisable at any time (it
being  understood  by all such parties that the General  Partner has deemed such
election to be advisable in the event a termination of the Partnership occurs as
a result of the Initial  Offering).  All such parties  hereby  further  agree to
execute and file all documents  and to take any other steps  necessary to effect
such election and appoint the General Partner as their  authorized agent to take
such steps on their behalf.


                                   ARTICLE 10

                                  DISTRIBUTIONS


     10.1 DISTRIBUTIONS FOR 1986.

     On February 15, 1987, the Partnership shall make a distribution, 99% to the
Unitholders  and 1% to the  General  Partner,  in order that  Unitholders  shall
receive  3.54 (less 3.006 per Unit for each day  commencing  October 1, 1986 and
ending the day prior :to the initial Closing Date, inclusive). Such distribution
shall be made to Unitholders  of record on December 31, 1986.  The  distribution
shall be made first from Cash Available From  Operations for the period from the
initial Closing Date through December 31, 1986 and, to the extent Cash Available
From Operations is not sufficient to make a distribution, from any other source.

     10.2 DISTRIBUTIONS OF CASH AVAILABLE FROM OPERATIONS.

     (A)  During the year ended  December  31,  1987,  all Cash  Available  From
Operations  shall be  distributed,  99% to the Unitholders and 1% to the General
Partner, up to a maximum of S2.16 per Unit.

     (B) After December  31,1987,  all Cash Available From  Operations  shall be
distributed 99% to the Unitholders and 1% to the General Partner.

     (C) The Record Date for such  distributions  shall be the last business day
of each calendar quarter, unless otherwise determined by the General Partner.

     10.3 DISTRIBUTIONS OF CASH AVAILABLE FROM SALE OR REFINANCING.

     (A) Deleted.

     (B) Through  December 31, 2004, any Cash Available From Sale or Refinancing
may, at the  discretion  of the  Ceneral  Partner,  be  retained  for use in the
Partnership's business.

     (C) After  December  31,  2004,  subject  to  Section  3.3(B)(2),  any Cash
Available From Sale or Refinancing  shall be distributed  99% of the Unitholders
and 1%o to the Ceneral Partner.

     (D) Cash Available  From Sale or  Refinancing  shall be distributed at such
time as the General  Partner in its  discretion  may determine to the holders of
record  on the  first  business  day in the  month  during  which  such  sale or
refinancing occurs,  unless a different Record Date is determined by the General
Partner.

     10.4 DISTRIBUTIONS OF CASH FROM OTHER SOURCES. In its sole discretion,  the
General  Partner may  distribute,  99% to the  Unitholders and 1% to the General
Partner, cash from any other source. including borrowings and reserves.

     10.5  DISTRIBUTIONS  OF PARTNERSHIP  ASSETS.  In its sole  discretion,  the
General  Partner may  distribute,  99% to the  Unitholders and 1% to the General
Partner, Partnership property other than cash.


                                       32


<PAGE>


combinations of cash and property, and additional Units, Depositary Units, or
other securities of the Partnership which have been authorized and issued
pursuant to the terms of this Agreement.

     10.6   LIQUIDATING   DISTRIBUTIONS.   NOTWITHSTANDING   SECTION   10.3,   A
DISTRIBUTION  THAT IS  ALSO A  LIQUIDATING  DIStribution  (after  payment  of or
provision  for  Partnership  liabilities)  shall be made  first to  Partners  in
accordance with the positive  balances in their Capital  Accounts and thereafter
99% to the  Unitholders  and 1% to the  General  Partner.  For this  purpose,  a
distribution  (other  than a  distribution  pursuant  to Section  10.2) shall be
treated  as  a  liquidating  distribution  if,  after  such  distribution,   the
Partnership's  remaining  assets,  if sold and the  proceeds  (after  payment of
liabilities) were distributed to Partners at that time, would be insufficient to
reduce to zero the positive  Capital  Accounts of all Partners  having  positive
Capital  Accounts  (taking into account all adjustments  under Section 8.11 that
would be made as a result of such sale).

     10.7 TAX  WITHHOLDING.  The Partnership may withhold from any  distribution
the amount so  required  by  applicable  Federal  or state  income tax laws with
respect to such distribution (or which the General Partner reasonably determines
may in the future be required to be withheld  from a  constructive  distribution
arid which is attributable to such actual distribution).  Any amount so withheld
shall,  for purposes of this  Agreement,  be treated as a distribution  from the
Partnership to the Person otherwise  entitled  thereto.  Any amount so w ithheld
and not at that time  treated  as held in trust for the  benefit,  of the United
States or a state shall be held in trust for the benefit of the Person otherwise
entitled thereto until such time as (i) such amount is paid to the United States
or a state  pursuant  to law or (ii) the  General  Partner  determines  that the
aggregate  of the  amounts so  withheld  are in excess of any  present or future
withholding  tax liability in respect of the Person  otherwise  entitled to such
distribution, in which event the Partnership shall pay such excess to the Person
entitled  thereto.  Any funds so withheld  and held in trust (other than for the
benefit of the United  States or a state) may be  invested  in  interest-bearing
accounts  with such  financial  institutions  (other  than an  Affiliate  of the
General  Partner) as may be selected  by the  General  Partner,  but in no event
shall the Partnership or the General Partner be held responsible for the loss of
any funds so deposited or for obtaining a rate of interest lower than that which
might  have  been  obtained  elsewhere.  The  General  Partner,  in its sole and
absolute  discretion,  may make such  elections in respect of withholding as are
permitted by applicable  Federal or state income tax laws.  The General  Partner
may require appropriate  documentation with respect to any distribution that the
distributee may receive such  distribution  free of withholding under Federal or
state  income tax laws.  Any amount  deposited in respect of a  withholding  tax
requirement  in  advance  of the time  such  amount  would  otherwise  have been
distributed  (or which  would not  otherwise  have  been  distributed)  shall be
treated as  distributed  at the time of such'  deposit.  Nothing in this section
shall be construed as in any way  limiting the right of the  Partnership  or the
General  Partner  to  obtain  reimbursement,   whether  from  a  distributee  or
otherwise,  for any taxes the Partnership or the General Partner may be required
to pay in respect of any actual or  constructive  distribution or for any excess
distribution  resulting  from  withholding  tax  requirements.   The  Units  and
Depositary  Units whose status  gives rise to such  withholding  obligation  are
pledged as security for such reimbursement.


                                   ARTICLE 11

                      BOOKS, RECORDS, ACCOUNTS, AND REPORTS


     11.1 BOOKS AND RECORDS.

     (A) The Partnership  shall  continuously  maintain an offce in the State of
California, at which the following books, and records shall be kept:

          (1) A  current  list of the  full  name  and last  known  business  or
     residence address of each Partner set forth in alphabetical  order together
     with the contribution and the share in profits and losses of each Partner;


                                       33


<PAGE>


          (2)  A  copy  of  the  Certificate  of  Limited  Partnership  and  all
     certificates  of amendments  thereto,  together with executed copies of any
     powers  of  attorney  pursuant  to  which  any  such  certificate  has been
     executed;

          (3) Copies of the Partnership's  Federal,  state, and local income tax
     or information returns and reports, if any, for the six most recent taxable
     years;

          (4) Copies of this Agreement and all amendments thereto;

          (5) Financial  statements of the  Partnership  for the six most recent
     fiscal years; and

          (6) The  Partnership's  books and records for at least the current and
     past three fiscal years.

     (B) The  Partnership  shall  also  maintain  at its  principal  offce  such
additional  books  and  records  as  are  necessary  for  the  operation  of the
Partnership.

     (C) Any records  maintained by the Partnership in the regular course of its
business, including the record of the Unitholders, books of account, and records
of  Partnership  proceedings  may be kept on, or be in the form of, punch cards,
magnetic tape,  photographs,  micrographics,  or any other  information  storage
device,  provided that the records so kept can be converted into clearly legible
written form within a reasonable period of time.

     11.2  LIMITED   PARTNERS'  RIGHTS  REGARDING   BOOKS,   RECORDS,   AND  TAX
INFORMATION.

     (A) Subject to Section  11.7,  to the extent not  previously  supplied to a
Limited  Partner,  upon the request of a Limited  Partner,  the General  Partner
shall  promptly  deliver  to  the  limited  Partner,   at  the  expense  of  the
Partnership,  a copy of the items set forth in Sections  11.1  (A)(1),  (2), and
(4).

     (B) Each Limited Partner has the right upon reasonable request:

          (1) To inspect and copy during normal  business  hours, at the Limited
     Partner's expense, any of the Partnership's  records required to be kept of
     the Partnership, subject to Section 11.7.

               (2) To obtain from the General  Partner  promptly  after becoming
          available,   at  the  Limited  Partner's   expense,   a  copy  of  the
          Partnership's  Federal,  state,  and local  income tax or  information
          returns for each year.

     (C) The General Partner shall send to each Partner within 90 days after the
end of each taxable year such  information  as is necessary to complete  Federal
and state income tax or information returns.

     (D) The Partner and the Partner's  representatives shall not divulge to any
other Person any  confidential or proprietary  data,  information or property or
any  trade  secrets  of the  Partnership  discovered  in any  inspection  of the
Partnership's books and records.

     11.3 ACCOUNTING BASIS AND FISCAL YEAR. The Partnership's  books and records
(i) shall be kept on a basis chosen by the General  Partner in  accordance  with
the  accounting  methods  followed by the  Partnership  for  Federal  income tax
purposes and according to generally accepted accounting  principles,  (ii) shall
reflect all  Partnership  transactions,  (iii) shall be appropriate and adequate
for the  Partnership's  business and for the carrying out of all  provisions  of
this  Agreement,  and  (iv)  shall be  closed  and  balanced  at the end of each
Partnership  fiscal  year.  The  fiscal  year of the  Partnership  shall  be the
calendar year, unless otherwise determined by the General Partner.

     11.4 REPORTS.

     (A) The General  Partner shall cause an audited annual report to be sent to
each of the  Unitholders  no later  than 90 days  after the close of the  fiscal
year. That report shall contain a balance sheet as of the end of the fiscal year
and an income  statement and  statements  of partners'  equity and of changes in
financial  position for the fiscal year.  Such  statements  shall be prepared in
accordance  with  generally  accepted  accounting  principles  and  audited  and
certified by a nationally  recognized  firm of  independent  public  accountants
selected by the General Partner.


                                       34


<PAGE>


     (B) The General  Partner  shall cause  quarterly  unaudited  reports of the
Partnership's  operations  to be  sent to  each  of the  Unitholders  as soon as
practical  after the end of each  quarter,  commencing  with the fiscal  quarter
ending March 31, 1987, but in no event more than 60 days after the close of each
fiscal quarter, other than the last quarter of the Partnership's fiscal year.

     (C) The  financial  statements  referred  to in  Section  11.4(B)  shall be
accompanied by the report thereon, of the independent accountants engaged by the
Partnership  or, if there is no such  report,  the  certificate  of the  General
Partner that such  financial  statements  were  prepared  without audit from the
books and records of the Partnership.

     11.5 TAX MATTERS PARTNER.  The General Partner is hereby  designated as the
"Tax Matters Partner" of the Partnership in accordance with Section 6231 (a) (7)
of the Code and is authorized,  at the Partnership's  sole cost and expense,  to
represent  the   Partnership   and  each   Unitholder  in  connection  with  all
examinations of the Partnership affairs by tax authorities,  including resulting
administrative  and judicial  proceedings,  and to expend  Partnership funds for
professional  services and costs connected therewith.  Each Unitholder agrees to
cooperate  with the General  Partner and to do or refrain from doing any and all
things  reasonably  required by the General Partner to conduct such  proceeding.
The  General  Partner  shall  have the right to settle any  audits  without  the
consent of the Unitholders and to take any and all other action on behalf of the
Unitholders  or the  Partnership  in  connection  with any tax audit or judicial
review proceeding to the extent permitted by applicable law and regulations.

11.6 BANK ACCOUNTS.  The Partnership  shall  establish and maintain  accounts in
financial institutions (including, without limitation,  national or state banks,
trust  companies,  or  savings  and loan  institutions)  in such  amounts as the
General  Partner  may  deem  necessary  from  time to  time.  The  funds  of the
Partnership shall be deposited in such accounts and shall not be commingled with
the funds of the General Partner or any Affiliate  thereof;  provided,  however,
that nothing shall prohibit the Partnership  from investing in joint ventures or
partnerships  with the General Partner or its Affiliates;  and provided  further
that nothing  herein shall  preclude any  investment of  Partnership  funds in a
mutual  fund or similar  entity for which a separate  account is  maintained  on
behalf of each  participant.  Checks shall be drawn on and  withdrawals of funds
shall be made  from any such  accounts  for  Partnership  purposes  and shall be
signed by the Person or Persons  designated  by the General  Partner.  Temporary
surplus funds of the Partnership may be invested pursuant to the power contained
in Section 4.1(w).

     11.7  CONFIDENTIALITY.  The General Partner may keep  confidential from the
Unitholders for such period of time as the General Partner deems reasonable, any
information which the General Partner reasonably believes to be in the nature of
trade secrets or other  information  disclosure of which the General  Partner in
good faith  believes  could damage the  Partnership or its business or which the
Partnership is required by agreements with third parties to keep confidential.


                                   ARTICLE 12

                            ISSUANCE OF CERTIFICATES


     12.1  ISSUANCE OF  CERTIFICATES.  Upon the  issuance of Units,  the General
Partner  shall  cause  the  Partnership  to  issue  one  or  more   Certificates
substantially in the form of the Certificate attached hereto as Exhibit 1 in the
name of each Limited  Partner  certifying that the Limited Partner named therein
is a Limited Partner in the Partnership as provided in the  Partnership's  books
and records,  stating the number of Units into which his Partnership Interest is
divided,  and including as a part thereof a form of assignment,  subject to this
Article 12,  sufficient to convey the partnership  interest of a limited partner
to an  assignee  under  the  California  Act.  Upon  the  transfer  of a Unit in
accordance with the terms of this Agreement, the General Partner shall cause the
Partnership to issue replacement  Certificates,  according to such procedures as
the General Partner may establish in its sole and absolute discretion.


                                       35


<PAGE>


new  Certificate or cause to be issued a new Depositary  Receipt in place of any
Certificate or Depositary  Receipt  previously issued if the registered owner of
the Certificate or Depositary Receipt:

          (i) makes proof by affidavit,  in form and substance  satisfactory  to
     the  General  Partner  and  the  Depositary,   that  a  previously   issued
     Certificate or Depositary  Receipt has been mutilated,  lost,  destroyed or
     stolen;

          (ii) requests the issuance of a new Certificate or Depositary  Receipt
     before the  Partnership or the  Depositary has notice that the  Certificate
     has been acquired by a purchaser for value in good faith and without notice
     of an adverse claim;

          (iii) if requested by the General Partner or the Depositary,  delivers
     to the  Partnership  and/or the  Depositary a bond,  in form and  substance
     satisfactory to the General Partner and/or the Depositary, with such surety
     or sureties and with fixed or open penalty,  as the General  Partner and/or
     Depositary  may  direct,  in its or  their  discretion,  to  indemnify  the
     Partnership  and the  Depositary  against  any  claim  that  may be made on
     account  of the  alleged  mutilation,  loss,  destruction,  or theft of the
     Certificate; and

          (iv)  satisfies  any  other  reasonable  requirements  imposed  by the
     General Partner and/or the Depositary.

     If a Unitholder  fails to notify the  Partnership  within a reasonable time
after  he has  notice  of the  mutilation,  loss,  destruction,  or  theft  of a
Certificate or Depositary  Receipt,  and a transfer of the Units  represented by
the  Certificate  or Depositary  Receipt is  registered  before  receiving  such
notification,  the  Unitholder  shall be precluded from making any claim against
the Partnership,  the Depositary, or any Transfer Agent for such transfer or for
a new Certificate or Depositary Receipt.

     12.3  MAINTENANCE  OF  TRANSFER  RECORDS.  The  Partnership's   Depositary,
registrar, and transfer agent (who may be the same Person) will maintain records
reflecting the Depositary  Receipts  registered in the name of each  Unitholder,
and any subsequent transfers of Depositary Receipts to Assignees and Substituted
Limited Partners.

     12.4  RECORD  UNITHOLDER.  The  Partnership  shall be entitled to treat the
Record  Unitholder  as the  Limited  Partner or Assignee in fact of the Units or
Depositary  Units,  as the case may be,  represented  thereby and,  accordingly,
shall not be bound to recognize  any  equitable or other claim to or interest in
such Units or Depositary  Units on the part of any other Person,  whether or not
the Partnership  shall have actual or other notice thereof,  except as otherwise
provided by law or any applicable rule, regulation, guideline, or requirement of
any  securities  exchange on which the Units or Depositary  Units are listed for
trading.  Without  limiting  the  foregoing,  when a Person  (such as a  broker,
dealer, bank, trust company, or clearing corporation,  or an agent of any of the
foregoing)  is acting  as a  nominee,  agent,  or in some  other  representative
capacity for another Person in acquiring and/or holding  Depositary  Receipts or
Certificates, as between the Partnership on the one hand and such Persons on the
other  hand,  such  representative  Person (a) shall be the  Limited  Partner or
Assignee (as the case may be) beneficially  and of record,  (b) must execute and
deliver a T: ansfer  Application,  and (c) will be bound by this  Agreement  and
will have the  obligations of a Limited Partner or Assignee (as the case may be)
hereunder and as provided for herein.

     12.5 WITHDRAWAL OF CERTIFICATEs. A Record Unitholder of Depositary Receipts
may not withdraw  Depositary Units evidenced thereby from deposit unless he is a
Limited Partner.  Upon the written request of any limited Partner accompanied by
a surrendered Depositary Receipt held by a Limited Partner, the Partnership will
cause to be issued to such Limited  Partner a Certificate or Certificates in the
name of such  Limited  Partner  evidencing  the same number of Units.  A Limited
Partner may redeposit any such  Certificate with the Depositary which shall then
reissue  Depositary  Receipts in the name of the Limited Partner thereof upon 60
days' prior written notice.


                                       36


<PAGE>


     12.6  LEGENDS.  The  Partnership  may cause to be  imposed,  imprinted,  or
stamped  on any  Certificate  or  Depositary  Receipt  one or  more  legends  or
restrictions  on  transfer  which the  General  Partner  in its sole  discretion
believes  may be  necessary  or  advisable  to  comply  with  Federal  or  state
securities laws or other applicable laws, rules, regulations, or agreements.


                                   ARTICLE 13

                              TRANSFER OF INTERESTS


     13.1 TRANSFER IN GENERAL.

     (A) The term  "transfer,"  when used in this  Article 13 with  respect to a
Partnership  Interest,  Units,  or  Depositary  Units  shall  include  any sale,
assignment,  gift, pledge, encumbrance,  hypothecation,  mortgage,  exchange, or
other disposition.

     (B) No Partnership Interest, Unit, or Depositary Unit shall be transferred,
in whole or in part,  except in  accordance  with the terms and  conditions  set
forth in Section  8.4,  Article 13, and Article  14. Any  transfer or  purported
transfer  of any  Partnership  Interest,  Depositary  Unit,  or Unit not made in
accordance with Section 8.4, Article 13, and Article 14, shall be null and void.

     13.2 TRANSFER OF INTERESTS OF THE GENERAL PARTNER.

     (A) Until 10 years after the  Closing  Date,  the  General  Partner may not
transfer all or any part of its General Partner Partnership  Interest unless (i)
a Majority Interest consents to such transfer and (ii) the Partnership  receives
an opinion of counsel that such transfer would not result in the loss of limited
liability  of any  Unitholder  or cause  the  Partnership  to be  treated  as an
association  taxable as a  corporation  for  Federal  income tax  purposes.  The
General  Partner  shall have the absolute and  unrestricted  right,  power,  and
authority to transfer any or all of its  Partnership  Interest after the date 10
years from the Closing Date.

     (B) No provision of this  Agreement  shall be construed to prevent (and all
Partners  and  Assignees  hereby  expressly  consent to) (i) the transfer by the
General Partner of its Partnership  Interest to a Related Entity or the transfer
by  the  General  Partner  of  its  Partnership  Interest  upon  its  merger  or
consolidation  into  any  other  corporation  or  the  transfer  by it of all or
substantially  all of its assets to another  corporation,  and the assumption of
the rights  and duties of the  General  Partner  by such  Related  Entity or the
transferee  corporation,  provided  such  Related  Entity  or  such  corporation
furnishes  to  the   Partnership   an  opinion  of  counsel  that  such  merger,
consolidation,  transfer,  or  assumption  will not  result in a loss of limited
liability of any  Unitholder  or result in the  Partnership  being treated as an
association  taxable as a corporation for Federal income tax purposes,  (ii) the
transfer by the General Partner of or the mortgage,  pledge,  hypothecation,  or
granting  a security  interest  in all or any part of its  interest  in items of
Partnership  income,  gains,  losses,  deductions,  credits,  distributions,  or
surplus,  (iii) the sale or assignment of any Units held by the General  Partner
or its Affiliates,  subject to Section 8.4(A),  or (iv) the transfer,  mortgage,
pledge, hypothecation, or grant of a security interest by the General Partner in
any Units owned by the General Partner as collateral for a loan or loans.

     13.3  TRANSFER  OF UNITS.  Units that have never  been  deposited  with the
Depositary or that have been withdrawn  from the Depositary and not  redeposited
are not transferable except by bequest, inheritance, or operation of law or upon
transfer to the General Partner or the Partnership;  provided, however, that the
General  Partner or its Related  Entities  may,  without  restriction,  transfer
between or among  themselves,  Units that have  never  been  deposited  with the
Depositary  and Units  that  have been  withdrawn  from the  Depositary  and not
redeposited.

     13.4 TRANSFER OF DEPOSITARY UNITS.

     (A) Except as provided in Section 13.3, the Partnership shall not recognize
any transfer of Units or interests  therein  except by a transfer of  Depositary
Receipts representing Depositary Units.


                                       37


<PAGE>


Depositary  Units  may be  transferred  only  in the  manner  provided  in  this
Agreement and in the Depositary  Agreement.  No transfer of Depositary  Receipts
evidencing  Depositary  Units will be recorded or  otherwise  recognized  by the
Partnership  unless and until the transferee  has delivered a properly  executed
Transfer Application to the Depositary.

     (B) A transferee  who has completed  and  delivered a Transfer  Application
shall be deemed (i) to have  agreed to be bound by the terms and  conditions  of
the  Depositary  Agreement and the  Depositary  Receipt,  (ii) to have requested
admission  as  a  Substituted   Limited   Partner  with  respect  to  the  Units
transferred, (iii) to have agreed to comply with and be bound by this Agreement,
whether or not such transferree is admitted as a Substituted Limited Partner and
to execute any document that the General  Partner may  reasonably  require to be
executed  in  connection  with  the  transfer  or  with  the  admission  of such
transferee as a Substituted  Limited Partner pursuant to Article 14 with respect
to the Depositary Units transferred; (iv) to have represented and warranted that
such  transferee is a United States  Citizen or Resident Alien and has authority
to enter into the Depositary Agreement and this Agreement, (v) to have appointed
the  General  Partner his  attorney-in-fact  to execute  any  document  that the
General  Partner may deem  necessary or appropriate to be executed in connection
with the transfer  and/or his  admission as a Substituted  Limited  Partner with
respect to the  Depositary  Units  transferred,  (vi) to have given the power of
attorney  set forth in  Article  17, and (vii) to have  given the  consents  and
waivers contained in this Agreement.  Unless and until admitted as a Substituted
Limited  Partner  pursuant  to  Article  14 with  respect  to  Depositary  Units
transferred pursuant to this Section 13.4, the Record Unitholder of a Depositary
Receipt  transferred  pursuant  to this  Section  13.4 shall be an  Assignee  in
respect of such  Depositary  Units,  whether or not such Record  Unitholder is a
Limited Partner with respect to other Depositary  Units.  Except as specifically
provided  in this  Agreement,  an  Assignee  shall not be treated as or have the
rights of a Limited  Partner.  The General Partner shall vote and exercise other
powers  attributable to Depositary  Units or undeposited  Units of Assignees who
have not become Substituted Limited Partners, to the extent known by the General
Partner.

     (C) Each  distribution in respect of a Depositary Unit (or a Unit withdrawn
from the depositary  account  established with the Depositary)  shall be paid by
the Partnership,  directly or through the Depositary or through any other Person
or agent, only to the Record  Unitholders  thereof as of the Record Date set for
the distribution. Such payment shall constitute full payment and satisfaction of
the Partnership's liability in respect of such payment,  regardless of any claim
of any Person who may have an  interest  in or with  respect to such  payment by
reason of an assignment or otherwise.

     (D) Notwithstanding  anything to the contrary herein, the Partnership shall
not be required to recognize for any purpose any purported transfer by a Limited
Partner or Assignee of all or any part of a Depositary Unit held by such Limited
Partner or Assignee  until such  transfer has been  effected on the books of the
Transfer Agent.

     (E) Any holder of a Unit or a  Depositary  Receipt  (including a transferee
thereof) conclusively shall be deemed to have agreed to comply with and be bound
by all terms and conditions of this  Agreement,  with the same effect as if such
holder had executed a Transfer  Application,  whether or not such holder in fact
has executed such a Transfer Application. A request by any broker, dealer, bank,
trust company, clearing corporation,  or nominee holder, to register transfer of
a Depositary  Receipt,  however signed (including by any stamp,  mark, or symbol
executed or adopted with intent to authenticate the Depositary  Receipt),  shall
be  deemed  to have  executed  a  Transfer  Application  by and on behalf of the
beneficial owner of such Depositary Receipt.

     (F)  Notwithstanding  anything to the  contrary  herein (but subject to the
requirement  that a purchaser be a United States Citizen or Resident  Alien),  a
purchaser of a Depositary  Receipt from the  Underwriters  in connection with or
pursuant  to the  Initial  Offering  shall be  required  to  execute a  Transfer
Application to be delivered to the Partnership within 30 days of purchase.  Each
such  purchaser,  by acquiring  such  Depositary  Receipt in connection  with or
pursuant to the Initial Offering,  shall be deemed to have agreed to comply with
and to be bound by all terms and  conditions of this  Agreement,  the Depositary
Agreement,  and the  Depositary  Receipt  and to have  taken the  other  actions
specified in the Transfer  Application  and this  Agreement as if such purchaser
had executed the


                                       38



<PAGE>


Limited  Partners all  purchasers of Depositary  Receipts (who are United States
Citizens  or  Resident  Aliens)  from the  Underwriters  in  connection  with or
pursuant to the Initial  Offering,  and such  admission  shall be deemed to have
been made on the initial  Closing Date.  For purposes of this  paragraph (F), if
fewer than all  underwritten  Units have been sold by the Underwriters as of the
initial Closing Date,  only Persons who purchase Units from the  Underwriters on
or prior to the last day of the calendar  month in which the Closing Date occurs
shall be treated as having  purchased their Units in connection with or pursuant
to the Initial Offering.

     13.5 DEPOSITARY ARRANGEMENTS. The General Partner shall have full authority
to amend,  extend,  or terminate the  Depositary  Agreement or the services of a
Depositary  if,  in the sole  discretion  of the  General  Partner,  it deems it
appropriate  to do so. If the  services  of a  Depositary  are  terminated,  the
General  Partner shall make  substitute,  comparable,  or other  arrangements to
facilitate trading of Units or interests in Units.

     13.6 RESTRICTIONS ON TRANSFER; NON-UNITED STATES CITIZENS.

     (A) Notwithstanding the other provisions of this Article 13, no transfer of
any Unit,  Depositary  Unit, or Partnership  Interest of any Unitholder shall be
made if such  transfer (i) would violate the then  applicable  Federal and state
securities  laws  or  rules  and  regulations  of the  Securities  and  Exchange
Commission, state securities commissions, and any other governmental authorities
with jurisdiction over such transfer; (ii) would result in the Partnership being
treated as an  association  taxable as a  corporation'  for  Federal  income tax
purposes;  (iii) would affect the Partnership's  existence or qualification as a
limited  partnership under the California Act; or (iv) would, in the judgment of
the General  Partner,  materially  adversely affect the business or operation of
the Partnership.

     (B) No  Partnership  Interest may be acquired by or transferred to a Person
who is not,  or is  determined  by the  General  Partner  not to be, or does not
represent in writing that he is, a United States Citizen or Resident Alien.

     (C) In the event a Unitholder  or nominee of a Unitholder  is not or ceases
to be a United States  Citizen or Resident Alien for any reason  whatsoever,  or
fails to provide  satisfactory  evidence to the  General  Partner of such status
within 15 days of a request  therefore,  his Units and Depositary Units shall be
subject to redemption by the Partnership. The Partnership at any time shall have
the absolute  right,  in the  discretion of the General  Partner,  either (i) to
redeem such Units and  Depositary  Units,  or (ii) to permit such  Unitholder to
continue to hold his Units and Depositary  Units.  The procedures for redemption
shall be as follows, unless modified pursuant to Section 13.6(D):

     (1) The General Partner shall,  not later than the 30th day before the date
fixed for redemption,  give notice of redemption to the Unitholder,  at his last
address  designated  on  the  records  of  the  Partnership  or  Depositary,  by
registered or certified  mail,  postage  prepaid.  The notice shall be deemed to
have been given when so mailed. The notice shall specify the Units or Depositary
Units to be redeemed, the date fixed for redemption,  the place of payment, that
payment of the  redemption  price will be made upon  surrender of the Depositary
Receipt  or the  Certificate  evidencing  the  Units or  Depositary  Units to be
redeemed,  and that on and  after  the date  fixed  for  redemption  no  further
allocations or distributions to which the Unitholder would otherwise be entitled
in respect of such Units or Depositary Units will accrue or be made.

     (2) The  redemption  price per Unit or  Depositary  Unit  shall be the Unit
Price  (the  date  of  determination  of  which  shall  be the  date  fixed  for
redemption)  multiplied  by the  number  of  Units  or  Depositary  Units  to be
redeemed.  The  redemption  price shall be paid,  in the sole  discretion of the
General  Partner,  in  cash  or by a  combination  of  cash  and  delivery  of a
promissory  note of the  Partnership  in the principal  amount of the redemption
price  (less cash  paid),  bearing  interest  at the rate of 10%  annually,  and
payable in three equal annual  installments of principal,  together with accrued
interest, commencing one year after the redemption date.

     (3)  Upon  surrender  by or on  behalf  of the  Unitholder,  at  the  place
specified  in the  notice  of  redemption,  of  the  Depositary  Receipt  or the
Certificate evidencing the Units or Depositary Units


                                                        19


<PAGE>


to be redeemed,  duly endorsed in blank or  accompanied  by an  assignment  duly
executed in blank, the former  Unitholder or his duly authorized  representative
shall be entitled to receive the payment therefore.  No interest will be paid on
amounts  of cash  deposited  with  the  Depositary  or set  aside  for  payments
hereunder.

     (4) After the redemption date, the Units or Depositary Units redeemed shall
no longer be deemed issued and outstanding.

     (5) Nothing in this Section 13.6(C) shall prevent the recipient of a notice
of  redemption  from  transferring  his Units or  Depositary  Units  before  the
redemption  date if such transfer is otherwise  permitted  under this Agreement.
Upon receipt of notice of such a transfer,  the General  Partner shall  withdraw
the notice of  redemption,  provided the  transferee of such Units or Depositary
Units  certifies  in the Transfer  Application  that he, and, if he is a nominee
holding for the  account of another  Person,  that to the best of his  knowledge
such  other  Person,  is a United  States  Citizen  or  Resident  Alien.  If the
transferee fails to make such  certification,  such redemption shall be effected
on the original redemption date.

     (D) The  General  Partner,  in its  sole  discretion,  may  establish  such
additional or different  procedures it deems necessary or advisable to implement
the restrictions set forth in this Section 13.6.

     13.7 GENERAL PARTNER'S RIGHT TO PURCHASE UNITS.

     (A)  Notwithstanding  any other provision of this  Agreement,  in the event
that the number of  outstanding  Units held by  holders  other than the  General
Partner or its Affiliates is less than 10% of the aggregate number of Units sold
from time to time to Persons other than the General  Partner or its  Affiliates,
at any time after  September  30,  1991,  the  General  Partner or an  Affiliate
thereof shall then have the right,  exercisable in its sole discretion,  to call
for purchase and purchase  all, but not less than all, of the  Depositary  Units
and undeposited Units that remain outstanding and held by Persons other than the
General Partner and its  Affiliates,  at a price per Unit equal to the following
percentage  of the  Unit  Price of a Unit as of the  date  fixed by the  General
Partner for such purpose (which determination date shall be no more than 90 days
prior to the Purchase Date):

     130% of the Unit Price from October 1, 1991 to September 30, 1996;
     120% of the Unit Price from October 1, 1996 to September 30, 2001; and
     110% thereafter.

     (B) In the event the General Partner or its Affiliate elect to exercise the
rights to purchase  Depositary Units and undeposited Units pursuant to paragraph
(A) above,  the General  Partner or its Affiliate  shall deliver to the Purchase
Agent  written  notice of such  election  to  purchase  (hereinafter  called the
"Notice of Election to Purchase")  and shall cause the Purchase  Agent to mail a
copy of such  Notice of  Election  to  Purchase  to the  Record  Unitholders  of
Depositary  Receipts and to the Record  Unitholders of undeposited  Units (other
than the General  Partner and its Affiliates) at least 10, but not more than 60,
days prior to the Purchase Date.  Such Notice of Election to Purchase shall also
be published in daily newspapers of general  circulation  printed in the English
language and  published in the Borough of Manhattan,  New York,  New York and in
San Francisco,  California. The Notice of Election to Purchase shall specify the
Purchase Date and the purchase  price and state that the General  Partner or its
Affiliate elects to purchase such Depositary Units and undeposited  Units,  upon
surrender  thereof in  exchange  for  payment,  at such office or offices of the
Purchase Agent as the Purchase  Agent may specify,  or as may be required by any
securities  exchange  on which the  Depositary  Units are listed or  admitted to
trading.  Any such Notice of Election to Purchase mailed to a Record  Unitholder
of  Depositary  Receipts  at his  address  as  reflected  in the  records of the
Depositary or, with respect to undeposited Units, to a Record Unitholder of such
Units at his address as  reflected in the records of the  Partnership,  shall be
conclusively  presumed to have been given whether or not the owner receives such
notice.  On or prior to the Purchase Date, the General  Partner or its Affiliate
shall  deposit with the  Purchase  Agent cash in an amount equal to the Purchase
Funds.  If the  Notice of  Election  to  Purchase  shall have been duly given as
aforesaid at least 10 days prior to the Purchase Date. and if on or prior to


                                       40


<PAGE>


the Purchase Date the Purchase Funds shall have been deposited with the Purchase
Agent  in  trust  for  the  benefit  of the  holders  of  Depositary  Units  and
undeposited  Units subject to purchase as provided  herein,  then from and after
the Purchase Date, notwithstanding that any Depositary Receipts or, with respect
to undeposited  Units, any Certificate for Units shall not have been surrendered
for purchase, all rights of the holders of such Depositary Units and undeposited
Units shall  thereupon  cease,  except the right to receive the  purchase  price
therefor,  without  interest,  upon  surrender  to  the  Purchase  Agent  of the
Depositary Receipts representing  Depositary Units or Certificates  representing
unde- Units, and such Depositary Units and undeposited  Units shall thereupon be
deemed to be transferred  to the General  Partner or its Affiliate on the record
books of the  Depositary  and the  Partnership,  and the General  Partner or its
Affiliate, as applicable, shall be deemed to be the owner of all such Depositary
Units and undeposited  Units from and after the Purchase Date and shall have all
rights as the owner of such Depositary Units and undeposited  Units  (including,
without limitation, all rights as owner of such Depositary Units and undeposited
Units pursuant to Articles 9, 10, and 16).

     (C)  At any  time  from  and  after  the  Purchase  Date,  a  holder  of an
outstanding  Depositary Unit or undeposited Unit subject to purchase as provided
in this Section may surrender his Depositary  Receipt evidencing such Depositary
Unit or Certificate  evidencing such  undeposited  Unit to the Purchase Agent in
exchange for payment of the purchase price specified in Section 13.7(A), without
interest thereon.

                                   ARTICLE 14

            ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS

     14.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS.

     (A) Any person shall have the right to request  admission as a  Substituted
Limited Partner subject to the conditions of and in the manner  permitted by the
terms of this Agreement.  By transfer of a Depositary Receipt, the transferor is
deemed  to have  given  the  transferee  the  right to  request  admission  as a
Substituted  Limited  Partner  subject  to the  conditions  of and in the manner
permitted  under this  Agreement.  A transferee  who does not execute a Transfer
Application,  however,  shall have only the right to negotiate  such  Depositary
Receipt *to a  purchaser  or other  transferee,  subject to Section  13.6.  Each
transferee  of a Depositary  Receipt  (including  any Person,  such as a broker,
dealer, bank, trust company,  clearing corporation,  other nominee holder, or an
agent of any of the foregoing; acquiring such Depositary Unit for the account of
another Person) shall apply to become a Substituted Limited Partner with respect
to Depositary  Units  transferred  to such Person by executing and  delivering a
Transfer Application at the time of such transfer.  Such transferee shall become
a Substituted  Limited Partner with respect to Depositary  Units  transferred at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's sole discretion.  If such consent is withheld,
such transferee shall be an Assignee.  An Assignee is entitled to an interest in
the  Partnership  equivalent  to that of a Limited  Partner  with respect to the
allocations  and the  right  to  receive  distributions  from  the  Partnership,
including  liquidating  distributions,  but will  not have the  right to vote on
Partnership  matters and will otherwise be subject to the limitations  under the
California  Act on the  rights  of an  assignee  who has not  become  a  limited
partner.  Unless the  Depositary  is  notified  to the  contrary,  the General I
Partner  shall be  deemed  to have  given  its  consent  to the  admission  of a
transferee  as a  Substituted  Limited  Partner,  and  such  admission  shall be
effective,  at and from the close of  business on the last  business  day of the
calendar month in which a properly executed Transfer  Application is received by
a Transfer Agent.

     (B)  Under  the  terms  of the  Depositary  Agreement,  the  Depositary  is
obligated  to prepare,  as of the close of business on the last  business day of
each month, a list or other appropriate  evidence setting forth the transfers of
Depositary  Units  registered by all Transfer Agents since the last business day
of the preceding month (the "transfer  record"),  setting forth the business day
on which such  Substituted  Limited Partner was admitted to the Partnership and,
as promptly as practicable  after the last business day of each month, to submit
the transfer record to the General Partner.


                                       41


<PAGE>


     (C) Any Limited Partner who transfers all of his Units and Depositary Units
with respect to which he has been  admitted as a Limited  Partner shall cease to
be a Limited  Partner  of the  Partnership  upon a  transfer  of such  Units and
Depositary  Units in accordance with Article 13 and shall have no further rights
as a Partner in or with respect to the Partnership  (whether or not the Assignee
of such former Limited  Partner is admitted to the  Partnership as a Substituted
Limited Partner).

     (D) No person  shall be entitled to become a  Substituted  Limited  Partner
except in accordance with this Section 14.1.

     (E) The General Partner will vote and exercise other powers attributable to
Units and Depositary  Units owned by an Assignee that has not been accepted as a
Substituted Limited Partner, in the General Partner's sole discretion.

     14.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person who makes a Capital
Contribution  to the  Partnership  shall be  admitted to the  Partnership  as an
Additional  Limited  Partner  upon  furnishing  to the  General  Partner  (a) an
acceptance,  in form  satisfactory to the General Partner,  of all the terms and
conditions  of this  Agreement,  including,  without  limitation,  the  power of
attorney  granted in Article 17, and (b) such other  documents or instruments as
may be required in order to effect his admission as a Limited Partner,  and such
admission shall become effective on the date that the General Partner determines
in its  sole  discretion  and  issues  to  such  Additional  Limited  Partner  a
certificate evidencing ownership of his Units.

     14.3  NO  ACTION  NECESSARY  BY  UNITHOLDERS.   No  action  or  consent  by
Unitholders  shall be required in connection with the admission of Additional or
Substituted  Limited  Partners to the  Partnership  for Limited  Partners  added
pursuant to Sections 8.3, 8.4, 8.10, 14.1,  14.2, or otherwise  pursuant to this
Agreement.  Only  the  consent  of the  General  Partner  is  necessary  for the
admission or substitution of any Limited  Partners to the Partnership  after the
filing of the  Certificate  of Limited  Partnership  for Limited  Partners added
pursuant to Sections 8.3, 8.4, 8.10, 14.1,  14.2, or otherwise  pursuant to this
Agreement.


                                   ARTICLE 15

                         CHANCES IN THE GENERAL PARTNER


     15.1 GENERAL PARTNER CEASING TO BE THE GENERAL PARTNER.

     (A)  The  General  Partner  shall  cease  to be a  general  partner  of the
Partnership only upon the occurrence of any one or more of the following events:

          (1) The General Partner's withdrawal from the Partnership;

          (2) The General  Partner's  removal as the General Partner pursuant to
     Section 15.2(B);

          (3)  Effective  as provided  in Section  15.1(B)  below,  an order for
     relief  against  the  General  Partner  is entered  under  Chapter 7 of the
     Federal  Bankruptcy  Code,  or the  General  Partner:  (a)  makes a general
     assignment  for the benefit of  creditors;  (b) files a voluntary  petition
     under the Federal  Bankruptcy  Code; (c) files a petition or answer seeking
     for  the  General  Partner  any  bankruptcy,  reorganization,  arrangement,
     composition,  readjustment,  liquidation,  dissolution,  or similar  relief
     under  any  statute,  law,  or  regulation;  (d)  files an  answer or other
     pleading  admitting  or failing to contest the  material  allegations  of a
     petition  filed  against  the  General  Partner in any  proceeding  of this
     nature;  or (e) seeks,  consents to, or acquiesces in the  appointment of a
     trustee.  receiver,  or liquidator of the General  Partner or of all or any
     substantial part of the General Partner's properties;

          (4) The death of an individual General Partner;

          (5) The  entry  by a  court  of  competent  jurisdiction  of an  order
     adjudicating  an  individual  General  Partner  incompetent  to manage  the
     General Partner's person or property;


                                       42


<PAGE>


          (6) In the case of a General  Partner that is a separate  partnership,
     the dissolution and termination of the separate partnership; or

          (7) In the case of a General Partner that is a corporation, the filing
     of a certificate of dissolution,  or its equivalent, for the corporation or
     the revocation of its charter.

     (B) Any event  described  in Section  15.1 (A) (3) shall  cause the General
Partner to cease to be a general partner of the Partnership  only as provided in
this  Section  15.1(B).  Immediately  upon the later of (1) the  entering of the
order for relief under Chapter 7 of the Federal Bankruptcy Code or (2) the final
disposition  of any appeal by the General  Partner  from the entering of such an
order,  and immediately upon the occurrence of any of the other events described
in Section 15.1 (A)(3),  the General  Partner  shall give notice of the event to
the Partners.  The General  Partner shall cease to be a General Partner 120 days
after, such notice is given.

     (C) If the cessation of the General Partner  pursuant to Section 15.1 would
result in a dissolution of the Partnership,  the Organizational  Limited Partner
shall automatically become a General Partner so as to prevent the dissolution of
the  Partnership.  The  Organizational  Limited  Partner shall  continue to be a
General Partner until determined otherwise by a Majority Interest.

     15.2 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER.

     (A) Airlease Management  Services,  Inc. covenants and agrees that it shall
continue to act as General Partner of the  Partnership  until the date' which is
10 years after the initial  Closing  Date,  subject to its right to transfer its
interest  as a General  Partner  pursuant  to Section  13.2 and  subject to this
Section  15.2(A).  At any time after the date which is 10 years from the Closing
Date, the General Partner may withdraw from the Partnership  without  liability,
penalty,  or cost to it,  effective upon at least 90 days advance written notice
to the Limited Partners, such withdrawal to take effect on the date specified in
such notice.  If the General  Partner gives a notice of  withdrawal,  a Majority
Interest may, prior to the effective date of such withdrawal,  elect a successor
General  Partner.  If no successor  General Partner is elected,  the Partnership
shall be  dissolved  pursuant  to Section  16.1.  The  General  Partner may also
withdraw from the Partnership,  at any time and without liability,  penalty,  or
cost to it, if its continued  status as the general  partner of the  Partnership
would be prohibited by law or would materially adversely affect the Partnership.

     (B) The General  Partner may be removed  upon the vote of Limited  Partners
holding 66 2/3% or more of the outstanding Units. Any such action by the Limited
Partners  for removal of the General  Partner must also provide for the election
of a new  General  Partner.  The right of the  Limited  Partners  to remove  the
General  Partner  shall not exist or be  exercised  unless the  Partnership  has
received  an opinion of  independent  counsel  that the  removal of the  General
Partner and the selection of a successor  General Partner will not result in (i)
the loss of limited  liability of any  Unitholder  or (ii) the  treatment of the
Partnership  as an association  taxable as a corporation  for Federal income tax
purposes.

     (C) Airlease  Management  Services,  Inc. covenants and agrees that it will
remain a Related Entity for at least 10 years after the Closing Date and so long
thereafter  as it is the  General  Partner;  provided  that it may cease to be a
Related  Entity if its continued  status as a Related Entity would by prohibited
by law or would materially adversely affect the Partnership.

     15.3 Admission of Successor  General Partner.  A successor  General Partner
selected  pursuant to Section  15.2 or the  transferee  of or  successor  to the
Partnership Interest of the General Partner shall be admitted to the Partnership
as the  General  Partner,  effective  as of the date  determined  by the General
Partner and the successor  General  Partner.  An amendment or restatement of the
Certificate of Limited Partnership shall be filed with the Secretary of State of
the State of California effecting such substitution as promptly as practicable.

     15.4 Rights on Removal or Withdrawal.  A Departing General Partner shall be
entitled to all compensation  accrued as of the date of cessation as the General
Partner and shall have the same rights


                                       43


<PAGE>


to  inspect  and make  copies  or  excerpts  of the  books  and  records  of the
Partnership  as is  provided  to  Limited  Partners  until all  amounts  due the
Departing  General  Partner as of the date the  General  Partner  ceased to be a
General  Partner  have been  paid.  The  Departing  General  Partner  shall be a
creditor  of  the  Partnership  as to  all  such  amounts  owed  to  it  by  the
Partnership,  and shall not have any portion of its interest as General  Partner
converted to an interest as a Limited  Partner or Assignee except as provided in
Section 15.7. As to any Units so held or received, the Departing General Partner
shall be entitled  to  exercise  all of the voting  rights  provided  under this
Agreement as a Partner.

     15.5 LIABILITY ON REMOVAL OR  WITHDRAWAL.  If, at the time of the Departing
General  Partner's  departure,  the  Partnership  is indebted  to the  Departing
General  Partner under this  Agreement or any other  instrument or agreement for
funds  advanced,  properties  sold;  services  rendered,  or costs and  expenses
incurred by the Departing General Partner, the Partnership shall, within 60 days
after the effective date of such Departing General Partner's  departure,  pay to
the  Departing  General  Partner  the full  amount  of such  indebtedness.  Upon
departure,  the Departing  General Partner shall have no liability for any debts
or  liabilities  of the  Partnership  incurred  after the date of cessation as a
General Partner.

     15.6 SUCCESSOR AND PREDECESSOR GENERAL PARTNER.  Unless the General Partner
has been removed as a General Partner pursuant to Section  15.2(B),  the General
Partner shall have the right to transfer its  business,  including a transfer by
operation of law, as provided in Section  13.2,  and any Person  continuing  the
business of the General  Partner shall  immediately  become a General Partner of
this Partnership and any successor or  reconstituted  partnership and shall have
the exclusive  right to continue the Partnership and shall continue the business
of the  Partnership  pursuant  to the terms  and  provisions  of this  Agreement
without any action or vote of any Person. When any Person ceases to be a General
Partner under this Agreement or a partner,  director,  officer, employee, agent,
or  Affiliate  of a General  Partner,  that  Person  shall  continue to have the
benefit of any provisions of this Agreement providing for indemnity, exculpation
or insurance.  which  protected the Person as the General  Partner or a partner,
director,  officer,  employee,  agent, or Affiliate of the General  Partner,  or
which  limited or defined the liability of the Person with respect to activities
in which such Person engaged as the General Partner.

     15.7 Interest of Departing General Partner and Successor.

     (A) A  Departing  General  Partner  shall,  at the option of its  successor
exercisable  prior  to the  effective  date of the  departure  of the  Departing
General  Partner,  promptly  receive  from its  successor  in  exchange  for its
interest as a General Partner,  an amount in cash equal to the fair market value
of the Departing General Partner's interest as a General Partner,  determined as
of the effective  date of departure.  If the option is exercised,  the Departing
General Partner shall, as of the effective date of departure,  cease to share in
any  allocations  or  distributions  with  respect to its  interest as a General
Partner.  For  purposes  of this  Section  15.7,  the fair  market  value of the
Departing  General  Partner's  Partnership  Interest as a General Partner herein
shall be such value as may be agreed by the  Departing  General  Partner and the
successor.

     (B) If the successor to a Departing  General  Partner does not exercise the
option described in paragraph (A) above,  the interest of the Departing  General
Partner as a General Partner of the Partnership shall be converted into Units on
a basis agreed by the Partnership and the Departing General Partner.

     (C) In the absence of an  agreement  pursuant to (A) or (B) above within 30
days after the effective date of the Departing General Partner's departure,  the
value of the interests of the Departing  General  Partner shall be determined by
an appraiser  selected by the Departing  General Partner and its successor,  the
determination  of which shall be conclusive  as to the matter.  If those parties
cannot agree as to such  appraiser  within 45 days after the  effective  date of
such  departure,  then such  appraiser  shall be  designated  by two  appraisers
selected by the Departing General Partner and its successor.


                                                       44


<PAGE>


     (D) If the successor to a Departing  General  Partner does not exercise the
option  described in paragraph (A) above,  the successor  shall at the effective
date of its  admission  to the  Partnership  contribute  to the  capital  of the
Partnership cash or property equal to 1% of the Capital Accounts of all Partners
and  Assignees.  In such event,  such  successor  shall be entitled to 1% of all
Partnership allocations and distributions.


                                   ARTICLE 16

                    DISSOLUTION, WINDING UP, AND LIQUIDATION


     16.1 DISSOLUTION. The Partnership shall be dissolved upon the expiration of
its  term on  December  31,  2036 or upon  the  first  occurrence  of one of the
following:

     (A) A  General  Partner  ceases  to be a  General  Partner  (other  than by
removal)  unless (1) at the time there is at least one other General  Partner or
(2) all Partners  agree in writing to continue  the business of the  Partnership
and to admit one or more General Partners;

     (B) An  election by the General  Partner to  dissolve  or  discontinue  the
Partnership which is approved by a Majority Interest;

     (C) The Partnership becomes bankrupt; or

     (D) The sale or disposition of all or substantially all Partnership  Assets
(other than a sale or  disposition  the proceeds of which are  reinvested by the
General  Partner  pursuant to Section  3.3),  including  the cessation of active
business,  the  distribution  of all cash,  and the  termination of reserves for
liabilities.

     16.2  CONTINUATION  OF THE  BUSINESS OF THE  PARTNERSHIP.  Upon the General
Partner ceasing to be a General Partner or a dissolution of the Partnership, the
business of the Partnership may be continued as follows:

     (A)  If  the  General  Partner  ceases  to  be a  general  partner  of  the
Partnership,  any then remaining General Partner,  including the  Organizational
Limited  Partner  who  becomes a General  Partner  pursuant  to Section  15.1(C)
(without the necessity for the consent of the Unitholders), shall have the right
to continue  and/or  reconstitute  or reform the  Partnership and no dissolution
shall have been deemed to occur.

     (B) Unless a higher vote is required by the  California  Act, upon an event
of dissolution described in Section 16.1(A), the Partnership shall thereafter be
liquidated in due course unless a Majority  Interest  pursuant to Section 7.9(A)
(4) elects to continue  the  Partnership.  Unless an  election  to continue  the
Partnership is made within 150 days of the event of dissolution, the Partnership
shall  conduct only  activities  necessary  to wind up its  affairs.  If such an
election to continue the Partnership is made then:

          (i) within such 150-day  period a successor  General  Partner shall be
     selected by a Majority Interest;

          (ii) the Partnership shall continue; and

          (iii) all necessary  steps shall be taken to amend the Agreement,  and
     the successor  General Partner may for this purpose  exercise the powers of
     attorney granted pursuant to Article 17.

     (C) In all other events where a dissolution has occurred, upon the approval
of a Majority  Interest to continue the business of the Partnership,  unless the
California Act requires a higher vote.

     16.3 AUTHORITY TO WIND UP. If dissolution of the Partnership occurs for any
reason,  the General  Partner  (unless such General  Partner hasp ceased to be a
General  Partner  pursuant to Section 15.1 (A) (2), (3), (4), (5), (6), or (7) )
shall have the authority (which may be delegated by it to a legal


                                       45


<PAGE>


representative)  to wind up the business and affairs of the Partnership.  If the
Partnership is dissolved  pursuant to Section 16.1 and not continued pursuant to
Section 16.2,  and the General  Partner does not or can not wind up the business
and affairs of the  Partnership,  any Person  designated by a decree of court or
designated by approval of a Majority  Interest  shall wind up the affairs of the
Partnership  and shall be entitled to  compensation  therefor as approved by the
court or an approval of a Majority Interest.

     16.4  ACCOUNTING.  Upon  dissolution (if the business of the Partnership is
not  continued),  and again upon the  termination of the  Partnership  after the
winding up of the affairs of the  Partnership is complete,  an accounting of the
Partnership shall be made and it shall be audited or reviewed by the independent
public  accountants  of the  Partnership,  and a report  thereof  as  audited or
reviewed shall be furnished to the General  Partner or its legal  representative
and to all Unitholders.

     16.5 WINDING UP AND LIQUIDATION.  Upon dissolution of the Partnership where
an election to continue the business of the  Partnership  has not been made,  it
shall be wound up and liquidated as rapidly as business circumstances permit. If
the  liquidator  determines  that  an  immediate  sale  of  part  or  all of the
Partnership  Assets  would be  impractical  or  would  cause  undue  loss to the
Unitholders, the liquidator may, in its absolute discretion,  distribute to some
or all Partners and Assignees,  in lieu of cash, as tenants in common  undivided
interests in such assets as the liquidator deems unsuitable for liquidation. The
liquidator may defer  liquidation or  distribution of assets to the Partners and
Assignees in kind if it determines  that a sale or such a distribution  would be
impractical or would cause undue loss to the Unitholders. The liabilities of the
Partnership shall be entitled to payment in the following order:

     (A) Those to creditors, in the order of priority as provided by law, except
those to  secured  creditors  the  obligations  owed to whom will be  assumed or
otherwise transferred on liquidation of Partnership Assets;

     (B) Those amounts deemed  necessary by the General Partner or the Person(s)
winding up the affairs of the  Partnership  for any  contingent  liabilities  or
obligations  of the  Partnership  shall be set aside as a reserve for contingent
liabilities to be  distributed at such time and in such manner  hereunder as the
Person(s)  winding up the affairs of the  Partnership  shall determine in his or
its sole discretion; and

     (C) To the Partners as provided in Section 10.6.

     16.6 NO RECOURSE  AGAINST THE GENERAL PARTNER.  The Unitholders  shall look
solely to the assets of the Partnership for the payment of any income  allocated
to the Limited Partners or Assignees or the return of Capital Contributions, and
if the assets of the  Partnership  remaining  after  payment or discharge of the
debts and liabilities of the Partnership are  insufficient to return the Capital
Contributions,  they shall have no recourse against the General Partner (subject
to Section 16.8), any director,  officer, employee, partner, agent, or Affiliate
of the General Partner, or any Limited Partner or Assignee for such purpose.

     16.7  CLAIM OF  LIMITED  PARTNERS  AND  ASSIGNEES.  No  Limited  Partner or
Assignee shall have the right or power to demand or receive  property other than
cash, whether as a return of capital, a distribution,  a payment on liquidation,
or otherwise.

     16.8 GENERAL PARTNER'S  OBLIGATION TO MAKE UP NEGATIVE CAPITAL ACCOUNT. If,
immediately  prior to the dissolution and  termination of the  Partnership,  the
General  Partner's  Capital  Account has a deficit  balance and the  Partnership
assets  available  for   distribution   upon  dissolution  and  termination  are
insufficient to provide distributions to Limited Partners equal to their Capital
Contributions  less  distributions  previously  received  from any  source,  the
General Partner shall be obligated to contribute to the Partnership  that amount
of capital (if any) equal to the lesser of (i) an amount  sufficient  to restore
the General  Partner's  Capital  Account to zero: or (ii) 1.01% of the aggregate
Capital  Contributions  of. the Limited  Partners,  less any capital  previously
contributed by the General Partner.


                                       46


<PAGE>


                                   ARTICLE 17

                                POWER OF ATTORNEY


     Each Limited  Partner  (including  any  Additional or  Substituted  Limited
Partner), each Person who executes a Transfer Application, and each Assignee who
accepts  Depositary  Units is deemed to  irrevocably  constitute,  appoint,  and
empower the General Partner (and any successor by merger, transfer, election, or
otherwise),   and  each  of  the  General  Partner's   authorized  officers  and
attorneysin-fact,  with full power of substitution, as the true and lawful agent
and  attorney-in-fact of such Unitholder,  with full power and authority in such
Unitholder's name, place, and stead and for such Unitholder's use or benefit:

     (A) to make, execute, verify, consent to, swear to, acknowledge,  make oath
as to, publish,  deliver,  file, and/or record in the appropriate public offices
(i) all  certificates  and other  instruments,  including,  at the option of the
General Partner,  this Agreement and the Certificate of Limited  Partnership and
all  amendments  and  restatements  thereof,  that  the  General  Partner  deems
appropriate  or necessary  to qualify,  or continue  the  qualification  of, the
Partnership  as a limited  partnership  (or a  partnership  in which the Limited
Partners  have  limited   liability)   in  the  State  of  California   and  all
jurisdictions  in which the Partnership may or may intend to conduct business or
own assets;  (ii) all other certificates,  instruments,  and documents as may be
requested by, or may be appropriate or necessary  under the laws of any state or
other  jurisdiction  in which  the  Partnership  may or may  intend  to  conduct
business or own assets;  (iii) all  instruments  that the General  Partner deems
appropriate or necessary to reflect any amendment,  change,  or  modification of
this  Agreement in  accordance  with the terms hereof (iv) all  conveyances  and
other  instruments  or documents that the General  Partner deems  appropriate or
necessary to effectuate or reflect the dissolution, termination, and liquidation
of the  Partnership  pursuant  to the terms of this  Agreement;  (v) any and all
financing statements,  continuation  statements,  mortgages,  or other documents
necessary  to grant to or perfect  for  secured  creditors  of the  Partnership,
including the General Partner and its Affiliates, a security interest, mortgage,
pledge or lien on all or any of the Partnership  Assets; (vi) all instruments or
papers  required to continue  the business of the  Partnership  pursuant to this
Agreement;  (vii) all instruments  (including this Agreement and the Certificate
of Limited Partnership and amendments and restatements  thereof) relating to the
admission  of any Partner  pursuant  to this  Agreement;  (viii) all  artifacts,
affidavits,  instruments  and  documents  as may be  necessary  or  desirable in
connection with  documentation and registration of Aircraft with the FAA and any
other  governmental  authority having  jurisdiction  over the Partnership or the
Partnership's  Aircraft, and (ix) all other instruments as the attorneys-in-fact
or any one of them may deem  necessary  or  advisable  to carry  out  fully  the
provisions of this Agreement in accordance with its terms; and

     (B) to enter into the  Depositary  Agreement  and deposit all Units of such
Unitholder in the depositary account  established by the Depositary  pursuant to
the Depositary Agreement.

     The  execution  and delivery by any of said  attorneys-in-fact  of any such
agreements,  amendments,  consents,  certificates, or other instruments shall be
conclusive  evidence  that such  execution and delivery was  authorized  hereby.
Nothing herein  contained shall be construed as authorizing any Person acting as
attorney-in-fact   pursuant   to  this   Article   17  to  take   action  as  an
attorney-in-fact for any Unitholder to increase in any way the liability of such
Unitholder  beyond the liability  expressly set forth in this  Agreement,  or to
amend this Agreement except in accordance with Article 18.

     The  appointment  by each  Unitholder  of the  Persons  designated  in this
Article 17 as  attorneys-in-  shall be deemed to be a power of attorney  coupled
with an interest in recognition of the fact that each of the  Unitholders  under
this  Agreement  will be relying upon the power and authority of such Persons to
act  pursuant to this power of attorney  for the orderly  administration  of the
affairs of the  Partnership.  The foregoing power of attorney is hereby declared
to be  irrevocable,  and it shall  survive.  and shall be not  affected  by, the
subsequent death, incompetency, dissolution, disability, incapacity, bankruptcy,
or termination of any Unitholder and it shall extend to such Unitholder's heirs,
successors.  and  assigns.  Each  Unitholder  hereby  agrees  to be bound by any
representations made by any Person


                                       47


<PAGE>


acting as attorney-in-fact pursuant to this power of attorney in accordance with
this Agreement.  Each Unitholder  hereby waives any and all defenses that may be
available  to  contest,  negate,  or disarm the  action of any  Person  taken as
attorney-in-fact under this power of attorney in accordance with this Agreement.
Each Unitholder shall execute and deliver to the General Partner, within 15 days
after  receipt of the  General  Partner's  request  therefor,  all such  further
designations,  powers of attorney,  and other instruments as the General Partner
deems   necessary  to  effectuate   this  Agreement  and  the  purposes  of  the
Partnership,  and if not so executed and delivered,  shall be deemed to be given
within such 15-day  period to the same extent as if so executed and delivered to
the General Partner.


                                   ARTICLE 18

                       AMENDMENTS TO PARTNERSHIP DOCUMENTS


     18.1 AMENDMENTS BY THE GENERAL PARTNER.

     The General  Partner may without prior notice or consent of any  Unitholder
amend any  provision of this  Agreement (1) to elect for the  Partnership  to be
bound by any successor  statute  governing  limited  partnerships and, if in the
General Partner's opinion, the amendment does not have a material adverse effect
on the Unitholder' s (other than those who consent  thereto) or to elect for the
Partnership to be reorganized as a limited partnership governed by and under the
laws of a jurisdiction  other than California,  pursuant to the power granted in
Section 4.12, (2) to conform this  Agreement  tochanges in the California Act or
the FAA Act or  interpretations  thereof  which,  in the sole  discretion of the
General Partner, it believes appropriate, necessary or desirable, p rovided that
in its  reasonable  opinion such  amendment  does not have a materially  adverse
effect  upon  the  Unitholders  or the  Partnership,  (3) if  the  amendment  is
necessary,  in the  opinion of counsel to the  General  Partner,  to prevent the
Partnership  or the General  Partner or the directors or officers of the General
Partner from being in any manner  subject to the  provisions  of the  Investment
Company  Act of 1940,  the  Investment  Advisers  Act of 1940,  or "plan  asset"
regulations  adopted under the Employee  Retirement Income Security Act of 1974,
whether or not substantially similar to plan asset regulations currently applied
or proposed by the  Department of Labor,  provided that such  amendment does not
have a materially adverse effect upon the Unitholders or the Partnership, (4) to
reflect the  exercise of any power  granted to the  General  Partner  under this
Agreement,  (5) to make any change which,  in the sole discretion of the General
Partner,  is  advisable  to  qualify or to  continue  the  qualification  of the
Partnership  as a limited  partnership  or a  partnership  in which the  Limited
Partners have limited liability under the laws of any state or that is necessary
or advisable,  in the sole discretion of the General Partner, to ensure that the
Partnership  will not be treated as an association  taxable as a corporation for
Federal  income  tax  purposes,  (6) to make any  change  that is  necessary  or
advisable,  in the sole  discretion  of the  General  Partner,  to  satisfy  any
requirements,  conditions  or  guidelines  contained in any opinion,  directive,
order,  ruling or  regulation of any Federal or state agency or contained in any
Federal or state  statute or that is necessary or  desirable to  facilitate  the
trading of the Depositary Units or comply with any rule, regulation,  guideline,
or  requirement  of any  securities  exchange  or  market  system  on which  the
Depositary Units are or will be listed for trading,  (7) to amend the provisions
of  Articles 8 or 9 or both if the  Partnership  is advised at any time by legal
counsel that the allocations  provided in Article 9 are unlikely to be respected
for Federal income tax purposes,  in which case the General Partner is empowered
to amend such provisions to the minimum extent  necessary in accordance with the
advice of counsel to effect the plans of allocations and distributions  provided
in this Agreement (new  allocations made by the General Partner in reliance upon
the advice of counsel  described  above shall be deemed to be made pursuant to a
fiduciary  obligation  of  the  General  Partner  to  the  Partnership  and  the
Unitholders, and no such new allocation shall give rise to any claim or cause of
action by any Unitholder), in addition to the right given to the General Partner
in Section  9.2(E) and 9.3(E),  (8) to correct a mistake,  clerical or technical
error, ambiguity, or omission in this Agreement, (9) as necessary to reflect the
respective allocations,  distributions,  voting, liquidation,  and other rights,
preferences, privileges, and restrictions with respect to new Units or interests
issued by the  Partnership,  or (10) to effect any other amendment that does not
have a


                                       48


<PAGE>


materially  adverse effect on the  Unitholders  (other than to  Unitholders  who
consent to the amendment); provided, however, that the General Partner shall not
make any of the foregoing  amendments unless the Partnership shall have received
the favorable  written  opinion of counsel to the effect that such amendment (i)
shall not  cause  the  Limited  Partners  to be deemed to be taking  part in the
management  and control of the business and affairs of the  Partnership so as to
subject the Limited Partners to unlimited liability thereof, (ii) will not cause
the  Partnership  to be treated as an association  taxable as a corporation  for
Federal  income  tax  purposes,  and (iii) is  otherwise  permissible  under the
California  Act. The  amendment  shall  promptly  thereafter be disclosed to the
Unitholders. In the event an amendment shall have been approved pursuant to this
Article 18, the General Partner shall execute such amendment,  certificate,  and
other  documents as may be reasonably  required for the purpose of  effectuating
the same; provided,  however, that nothing in this Article 18 shall be construed
to limit the  authority  of the  General  Partner  to admit  Additional  Limited
Partners or Substituted Limited Partners.

     18.2 AMENDMENT PROCEDURES.

     Except as  provided  in  Sections  18.1 and 18.3,  all  amendments  to this
Agreement shall be made solely in accordance with the following procedures:

          (A) Any amendments of this Agreement must be proposed either:

               (1) By  the  General  Partner,  by  submitting  the  text  of the
          proposed amendment to all Limited Partners in writing; or

               (2) By Limited  Partners  owning (as Limited  Partners and not as
          Assignees) at least 25% of the total Units and Depositary  Units owned
          by Limited  Partners (as Limited  Partners and not as  Assignees),  by
          submitting their proposed amendment in writing to the General Partner.
          The  General  Partner  shall,  within 60 days after the receipt of any
          such  proposed  amendment,  or as  soon  thereafter  as is  reasonably
          practicable,  submit the text of the proposed amendment to all Limited
          Partners.  The  General  Partner may  include in such  submission  its
          recommendation as to the proposed amendment.

          (B) If an amendment is proposed  pursuant to this  Section  18.2,  the
     General Partner shall seek the written  consent of the Limited  Partners to
     such amendment or shall call a meeting of the Limited  Partners to consider
     and vote on the proposed  amendment,  unless,  in the opinion of counsel to
     the General  Partner,  such proposal would be illegal under applicable law,
     if adopted, in which case the General Partner shall not be required to take
     any further action with respect thereto.

          (C) A proposed amendment,  other than those set forth in Section 18.1,
     shall be effective  only if approved by the General  Partner and a Majority
     Interest,  unless a greater  percentage of the Limited Partners is required
     by any other provision of this Agreement.

     18.3 RESTRICTED AMENDMENTS.

     (A) Except with the  affirmative  vote of the  General  Partner and Limited
Partners owning 95% of the outstanding Units for which the Partnership has valid
current  addresses,  no amendment shall be adopted which would (i) result in the
loss of limited  liability of any  Unitholder who does not consent  thereto,  or
(ii) change the form of the Partnership to a general partnership.

     (B) Upon the approval of a Majority  Interest,  the form of the Partnership
may be changed to a corporation if the General  Partner has determined that such
change is  advisable  as a result of  amendments  to the Code that result in the
Partnership being taxed as a corporation.

     (C)  Notwithstanding  the  provisions of Section 18.1, no provision of this
Agreement  which  establishes a percentage of votes  required of the Partners to
take any action shall be amended,  altered, changed, or rescinded in any respect
which  would have the effect of  reducing  the voting  requirement,  unless such
action is approved by Limited Partners holding outstanding Units whose aggregate
percentage  interests  in  such  Units  constitute  not  less  than  the  voting
requirements sought to be


                                       49


<PAGE>


reduced.  This  Section  18.3(C)  shall only be amended with the approval by the
General Partner and Limited  Partners  owning 95% of the  outstanding  Units for
which the Partnership has valid current addresses.

     18.4 AMENDMENTS NEEDING CONSENT OF THE GENERAL PARTNER. Notwithstanding any
other  provision of this  Agreement,  without the consent of the General Partner
(and any  Departing  General  Partner  that  would be  affected  thereby),  this
Agreement  may not be  amended  to modify the  compensation,  distributions,  or
rights of  reimbursement  to which the  General  Partner  or  Departing  General
Partner  is  entitled  or  affect  the  duties  of the  General  Partner  or the
indemnification  or the protection  from liability  which the General Partner or
Departing  General Partner and their  officers,  directors,  agents,  employees,
Affiliates, and assigns are entitled.

     18.5 AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP.

     (A) The  General  Partner  shall  cause  to be filed  with  the  California
Secretary of State,  within 30 days after the  happening of any of the following
events,  an amendment to the Certificate of Limited  Partnership  reflecting the
occurrence of any of the following events:

          (1) A change in the name of the Partnership;

          (2) A change in either of the following:

               (i) The street address of the Partnership's  principal  executive
          office;

               (ii) If the principal executive office is not in California,  the
          street address of an office in California;

          (3) A change in the address or withdrawal of the General Partner, or a
     change in the  address  of the  agent  for  service  of  process,  unless a
     corporate agent is designated, or appointment of a new agent for service of
     process;

          (4) The admission of a General Partner and that Partner's address; or

          (5) The  discovery  by the General  Partner of any false or  erroneous
     material statement contained in the Certificate of Limited Partnership.

     (B)  Any   certificate  of  limited   partnership   filed  or  recorded  in
jurisdictions  other than California  shall be amended as required by applicable
law.

     (C) The Certificate of Limited  Partnership may also be amended at any time
in any other manner deemed appropriate by the General Partner.

     18.6  AMENDMENT  REGARDING  NEW GENERAL  PARTNER.  In  connection  with the
admission to the  Partnership  of any  successor  General  Partner,  the General
Partner shall take all steps  necessary and appropriate to prepare and record or
file any  amendment or  restatement  to this  Agreement and the  Certificate  of
Limited  Partnership that may be required with respect to such admission and may
for this purpose exercise the power of attorney granted pursuant to Article 17.


                                   ARTICLE 19

                            MISCELLANEOUS PROVISIONS


     19.1 NOTICES. All notices or other communications  required or permitted to
be  given  pursuant  to  this  Agreement  shall,  in  the  case  of  notices  or
communications  required or permitted to be given to Unitholders,  be in writing
and shall be considered as properly given or made if personally  delivered or if
mailed by United States first class mail, postage prepaid, or if sent by prepaid
telegram,  and addressed to such Unitholder's  address for notices as it appears
on the records of the Partnership, and, in the case of notices or communications
required or  permitted to be given to the General  Partner,  shall be in writing
and shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram,  or if mailed by United States certified or registered
mail return receipt requested,


                                       50


<PAGE>


postage prepaid,  and addressed to the General Partner at 2988 Campus Drive, San
Mateo,  California 94403. Any Unitholder may change the address for notices,  by
giving  notice of such change to the  Partnership,  and the General  Partner may
change  its  address  for  notices  by  giving  notice  of  such  change  to all
Unitholders.  Commencing  on the 10th day after the giving of such notice,  such
newly  designated  address shall be such Person's address for the purpose of all
notices or other  communications  required or permitted to be given  pursuant to
this Agreement.  Any notice or other  communication shall be deemed to have been
given as of the date on  which it is  personally  delivered  or,  if  mailed  or
telegraphed,  the date on which it is  deposited  in the United  States mails or
transmitted,  in each case in  compliance  with the terms of this Section  19.1,
except  that any  notice or other  communication  mailed or  telegraphed  to the
General  Partner  which is not  received by the General  Partner  within 10 days
after the date of its mailing or transmission shall be deemed to have been given
as of the date actually received by the General Partner.

     19.2  CHOICE OF VENUE AND LAW.  Action to  enforce  any  provision  of this
Agreement  or in any action  brought by the  Partners or  Assignees  against the
General  Partner  or  the  Partnership   shall  be  brought  in  San  Francisco,
California.  This Agreement shall be governed by and construed under the laws of
the State of California.

     19.3  ARTICLE AND  SECTION-HEADINGS.  The  headings in this  Agreement  are
inserted for convenience and  identification  only and are in no way intended to
describe,  interpret,  define,  or limit the  scope,  extent,  or intent of this
Agreement or any provision hereof.

     19.4 SOLE AGREEMENT.  This Agreement and the exhibits hereto constitute the
entire  understanding  of the parties  hereto with respect to the subject matter
hereof and supersede all prior or contemporaneous  agreements and understandings
pertaining thereto.

     19.5 FORCE MAJEURE. If the General Partner is rendered unable, wholly or in
part, by "force majeure" (as herein defined) to carry out any of its obligations
under  this  Agreement,  other  than  the  obligation  hereunder  to make  money
payments,  the obligations of the General Partner,  insofar as it is affected by
such  force  majeure,  shall  be  suspended  during,  but no  longer  than,  the
continuance of such force majeure. The term "force majeure" as used herein shall
mean an act. of God,  strike,  lockout or other industrial  disturbance,  act of
public  enemy,  war,  blockade,  public riot,  lightning,  fire,  storm,  flood,
explosion,  governmental restraint,  unavailability of equipment,  and any other
cause, whether of the kind specifically enumerated above or otherwise,  which is
not within the control of the General Partner.

     19.6 REMEDIES CUMULATIVE.  The remedies of the parties under this Agreement
are  cumulative and shall not exclude any other remedies to which any Person may
be lawfully entitled.

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

     19.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto irrevocably
waives during the cerm of the Partnership any right that he may have to maintain
any action for partition with respect to Partnership Assets.

     19.9   ASSIGNABILITY.   Subject  to  the  restrictions  on  transferability
contained  herein,  each  and  all  of the  covenants,  terms,  provisions,  and
agreements  herein  contained  shall be binding upon and inure to the benefit of
the   successors,    heirs,   devisees,   executors,    administrators,    legal
representatives, and assigns of the respective parties hereto.

     19.10 GENDER AND NUMBER.  Whenever the context requires,  the gender of all
words used  hereby  shall  include the  masculine,  feminine,  and  neuter,  the
singular of all words shall  include the singular and plural,  and the plural of
all words shall include the singular and plural.


                                       51


<PAGE>


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

     19.12 CREDITORS.  None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.

     19.13  CONSTRUCTION.  If any  language  is  stricken  or deleted  from this
Agreement,  such language  shall be deemed never to have appeared  herein and no
other  implication  shall be drawn therefrom.  The language in all parts of this
Agreement shall be in all cases construed  according to its fair meaning and not
strictly for or against the General Partner or the Unitholders.

     19.14 SEVERABILITY.  If any provision of this Agreement, or the application
thereof,  shall, for any reason and to any extent,  be invalid or unenforceable,
the remainder of this  Agreement and the  application of such provision to other
Persons or  circumstances  shall not be affected  thereby,  but rather  shall be
enforced to the maximum extent permissible under applicable law.

     19.15 SURVIVAL. It is the express intention and agreement of all parties to
this  Agreement  that all covenants,  agreements,  statements,  representations,
warranties,  and indemnities  made in this Agreement shall survive the execution
and delivery of this Agreement.

     19.16 EXECUTION IN COUNTERPARTS.  To facilitate  execution,  this Agreement
may be executed in as many counterparts as may be required;  and it shall not be
necessary  that the  signatures  of, or on behalf of,  each  party,  or that the
signatures  of  all  persons  required  to  bind  any  party,   appear  on  each
counterpart;  but it shall be sufficient that the signature of, or on behalf of,
each party,  or that the  signatures of the persons  required to bind any party,
appear on one or more of the counterparts.  All counterparts  shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement  to  produce  or  account  for  more  than a  number  of  counterparts
containing  the  respective  signatures  of, or on behalf  of,  all the  parties
hereto.


                                       52


<PAGE>


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

                                         GENERAL PARTNER:

                                         AIRLEASE MANGEMENT SERVICES, INC.

                                         By:____________________________________

                                         Title:   President
                                               _________________________________



                                         ORGANIZATIONAL LIMITED PARTNER:

                                         UNITED STATES AIRLEASE HOLDING, INC.

                                         By:____________________________________

                                         Title:   President
                                               _________________________________



                                         LIMITED PARTNERS:

                                         NORTH AMERICAN AIRCRAFT FINANCE
                                         CORPORATION

                                         By:____________________________________

                                         Title:   Executive Vice President
                                               _________________________________



                                         OTHER LIMITED PARTNERS (pursuant
                                         to powers-of-attorney to the General
                                         Partner)

For the purposes of Section 3.5 only:

UNTIED STABS AIRLEASE. INC.

By:______________________________________

Title:   President
      ___________________________________


                                       53



<PAGE>


                                                                       EXHIBIT I
                                                                  TO AMENDED AND
                                                           RESTATED AGREEMENT OF
                                                             LIMITED PARTNERSHIP
                                                             OF AIRLEASE LTD., A
                                                              CALIFORNIA LIMITED
                                                                     PARTNERSHIP


                                   CERTIFICATE
                                       FOR
                            LIMITED PARTNERSHIP UNITS
                                       OF
                 AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP

No.__________                                                   __________ Units


    Airlease Management Services, Inc., as the General Partner of Airlease Ltd.,
A California Limited Partnership, hereby certifies that
is the  registered  owner  of  units  of  limited  partnership  interest  in the
Partnership ("Units"). The rights, preferences,  privileges, and restrictions of
the  Units  are set forth in the  Amended  and  Restated  Agreement  of  Limited
Partnership  under which the Partnership was formed and is existing,  and in the
Certificate  of  Limited  Partnership  filed  for  record  in the  Office of the
Secretary  of State of the State of  California,  copies of which are on file at
the General Partner's office at 2988 Campus Drive, San Mateo,  California 94403.
THIS CERTIFICATE IS NON-NEGOTIABLE AND IS NOT TRANSFERABLE  EXCEPT UPON DEATH OR
BY OPERATION OF LAW OR TO THE GENERAL PARTNER OR THE PARTNERSHIP.

                                         Airlease, Ltd., A California
                                         Limited Partnership

                                         By Airlease Management Services,
                                            Inc., General Partner

Dated:_________________                  By:____________________________________

                                         Title:_________________________________


BY  ACCEPTANCE  OF THIS  CERTIFICATE  FOR LIMITED  PARTNERSHIP  UNITS,  AND AS A
CONDITION  TO BEING  ENTITLED TO ANY RIGHTS IN OR BENEFITS  WITH  RESPECT TO THE
UNITS EVIDENCED  HEREBY,  A HOLDER HEREOF  (INCLUDING ANY TRANSFEREE  HEREOF) IS
DEEMED TO HAVE AGREED, WHETHER OR NOT SUCH HOLDER IS ADMITTED TO THE PARTNERSHIP
AS A SUBSTITUTED  LIMITED PARTNER WITH RESPECT TO THE UNITS EVIDENCED HEREBY, TO
COMPLY WITH AND BE BOUND BY ALL TERMS AND CONDITIONS OF THE AMENDED AND RESTATED
AGREEMENT OF LIMITED  PARTNERSHIP  UNDER WHICH THE PARTNERSHIP WAS FORMED AND IS
EXISTING  (INCLUDING,   WITHOUT  LIMITATION,   PROVISIONS  THEREOF  RELATING  TO
CONFLICTS OF INTEREST, LIMITATIONS ON LIABILITY, REDEMPTION, AND INDEMNIFICATION
OF THE  GENERAL  PARTNER  THEREOF),  A COPY OF  WHICH  HAS  BEEN  AVAILABLE  FOR
INSPECTION AND MAY BE OBTAINED UPON REQUEST FROM THE  PARTNERSHIP.  A PERSON WHO
I$ NOT A UNITED  STATES  CITIZEN OR RESIDENT  ALIEN IN THE UNITED STATES MAY NOT
HOLD ANY INTEREST IN THE  PARTNERSHIP,  AND ACQUISITIONS BY OR TRANSFERS TO SUCH
PERSON ARE NULL AND VOID.