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                                                                    Exhibit 10.1

                        AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                         SHELBOURNE PROPERTIES III L.P.

                  THIS AGREEMENT OF LIMITED PARTNERSHIP OF Shelbourne Properties
III L.P., dated as of _____ __, 2000, is entered into by and among Shelbourne
Properties III GP, Inc. (the "General Partner"), a Delaware corporation, as the
general partner of the Partnership and Shelbourne Properties III, Inc. (the
"Company"), a Delaware corporation as the limited partner of the Partnership.

                  WHEREAS, the Partnership was formed on April 3, 2000 for the
purposes of facilitating a conversion of High Equity Partners L.P.- Series 88
("HEP") a Delaware limited partnership.

                  WHEREAS, the conversion (the "Conversion") is being
effected pursuant to a merger agreement between HEP, the Partnership and the
Company pursuant to which HEP is being merged into the Partnership and the
partnership interests in HEP are being converted into shares of common stock of
the Company in exchange for their partnership interests in HEP;

                  WHEREAS, pursuant to a Consent Solicitation Statement/
Prospectus a majority of the limited partners of HEP consented to the
Conversion of the Partnership, including the adoption of this Second Amended
and Restated Agreement of Limited Partnership; and

                  WHEREAS, pursuant to the Conversion, the Company proposes
to qualify as a real estate investment trust.

                  NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and for other good and valuable consideration, the parties hereby
agreed as follows:

                                    ARTICLE I

                                  DEFINED TERMS

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

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

                  "Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Sections 4.2 and 12.2 hereof and
who is shown as such on the books and records of the Partnership.

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

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

                  "Adjusted Property" means any property, the Carrying Value of
which has been adjusted pursuant to Exhibit B hereof.

                  "Advisor" means Shelbourne Management, LLC.

                  "Advisory Agreement" means the Advisory Agreement among the
General Partner, the Company and the Advisor dated the date of this Agreement.

                  "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

                  "Agreed Value" means (i) in the case of any Contributed
Property as of the time of its contribution to the Partnership, the 704(c) Value
of such property, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such property is subject when contributed,
(ii) in the case of any Adjusted Property, its fair market value (as determined
under Exhibit B hereto) on the date of adjustment and (iii) in the case of any
property distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.

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

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


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

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

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

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

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

                  "Cash Amount" means an amount of cash per OP Unit equal to the
Value on the Specific Redemption Date of the REIT Shares Amount.

                  "Certificate of Incorporation" means the Certificate of
Incorporation or other organizational document governing the Company, as amended
or restated from time to time.

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

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

                  "Consent" means the consent or approval of a proposed action
by a Partner given in accordance with Section 14.2 hereof.


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

                  (i) "Conversion" has the meaning set forth in the second
WHEREAS clause hereof.

                  "Conversion Factor" means 3.0, provided that in the event that
the Company (i) declares or pays a dividend on its outstanding REIT Shares in
REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares; (ii) subdivides its outstanding REIT Shares; or (iii)
combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination (assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator of
which shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event (provided, however, if a
Notice of Redemption is given prior to such a record date and the Specified
Redemption Date is after such a record date, then the adjustment to the
Conversion Factor shall, with respect to such redeeming Partner, be retroactive
to the date of such Notice of Redemption). It is intended that adjustments to
the Conversion Factor are to be made in order to avoid unintended dilution or
anti-dilution as a result of transactions in which REIT Shares are issued,
redeemed or exchanged without a corresponding issuance, redemption or exchange
of OP Units. If, prior to a Specified Redemption Date, Rights (other than Rights
issued pursuant to an employee benefit plan or other compensation arrangement)
were issued and have expired, and such Rights were issued with an exercise price
that, together with the purchase price for such Rights, was below fair market
value in relation to the security or other property to be acquired upon the
exercise of such Rights, and such Rights were issued to all holders of
outstanding REIT Shares or the General Partner cannot in good faith represent
that the issuance of such Rights benefited the Limited Partners, then the
Conversion Factor applicable upon a Notice of Redemption shall be equitably
adjusted in a manner consistent with antidilution provisions in warrants and
other instruments in the case of such a below market issuance or exercise price.
A similar equitable adjustment to protect the value of OP Units shall be made in
all events if any Rights issued under a "Shareholder Rights Plan" became
exercisable and expired prior to a Specified Redemption Date.

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


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                  "Disregarded Entity" means a limited liability company or
other unincorporated entity which is wholly owned by the General Partner or the
Company and whose existence is disregarded for federal income tax purposes under
Treasury Regulation Section 1.7701-3.

                  "Effective Date" means the date of closing of the
Conversion.

                  "Extraordinary Transaction" shall mean, with respect to the
Company, the occurrence of one or more of the following events: (i) a merger
(including a triangular merger), consolidation or other combination with or into
another Person; (ii) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of its assets in one transaction or a
series of related transactions; or (iii) any reclassification, recapitalization
or change of its outstanding equity interests (other than a change in par value,
or from par value to no par value, or as a result of a split, dividend or
similar subdivision).

                  "General Partner" means Shelbourne Properties III GP, Inc., in
its capacity as the general partner of the Partnership, or its successors as
general partner of the Partnership.

                  "General Partner Interest" means a Partnership Interest held
by the General Partner, in its capacity as general partner. A General Partner
Interest may be expressed as a number of OP Units.

                  "Immediate Family" means, with respect to any natural Person,
such natural Person's estate or heirs or current spouse, parents,
parents-in-law, children, siblings and grandchildren (in each case whether by
adoption or not) and any trust or estate, all of the beneficiaries of which
consist of such Person or such Person's spouse, parents, parents-in-law,
children, siblings or grandchildren.

                  "Incapacity" or "Incapacitated" means, (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his or her Person
or estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership or limited liability
company which is a Partner, the dissolution and commencement of winding up of
the partnership or limited liability company; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation,


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reorganization or other relief of or against such Partner under any bankruptcy,
insolvency or other similar law now or hereafter in effect has not been
dismissed within one hundred twenty (120) days after the commencement thereof;
(g) the appointment without the Partner's consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days of
such appointment; or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.

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

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

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

                  "Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Partners and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled, as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partner Interest may be expressed as
a number of OP Units.

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

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

                  "Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period over
the Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.

                  "Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.


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                  "New Securities" has the meaning set forth in Section 4.3.

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

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

                  "Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).

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

                  "OP Unit" or "Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2 and
4.3. The number of OP Units outstanding and the Percentage Interest in the
Partnership represented by such Units are set forth in Exhibit A attached
hereto, as such Exhibit may be amended from time to time. The ownership of OP
Units shall be evidenced by such form of certificate for units as the General
Partner adopts from time to time unless the General Partner determines that the
OP Units shall be uncertificated securities.

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

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

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

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

                  "Partnership" means the limited partnership formed under the
Act and pursuant to this Agreement, as it may be amended and/or restated, and
any successor thereto.

                  "Partnership Interest" means an ownership interest in the
Partnership representing a Capital Contribution by either a Limited Partner or
the General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this


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Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Partnership Interest may be expressed as a
number of OP Units.

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

                  "Partnership Record Date" means the record date established by
the General Partner for a distribution pursuant to Section 5.1 hereof, which
record date shall be the same as the record date established by the Company for
a distribution to its shareholders of some or all of its portion of such
distribution.

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

                  "Percentage Interest" means, as to a Partner, its interest in
the Partnership as determined by dividing the OP Units owned by such Partner by
the total number of OP Units then outstanding and as specified in Exhibit A
attached hereto, as such Exhibit may be amended from time to time.

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

                  "Proxy/Prospectus" has the meaning set forth in the third
WHEREAS clause hereof.

                  "Publicly Traded" means listed or admitted to trading on the
New York Stock Exchange, the American Stock Exchange or another national
securities exchange or designated for quotation on the NASDAQ National Market,
or any successor to any of the foregoing.

                  "Qualified REIT Subsidiary" means an entity which is wholly
owned by a real estate investment trust and whose existence is disregarded for
federal income tax purposes under Section 856(i) of the Code.

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

                  "Redeeming Partner" has the meaning set forth in Section 8.7
hereof.

                  "Redemption Right" has the meaning set forth in Section 8.7
hereof.

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


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

                  "REIT Share" shall mean a share of common stock, par value
$.01 per share, of the Company.

                  "REIT Shares Amount" shall mean a number of REIT Shares equal
to the product of the number of OP Units owned by a Redeeming Partner,
multiplied by the Conversion Factor in effect on the date of receipt by the
General Partner of a Notice of Redemption, provided that in the event the
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
"Rights"), and the Rights have not expired at the Specified Redemption Date,
then the REIT Shares Amount shall also include the Rights that were issuable to
a holder of the REIT Shares Amount of REIT Shares on the applicable record date
relating to the issuance of such Rights.

                  "Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate
Book-Tax Disparities.

                  "Rights" shall have the meaning set forth in the definition of
"REIT Shares Amount."

                  "Sale or Disposition" means any of the following Partnership
transactions: sales, exchanges, or other dispositions of real or personal
property, condemnations or any recovery or damage awards, and insurance proceeds
(other than business or rental interruption insurance proceeds).

                  "704(c) Value" of any Contributed Property means the fair
market value of such property or other consideration at the time of
contribution, as determined by the General Partner using such reasonable method
of valuation as it may adopt. Subject to Exhibit B hereof, the General Partner
shall, in its sole and absolute discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate of the 704(c) Values of
Contributed Properties in a single or integrated transaction among the separate
properties on a basis proportional to their respective fair market values.

                  "Specified Redemption Date" means the sixty-first (61st) day
after receipt by the General Partner of a Notice of Redemption or, if such date
is not a Business Day, the first Business Day thereafter; provided that no
Specified Redemption Date shall occur before that date that is 12 months after
the issuance of the applicable OP Units, and provided further that if the
Company combines its outstanding REIT Shares into a smaller number of REIT
Shares, no Specified Redemption Date shall occur after the record date of such
combination of REIT Shares and prior to the effective date of such combination.


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

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

                  "Taxable REIT Subsidiary" means an entity in which the REIT
owns stock and which elects to be treated as such under Section 856(l) of the
Code.

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

                  "Transfer" has the meaning set forth in Section 11.1.

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

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

                  "Value" means, with respect to a REIT Share, the average of
the daily market price for the ten (10) consecutive trading days immediately
preceding the Specified Redemption Date. The market price for each such trading
day shall be: (i) if the REIT Shares are listed or admitted to trading on any
securities exchange or the Nasdaq National Market System, the closing price on
such day, or if no such sale takes place on such day, the average of the closing
bid and asked prices on such day; (ii) if the REIT Shares are not listed or
admitted to trading on any securities exchange or the Nasdaq National Market
System, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner; or
(iii) if the REIT Shares are not listed or admitted to trading on any securities
exchange or the Nasdaq National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than ten (10) days prior to the date
in question) for which prices have been so reported; provided that if there are
no bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the REIT Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes Rights, then the Value of such Rights
shall be determined by the General Partner acting in good faith on


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the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate, provided that the Value of any rights issued
pursuant to a "Shareholder Rights Plan" shall be deemed to have no value unless
a "triggering event" shall have occurred (i.e., if the Rights issued pursuant
thereto are no longer "attached" to the REIT Shares and are able to trade
independently).

                                   ARTICLE II
                             ORGANIZATIONAL MATTERS

                  Section 2.1 Organization

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

                  Section 2.2 Name

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

                  Section 2.3 Registered Office and Agent; Principal Office

                  The address of the registered office of the Partnership in the
State of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle, Delaware 19801, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office shall be Corporation Trust Company. The principal office of
the Partnership shall be 5 Cambridge Center, 9th Floor, Cambridge, Massachusetts
02142 or such other place as the General Partner may from time to time designate
by notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the General
Partner deems advisable.

                  Section 2.4 Term

                  The term of the Partnership commenced on April 3, 2000, the
date on which the Certificate was filed in the office of the Secretary of State
of the State of Delaware in accordance with the Act, and shall continue in
perpetuity, unless it is dissolved pursuant to the provisions of Article XIII
hereof or as otherwise provided by law.

                  Section 2.5 Power of Attorney


                                       11
<PAGE>

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

                           i. execute, swear to, acknowledge, deliver, file and
         record in the appropriate public offices (a) all certificates,
         documents and other instruments (including, without limitation, this
         Agreement and the Certificate of Limited Partnership and all amendments
         or restatements thereof) that the General Partner or the Liquidator
         deems appropriate or necessary to form, qualify or continue the
         existence or qualification of the Partnership as a limited partnership
         (or a partnership in which the Limited Partners have limited liability)
         in the State of Delaware and in all other jurisdictions in which the
         Partnership may or plans to conduct business or own property; (b) all
         instruments that the General Partner deems appropriate or necessary to
         reflect any amendment, change, modification or restatement of this
         Agreement in accordance with its terms; (c) all conveyances and other
         instruments or documents that the General Partner or the Liquidator
         deems appropriate or necessary to reflect the dissolution and
         liquidation of the Partnership pursuant to the terms of this Agreement,
         including, without limitation, a certificate of cancellation; (d) all
         instruments relating to the admission, withdrawal, removal or
         substitution of any Partner pursuant to, or other events described in,
         Article XI, XII or XIII hereof or relating to the Capital Contribution
         of any Partner; and (e) all certificates, documents and other
         instruments relating to the determination of the rights, preferences
         and privileges of Partnership Interests; and

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

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

                  B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's OP Units
and shall extend to such Limited Partner's or Assignee's heirs, successors,
assigns and personal representatives. Each such Limited Partner or Assignee
hereby agrees to be bound by any representation made by the General Partner or
any Liquidator, acting in good faith pursuant to such power of attorney, and
each such Limited Partner or Assignee hereby waives any and all defenses which
may be available to contest, negate or disaffirm the action of the General
Partner or any


                                       12
<PAGE>

Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's or
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.

                                   ARTICLE III

                                     PURPOSE

                  Section 3.1 Purpose and Business

                  The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Company at all times to be classified as a REIT, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture, limited
liability company or other similar arrangement to engage in any of the foregoing
or to own interests in any entity engaged, directly or indirectly, in any of the
foregoing; and (iii) to do anything necessary or incidental to the foregoing.
The General Partner also shall be empowered to do any and all acts and things
necessary or prudent to ensure that the Partnership will not be classified as a
"publicly traded partnership" for purposes of Section 7704 of the Code,
including but not limited to imposing restrictions on transfers and restrictions
on redemptions.

                  Section 3.2 Powers

                  The Partnership shall have full power and authority to do any
and all acts and things necessary, appropriate, proper, advisable, incidental to
or convenient for the furtherance and accomplishment of the purposes and
business described herein and for the protection and benefit of the Partnership,
including, without limitation, directly or through its ownership interest in
other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property and other real estate-related assets, and lease, sell,
transfer and dispose of real property and other real estate-related assets;
provided, however, that the Partnership shall not take, or refrain from taking,
any action which, in the judgment of the General Partner, in its sole and
absolute discretion, (i) could adversely affect the ability of the Company to
continue to qualify as a REIT, (ii) could subject the Company to any additional
taxes under Section 857 or Section 4981 of the Code or (iii) could violate any
law or regulation of any governmental body or agency having jurisdiction over
the Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the General Partner in writing.

                  Section 3.3 Partnership Only for Purposes Specified

                  The Partnership shall be a partnership only for the purposes
specified in Section 3.1 above, and this Agreement shall not be deemed to create
a partnership among the


                                       13
<PAGE>

Partners with respect to any activities whatsoever other than the activities
within the purposes of the Partnership as specified in Section 3.1 above.

                                   ARTICLE IV
                       CAPITAL CONTRIBUTIONS AND ISSUANCES
                            OF PARTNERSHIP INTERESTS

                  Section 4.1 Capital Accounts and Capital Contributions of the
Partners

                  A. Capital Accounts. Capital Accounts shall be maintained for
each Partner pursuant to Exhibit B hereof. On the Effective Date, the Capital
Account balances of the General Partner and the Company shall equal the product
ot their Percentage Interest and the Agreed Value of the assets acquired by the
Partnership on the Effective Date.

                  B. General Partnership Interest. The OP Units held by the
General Partner shall be deemed to be the General Partner Interest.

                  C. No Obligation to Make Additional Capital Contributions.
Except as provided in Sections 4.2 and 10.4 hereof or elsewhere in this
Agreement, the Partners shall have no obligation to make any additional Capital
Contributions or provide any additional funding to the Partnership (whether in
the form of loans, repayments of loans or otherwise). No Partner shall have any
obligation to restore any deficit that may exist in its Capital Account, either
upon a liquidation of the Partnership or otherwise. Each Partner shall own the
number of OP Units set forth for such Partner in Exhibit A and shall have a
Percentage Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest shall be adjusted in Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
additional Capital Contributions, the issuance of additional OP Units (pursuant
to any merger or otherwise), or similar events having an effect on any Partner's
Percentage Interest.

                  Section 4.2 Issuances of Partnership Interests

                  The General Partner is hereby authorized to cause the
Partnership from time to time to issue to the Partners (including the Company
and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) additional OP
Units or other Partnership Interests in one or more classes, or one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the Limited Partner Interests issued on the
Effective Date, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (ii) the right of
each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that no
such additional OP Units or other Partnership Interests shall be issued to the
Company, unless either (a)(1) the additional Partnership Interests are issued in
connection with the grant, award or issuance of REIT Shares or other equity
interests by the Company, which REIT Shares or other equity interests have
designations, preferences and other rights such that the economic interests
attributable to such REIT Shares or other equity interests are substantially
similar to the


                                       14
<PAGE>

designations, preferences and other rights of the additional Partnership
Interests issued to the Company in accordance with this Section 4.2 and (2) the
Company shall make a Capital Contribution to the Partnership in an amount equal
to the proceeds raised in connection with such issuance, or (b) the additional
Partnership Interests are issued to all Partners in proportion to their
respective Percentage Interests. In addition, the Company may acquire OP Units
from other Partners pursuant to this Agreement. In the event that the
Partnership issues Partnership Interests pursuant to this Section 4.2, the
General Partner shall make such revisions to this Agreement (without any
requirement of receiving approval of the Limited Partners) including but not
limited to the revisions described in Section 5.4, Section 6.2 and Section 8.7
hereof, as it deems necessary to reflect the issuance of such additional
Partnership Interests and the special rights, powers and duties associated
therewith. Unless specifically set forth otherwise by the General Partner, any
Partnership Interest issued after the Effective Date shall have the same rights,
powers and duties as the Partnership Interests issued on the Effective Date.

                  Section 4.3 Contributions of Proceeds of Issuances of REIT
Shares.

                  From and after the date hereof, the Company shall not issue
any additional REIT Shares (other than REIT Shares issued pursuant to Section
8.7), or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
Securities") other than to all holders of REIT Shares unless (i) the General
Partner shall cause the Partnership to issue to the Company, Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership having designations, preferences and other rights, all such
that the economic interests are substantially similar to those of the New
Securities; and (ii) the Company contributes to the Partnership the proceeds
from the issuance of such New Securities and from the exercise of rights
contained in such New Securities, provided that if the proceeds received by the
Company are less than the gross proceeds of such issuance as a result of any
underwriter's discount or other expenses paid or incurred in connection with
such issuance, then the Company shall be deemed to have made a Capital
Contribution to the Partnership in the amount equal to the sum of the net
proceeds of such issuance plus the amount of such underwriter's discount and
other expenses paid by the Company (which discount and expense shall be treated
as an expense for the benefit of the Partnership for purposes of Section 7.4).
Without limiting the foregoing, the Company is expressly authorized to issue New
Securities for no tangible value or for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
Company corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the interests of the Company
and the Partnership (for example, and not by way of limitation, the issuance of
REIT Shares and corresponding OP Units pursuant to an employee stock purchase
plan providing for employee grants or purchases of REIT Shares or employee stock
options that have an exercise price that is less than the fair market value of
the REIT Shares, either at the time of issuance or at the time of exercise); and
(y) the Company contributes all proceeds, if any, from such issuance and
exercise to the Partnership. In the case of employee acquisitions of New
Securities at a discount from fair market value or for no value in connection
with a grant of New Securities, the amount of such discount representing
compensation to the employee, as determined by the General Partner, shall be
treated as an expense of the issuance of such New Securities.


                                       15
<PAGE>

                  Section 4.4 No Preemptive Rights

                  Except to the extent expressly granted by the General Partner
(on behalf of the Partnership) pursuant to another agreement, no Person shall
have any preemptive, preferential or other similar right with respect to (i)
additional Capital Contributions or loans to the Partnership or (ii) issuance or
sale of any OP Units or other Partnership Interests.

                  Section 4.5 Other Contribution Provisions

                  In the event that any Partner is admitted to the Partnership
and is given a Capital Account in exchange for services rendered to the
Partnership, such transaction shall be treated by the Partnership and the
affected Partner as if the Partnership had compensated such Partner in cash for
the fair market value of such services, and the Partner had contributed such
cash to the capital of the Partnership.

                  Section 4.6 No Interest on Capital

                  No Partner shall be entitled to interest on its Capital
Contributions or its Capital Account.

                                    ARTICLE V
                                  DISTRIBUTIONS

                  Section 5.1 Requirement and Characterization of Distributions

                  The General Partner shall have the exclusive right and
authority to declare and cause the Partnership to make distributions as and when
and in such amounts as the General Partner deems appropriate or desirable in its
sole discretion. All distributions shall be made to Partners who are Partners on
the Partnership Record Date in accordance with their respective Percentage
Interests on such Partnership Record Date; provided that in no event may a
Partner receive a distribution with respect to an OP Unit if such Partner is
entitled to receive a distribution with respect to a REIT Share for which such
OP Unit has been exchanged and such distribution shall be made to the Company.
For so long as the Company elects to qualify as a REIT, the General Partner
shall take such reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with the Company's qualification as a REIT, to make
distributions so that the Company will receive amounts sufficient to enable the
Company to satisfy the requirements for qualifying as a REIT under the Code and
the Regulations (the "REIT Requirements") and avoid federal income taxation or
excise tax liability to the Company. Unless otherwise expressly provided for
herein or in an agreement at the time a new class of Partnership Interests is
created in accordance with Article IV hereof, no Partnership Interest shall be
entitled to a distribution in preference to any other Partnership Interest.

                  Section 5.2 Amounts Withheld

                  All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.4 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the


                                       16
<PAGE>

General Partner, Limited Partners or Assignees pursuant to Section 5.1 above for
all purposes under this Agreement.

                  Section 5.3 Distributions Upon Liquidation

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

                  Section 5.4 Revisions to Reflect Issuance of Additional
Partnership Interests

                  In the event that the Partnership issues additional
Partnership Interests to the General Partner, the Company or any Additional
Limited Partner pursuant to Article IV hereof, the General Partner shall make
such revisions to this Article V as it deems necessary to reflect the issuance
of such additional Partnership Interests.

                                   ARTICLE VI

                                   ALLOCATIONS

                  Section 6.1 Allocations For Capital Account Purposes

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

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

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

                  C. Allocation of Nonrecourse Debt. The Partners agree that
Nonrecourse Liabilities of the Partnership shall be allocated among the Partners
in accordance with the provisions of Regulations Section 1.752-3, as modified by
any guidance published by the Internal Revenue Service, or otherwise reasonably
interpreted.


                                       17
<PAGE>

                  D. Recapture Income. Any gain allocated to the Partners upon a
Sale or Disposition of any Partnership property shall, to the extent possible,
after taking into account other required allocations of gain pursuant to Exhibit
C, be characterized as Recapture Income in the same proportions and to the same
extent as such Partners have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture Income.

                  Section 6.2 Revisions to Allocations to Reflect Issuance of
Additional Partnership Interests

                  In the event that the Partnership issues additional
Partnership Interests to the General Partner, the Company or any Additional
Limited Partner pursuant to Article IV hereof, the General Partner shall make
such revisions to this Article VI as it deems necessary to reflect the terms of
the issuance of such additional Partnership Interests.

                                   ARTICLE VII

                      MANAGEMENT AND OPERATIONS OF BUSINESS

                  Section 7.1 Management

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

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

                           ii. the making of tax, regulatory and other filings,
         or rendering of periodic or other reports to governmental or other
         agencies having jurisdiction over the business or assets of the
         Partnership, the registration of any class of securities of the


                                       18
<PAGE>

         Partnership under the Securities Exchange Act of 1934, as amended, and
         the listing of any debt securities of the Partnership on any exchange;

                           iii. the acquisition, disposition, sale, mortgage,
         pledge, encumbrance, hypothecation or exchange of any or all of the
         assets of the Partnership (including the exercise or grant of any
         conversion, option, privilege or subscription right or other right
         available in connection with any assets at any time held by the
         Partnership) or the merger or other combination of the Partnership with
         or into another entity, on such terms as the General Partner deems
         proper in its sole and absolute discretion;

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

                           v. the management, operation, leasing, landscaping,
         repair, alteration, demolition or improvement of any real property or
         improvements owned by the Partnership or any Subsidiary of the
         Partnership or any other Person in which the Partnership has made a
         direct or indirect equity investment;

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

                           vii. the distribution of Partnership cash or other
         Partnership assets in accordance with this Agreement;

                           viii. the holding, managing, investing and
         reinvesting of cash and other assets of the Partnership and, in
         connection therewith, the opening, maintaining and closing of bank and
         brokerage accounts and the drawing of checks or other orders for the
         payment of moneys;

                           ix. the collection and receipt of revenues and income
         of the Partnership;

                           x. the selection and dismissal of employees of the
         Partnership (including, without limitation, employees having titles
         such as "president," "vice president," "secretary" and "treasurer,) and
         agents, outside attorneys, accountants, consultants and contractors of
         the Partnership, and the determination of their compensation and other
         terms of employment or hiring;


                                       19
<PAGE>

                           xi. the maintenance of such insurance for the benefit
         of the Partnership, the Partners and directors and officers thereof as
         it deems necessary and appropriate;

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

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

                           xiv. the determination of the fair market value of
         any Partnership property distributed in kind, using such reasonable
         method of valuation as the General Partner may adopt;

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

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

                           xvii. the exercise of any of the powers of the
         General Partner enumerated in this Agreement on behalf of any Person in
         which the Partnership does not have any interest pursuant to
         contractual or other arrangements with such Person;

                           xviii. the making, executing and delivering of any
         and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of
         trust, security agreements, conveyances, contracts, guarantees,
         warranties, indemnities, waivers, releases or other legal instruments
         or agreements in writing necessary or appropriate in the judgment of
         the General Partner for the accomplishment of any of the powers of the
         General Partner under this Agreement;

                           xix. the distribution of cash to acquire OP Units
         held by a Limited Partner in connection with a Limited Partner's
         exercise of its Redemption Right under Section 8.7 hereof;


                                       20
<PAGE>

                           xx. the amendment and restatement of Exhibit A hereto
         to reflect accurately at all times the Capital Contributions and
         Percentage Interests of the Partners as the same are adjusted from time
         to time to the extent necessary to reflect redemptions, Capital
         Contributions, the issuance of OP Units, the admission of any
         Additional Limited Partner or any Substituted Limited Partner or
         otherwise, which amendment and restatement, notwithstanding anything in
         this Agreement to the contrary, shall not be deemed an amendment of
         this Agreement, as long as the matter or event being reflected in
         Exhibit A hereto otherwise is authorized by this Agreement;

                           xxi. the approval and/or implementation of any merger
         (including a triangular merger), consolidation or other combination
         between the Partnership and another person that is not prohibited under
         this Agreement, whether with or without Consent, the terms of Section
         17-211(g) of the Act shall be applicable such that the General Partner
         shall have the right to effect any amendment to this Agreement or
         effect the adoption of a new partnership agreement for a limited
         partnership if it is the surviving or resulting limited partnership of
         the merger or consolidation (except as may be expressly prohibited
         under Section 14.1.C or Section 14.1.D); and

                           xxii. the taking of any and all actions necessary or
         desirable in furtherance of, in connection with or incidental to the
         foregoing.

                  B. No Approval by Limited Partners. Each of the Limited
Partners agrees that the General Partner is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the
Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement, the Act or any applicable
law, rule or regulation, to the full extent permitted under the Act or other
applicable law. The execution, delivery or performance by the General Partner or
the Partnership of any agreement authorized or permitted under this Agreement
shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.

                  C. Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the properties of the Partnership, (ii)
liability insurance for the Indemnitees hereunder and (iii) such other insurance
as the General Partner, in its sole and absolute discretion, determines to be
necessary.

                  D. Working Capital and Other Reserves. At all times from and
after the date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
(both in purpose and amount) from time to time, including upon liquidation of
the Partnership pursuant to Section 13.2 hereof.

                  E. No Obligations to Consider Tax Consequences of Limited
Partners. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken


                                       21
<PAGE>

(or not taken) by it. The General Partner and the Partnership shall not have
liability to a Limited Partner for monetary damages or otherwise for losses
sustained, liabilities incurred or benefits not derived by such Limited Partner
in connection with such decisions, provided that the General Partner has acted
in good faith and not beyond its authority under this Agreement.

                  Section 7.2 Certificate of Limited Partnership

                  The Partnership has previously caused the Certificate to be
filed with the Secretary of State of Delaware. To the extent that such action is
determined by the General Partner to be reasonable and necessary or appropriate,
the General Partner shall file amendments to and restatements of the Certificate
and do all the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, the District of Columbia or other
jurisdiction in which the Partnership may elect to do business or own property.
The General Partner shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do business
or own property. Subject to the terms of Section 8.6.A(iv) hereof, the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the Certificate or any amendment thereto to any Limited Partner.

                  Section 7.3 Title to Partnership Assets

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

                  Section 7.4 Reimbursement of the General Partner and the
Company

                  A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
hereof regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not be compensated for its services as
general partner of the Partnership.

                  B. Responsibility for Partnership Expenses. The Partnership
shall be responsible for and shall pay all expenses relating to the
Conversion, the ownership of its assets and its management, administration
and operations. The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its


                                       22
<PAGE>

sole and absolute discretion, for all expenses it incurs relating to the
Conversion and the ownership, management, administration and operation of, or
for the benefit of, the Partnership (including, without limitation, expenses
related to the ownership, management and administration of any Subsidiaries of
the Company or the Partnership or Affiliates of the Partnership). The General
Partner shall determine in good faith the amount of expenses incurred by it
related to the ownership and operation of, or for the benefit of, the
Partnership. Such reimbursements shall be in addition to any reimbursement to
the Company pursuant to Section 10.3.C hereof and as a result of indemnification
pursuant to Section 7.7 below. All payments and reimbursements hereunder shall
be characterized for federal income tax purposes as expenses of the Partnership
incurred on its behalf, and not as expenses of the General Partner.

                  C. Reimbursement of Company Expenses. The Company shall be
reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its sole and absolute discretion, for all expenses that the Company
incurs relating to the ownership and operation of, or for the benefit of, the
Partnership (including, without limitation, (i) expenses relating to the
ownership of interests in the Partnership, (ii) compensation of the Company's
officers and employees including, without limitation, payments under the
Company's Stock Incentive Plans that provides for stock units, or other phantom
stock, pursuant to which employees of the Company will receive payments based
upon dividends on or the value of REIT Shares, (iii) director fees and expenses
and (iv) all costs and expenses of being a public company, including costs of
filings with the SEC, reports and other distributions to its stockholders);
provided that the amount of any such reimbursement shall be reduced by any
interest earned by the Company with respect to bank accounts or other
instruments or accounts held by it on behalf of the Partnership. The Partners
acknowledge that all such expenses of the Company are deemed to be for the
benefit of the Partnership. Such reimbursement shall be in addition to any
reimbursement made as a result of indemnification pursuant to Section 7.7
hereof.

                  D. Partnership Interest Issuance Expenses. The General Partner
shall also be reimbursed for all expenses it incurs relating to any issuance of
additional Partnership Interests, debt of the Partnership or rights, options,
warrants or convertible or exchangeable securities pursuant to Article IV hereof
(including, without limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related to any of the
foregoing), all of which expenses are considered by the Partners to constitute
expenses of, and for the benefit of, the Partnership.

                  E. Tax Treatment of Certain Reimbursements. If and to the
extent that any reimbursement made pursuant to this Section 7.4 is determined
for federal income tax purposes not to constitute a payment of expenses of the
Partnership, then such reimbursement shall be treated as a distribution pursuant
to Article V hereof.

                  Section 7.5 Outside Activities of the General Partner and the
Company

                  A. General Partner. The General Partner shall not, directly or
indirectly, enter into or conduct any business other than in connection with the
ownership, acquisition and disposition of Partnership Interests as a General
Partner or Limited Partner and the management of the business of the Partnership
and such activities as are incidental to any of the foregoing.


                                       23
<PAGE>

                  B. Company. The Company shall not, directly or indirectly,
enter into or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a Limited Partner, the
ownership of the General Partner and such activities as are incidental to any of
the foregoing, and any other activities contemplated hereby.

                  Section 7.6 Transactions with Affiliates

                  A. Transactions with Certain Affiliates. The Partnership may
enter into transactions with Affiliates of the General Partner (including
transactions providing for the purchase or sale of property or other assets)
provided that the terms of such transactions are comparable to those that could
be obtained from unaffiliated third parties.

                  B. Benefit Plans. The General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners, may
propose and adopt on behalf of the Partnership employee benefit plans funded by
the Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any of the Partnership's Subsidiaries.

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

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

                  Section 7.7 Indemnification

                  A. General. To the fullest extent permitted by Delaware law,
the Partnership shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorneys fees and other legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the operations of the Partnership, the General
Partner or the Company as set forth in this Agreement, in which such Indemnitee
may be involved, or is threatened to be involved, as a party or otherwise,
unless it is established that: (i) the act or omission of the Indemnitee was
material to the matter giving rise to the proceeding and either was committed in
bad faith or was the result of active and deliberate dishonesty; (ii) the
Indemnitee actually received an improper personal benefit in money, property or
services; or (iii) in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful. Without
limitation, the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guaranty or otherwise for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including without limitation,
any indebtedness which the


                                       24
<PAGE>

Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or
its equivalent by an Indemnitee, or an entry of an order of probation against an
Indemnitee prior to judgment, creates a rebuttable presumption that such
Indemnitee acted in a manner that would preclude indemnification under this
Section 7.7. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Partnership, and neither the General Partner nor any
Limited Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.7.

                  B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee, in the case of any director or officer who is
an Indemnitee upon receipt by the Partnership of (i) a written affirmation by
the Indemnitee of the Indemnitee's good faith belief that the standard of
conduct necessary for indemnification by the Partnership as authorized in
Section 7.7.A has been met and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.

                  C. No Limitation of Rights. The indemnification provided by
this Section 7.7 shall be in addition to any other rights to which an Indemnitee
or any other Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.

                  D. Insurance. The Partnership may purchase and maintain
insurance on behalf of the Indemnitees and such other Persons as the General
Partner shall determine against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.

                  E. Benefit Plan Fiduciary. For purposes of this Section 7.7,
(i) 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, (ii) excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 7.7 and (iii) actions taken or omitted by the Indemnitee with respect to
an employee benefit plan in the performance of its duties for a purpose
reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose that is not
opposed to the best interests of the Partnership


                                       25
<PAGE>

                  F. No Personal Liability for Limited Partner. In no event may
an Indemnitee subject any of the Partners to liability by reason of the
indemnification provisions set forth in this Agreement.

                  G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.

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

                  I. Indemnification Payments Not Distributions. If and to the
extent any payments to the General Partner pursuant to this Section 7.7
constitute gross income to the General Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.

                  Section 7.8 Liability of the General Partner

                          A. General. Notwithstanding anything to the contrary
set forth in this Agreement, the General Partner and its directors and officers
shall not be liable for monetary damages to the Partnership, any Partners or any
Assignees for losses sustained, liabilities incurred or benefits not derived as
a result of errors in judgment or mistakes of fact or law or of any act or
omission if the General Partner acted in good faith.

                          B. No Obligation to Consider Separate Interests of
Limited Partners or Shareholders. The Limited Partners expressly acknowledge
that the General Partner is acting on behalf of the Partnership, that the
General Partner is under no obligation to consider the separate interests of the
Limited Partners (including, without limitation, the tax consequences to Limited
Partners or Assignees) in deciding whether to cause the Partnership to take (or
decline to take) any actions and that the General Partner shall not be liable
for monetary damages or otherwise for losses sustained, liabilities incurred or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted in good faith. In addition, the
Limited Partners expressly acknowledge that the Company is acting on behalf of
its shareholders, that the Company, in its capacity as the sole shareholder of
the General Partner, is under no obligation to consider the separate interests
of the Limited Partners (including, without limitation, the tax consequences to
Limited Partners or Assignees) in deciding whether to cause the General Partner
to cause the Partnership to take (or decline to take) any actions and that the
Company shall not be liable for monetary damages or otherwise for losses
sustained, liabilities


                                       26
<PAGE>

incurred or benefits not derived by Limited Partners in connection with such
decisions, provided that the General Partner has acted in good faith.

                          C. Actions of Agents. Subject to its obligations and
duties as General Partner set forth in Section 7.1.A above, the General Partner
may exercise any of the powers granted to it by this Agreement and perform any
of the duties imposed upon it hereunder either directly or by or through its
agents (including the Advisor). The General Partner shall not be responsible for
any misconduct or negligence on the part of any such agent (including the
Advisor) appointed by the General Partner in good faith.

                          D. Effect of Amendment. Any amendment, modification or
repeal of this Section 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the General Partner's liability
to the Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

                  Section 7.9 Other Matters Concerning the General Partner

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

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

                          C. Action Through Agents. The General Partner shall
have the right, in respect of any of its powers or obligations hereunder, to
employ persons in the operation and management of the business of the
Partnership, including but not limited to, the Advisor, supervisory managing
agents, building management agents, insurance, real estate and loan brokers,
agents, employees, managers, accountants, attorneys, consultants and others, on
such terms and for such compensation as the General Partner shall determine. In
addition, the General Partner may act through any of its duly authorized
officers or a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.

                  D. Actions to Maintain REIT Status or Avoid Taxation.
Notwithstanding any other provisions of this Agreement or the Act, any action of
the General Partner on behalf of the Partnership or any decision of the General
Partner to refrain from acting on behalf of the Partnership, undertaken in the
good faith belief that such action or omission is


                                       27
<PAGE>

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

                  E. Actions to Avoid Publicly Traded Partnership Status.
Notwithstanding any other provision of this Agreement, any action of the General
Partner on behalf of the Partnership or any decision of the General Partner to
refrain from acting on behalf of the Partnership, undertaken in the good faith
belief that such action or omission is necessary or advisable to ensure that the
Partnership will not be classified as a "publicly traded partnership" for
purposes of Sections 351(e), 469(k) or 7704 of the Code, including without
limitation imposing restrictions on transfers and redemptions of OP Units
hereunder and modifying the Specified Redemption Date, is expressly authorized
under this Agreement and is deemed approved by all the Limited Partners;
provided however, that the General Partner shall be under no obligation to avoid
publicly traded partnership status for the Partnership if the General Partner
determines, in its sole and absolute discretion, that the avoidance of such
status is no longer in the best interests of the Partners.

                  Section 7.10 Purchase of REIT Shares by Company

                  In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future or for the
purpose of retiring such REIT Shares, the purchase price paid by the Company for
such REIT Shares and any other expenses incurred by the Company in connection
with such purchase shall be considered expenses of the Partnership and shall be
advanced to the Company or reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales proceeds shall include the amount of dividends reinvested
under any dividend reinvestment or similar program provided that a transfer of
REIT Shares for OP Units pursuant to Section 8.7 would not be considered a sale
for such purposes); and (ii) if such REIT Shares are not retransferred by the
Company within thirty (30) days after the purchase thereof, or the Company
otherwise determines not to retransfer such REIT Shares, the General Partner
shall cause the Partnership to redeem a number of OP Units held by the Company,
as a Limited Partner, equal to the product obtained by dividing the number of
such REIT Shares by the Conversion Factor (in which case such advancement or
reimbursement of expenses shall be treated as having been made as a distribution
in redemption of such number of Units held by the Company).

                  Section 7.11 Reliance by Third Parties

                  Notwithstanding anything to the contrary in this Agreement,
any Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without consent or approval of any
other Partner or Person, to encumber, sell or otherwise use in any manner any
and all assets of the Partnership and to enter into any contracts on behalf of
the Partnership, and take any and all actions on behalf of the Partnership and
such


                                       28
<PAGE>

Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.

                                  ARTICLE VIII
                   RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

                  Section 8.1 Limitation of Liability

                  The Limited Partners shall have no liability under this
Agreement except as expressly provided in this Agreement, including Section 10.4
hereof, or under the Act.

                  Section 8.2 Management of Business

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

                  Section 8.3 [Intentionally Left Blank]

                  Section 8.4 Outside Activities of Limited Partners

                  Subject to any agreements entered into pursuant to Section
7.6.C hereof and any other agreements entered into by a Limited Partner or its
Affiliates with the Partnership or any of its Subsidiaries, any Limited Partner
(other than the Company) and any officer, director, employee, agent, trustee,
Affiliate or shareholder of any Limited Partner shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities that
are in direct competition with the Partnership or that are enhanced by the
activities of the Partnership. Neither the Partnership nor


                                       29
<PAGE>

any Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee. None of the Limited Partners (other
than the Company) nor any other Person shall have any rights by virtue of this
Agreement or the Partnership relationship established hereby in any business
ventures of any other Person and such Person shall have no obligation pursuant
to this Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person.

                  Section 8.5 Return of Capital

                  Except pursuant to the right of redemption set forth in
Section 8.7 below, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. No Limited Partner or Assignee shall have priority over any other
Limited Partner or Assignee, either as to the return of Capital Contributions or
as to profits, losses or distributions.

                  Section 8.6 Rights of Limited Partners Relating to the
Partnership

                  A. General. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.6.C below, each
Limited Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership, upon written
demand with a statement of the purpose of such demand and at such Limited
Partner's own expense:

                     i. to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the Company
pursuant to the Securities Exchange Act of 1934;

                     ii. to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership Year,

                     iii. to obtain a current list of the name and last known
business, residence or mailing address of each Partner, and

                     iv. to obtain a copy of this Agreement and the Certificate
of Limited Partnership and all amendments thereto, together with executed copies
of all powers of attorney pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have been executed.

                  B. Notice of Conversion Factor. The Partnership shall notify
each Limited Partner, upon request, of the then current Conversion Factor and,
with reasonable detail, how the same was determined.

                  C. Confidentiality. Notwithstanding any other provision of
this Section 8.6, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
and absolute discretion to be reasonable, any information that (i) the General
Partner reasonably believes to be in the nature of trade secrets or


                                       30
<PAGE>

other information the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage the
Partnership or its business or (ii) the Partnership is required by law or by
agreements with unaffiliated third parties to keep confidential.

                  Section 8.7 Redemption Right

                  A. General. Subject to Sections 8.7.B and 8.7.C hereof, on or
after that date which is 12 months after the issuance of OP Units to a Limited
Partner other than the Company, such Limited Partner shall have the right (the
"Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date the OP Units held by such Limited Partner (or such lesser amount
as the General Partner may permit) at a redemption price per OP Unit equal to
and in the form of the Cash Amount to be paid by the Partnership. The Redemption
Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the Company) by the Limited Partner who is
exercising the redemption right (the "Redeeming Partner"); provided, however,
that the Partnership shall not be obligated to satisfy such Redemption Right if
the Company elects to purchase the OP Units subject to the Notice of Redemption
pursuant to Section 8.7.B. A Limited Partner may not exercise the Redemption
Right for less than all of the OP Units held by such Partner unless the General
Partner otherwise consents. The Redeeming Partner shall have no right, with
respect to any OP Units so redeemed, to receive any distributions paid on or
after the Specified Redemption Date. The Assignee of any Limited Partner may
exercise the rights of such Limited Partner pursuant to this Section 8.7, and
such Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Assignee. In
connection with any exercise of such rights by an Assignee on behalf of a
Limited Partner, the Cash Amount shall be paid by the Partnership directly to
such Assignee and not to such Limited Partner.

                  B. Redemption by Company. Notwithstanding the provisions of
Section 8.7.A, a Limited Partner that exercises the Redemption Right shall be
deemed to have offered to sell the OP Units described in the Notice of
Redemption to the Company. The Company may, in its sole and absolute discretion
(subject to any limitations on ownership and transfer of REIT Shares set forth
in the Certificate of Incorporation), elect to assume directly and satisfy a
Redemption Right by paying to the Redeeming Partner either the Cash Amount or
the REIT Shares Amount, as the Company determines in its sole and absolute
discretion on the Specified Redemption Date, whereupon the Company shall acquire
the OP Units offered for redemption by the Redeeming Partner and shall be
treated for all purposes of this Agreement as the owner of such OP Units. If the
Company shall elect to exercise its right to purchase OP Units under this
Section 8.7.B with respect to a Notice of Redemption, it shall so notify the
Redeeming Partner within five (5) Business Days after the receipt by it of such
Notice of Redemption. Unless the Company (in its sole and absolute discretion)
shall exercise its right to purchase OP Units from the Redeeming Partner
pursuant to this Section 8.7.B, the Company shall not have any obligation to the
Redeeming Partner or the Partnership with respect to the Redeeming Partner's
exercise of the Redemption Right. In the event the Company shall exercise its
right to purchase OP Units with respect to the exercise of a Redemption Right in
the manner described in the first sentence of this Section 8.7.B, the
Partnership shall have no obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of such Redemption Right, and
each of the Redeeming Partner, the Partnership, and the Company shall treat the


                                       31
<PAGE>

transaction between the Company and the Redeeming Partner, for federal income
tax purposes, as a sale of the Redeeming Partner's OP Units to the Company. Each
Redeeming Partner agrees to execute such documents as the Company may reasonably
require in connection with the issuance of REIT Shares upon exercise of the
Redemption Right.. In the event that the Company determines to pay the Redeeming
Partner the Redemption Amount in the form of REIT Shares, the total number of
REIT Shares to be paid to the Redeeming Partner in exchange for the Redeeming
Partner's OP Units shall be the applicable REIT Shares Amount. In the event this
amount is not a whole number of REIT Shares, the Redeeming Partner shall be paid
(i) that number of REIT Shares that equals the nearest whole number less than
such amount plus (ii) an amount of cash which the Company determines, in its
reasonable discretion, to represent the fair value of the remaining fractional
Share which would otherwise be payable to the Redeeming Partner.

                  C. Exceptions to Exercise of Redemption Right. Notwithstanding
the provisions of Sections 8.7.A and 8.7.B above, a Partner shall not be
entitled to exercise the Redemption Right pursuant to Section 8.7.A above if
(but only as long as) the delivery of REIT Shares to such Partner on the
Specified Redemption Date (i) would be prohibited under the Certificate of
Incorporation, or (ii) as long as the REIT Shares are Publicly Traded, would be
prohibited under applicable federal or state securities laws or regulations
(assuming the Company would in fact assume and satisfy the Redemption Right).
Furthermore, the Redemption Right pursuant to Sections 8.7.A and 8.7.B shall be
subject to any restrictions on redemptions imposed by the General Partner
pursuant to Section 7.9.E hereof.

                  D. No Liens on Partnership Units Delivered for Redemption.
Each Limited Partner covenants and agrees with the Company that all OP Units
delivered for redemption shall be delivered to the Partnership or the Company,
as the case may be, free and clear of all liens, and, notwithstanding anything
contained herein to the contrary, neither the Company nor the Partnership shall
be under any obligation to acquire OP Units that are or may be subject to any
liens. Each Limited Partner further agrees that, in the event the General
Partner determines that any state or local real property transfer, gains, excise
or other similar tax is required to be paid in connection with the transfer of
its OP Units to the Partnership or the Company, such Limited Partner shall
assume full liability for and shall pay when due such transfer tax. Each Limited
Partner hereby unconditionally and irrevocably grants to the Partnership a
security interest in such Limited Partner's OP Units to secure such Limited
Partner's obligation to pay all amounts required to be paid pursuant to this
Section 8.7D, and shall take such actions as the General Partner shall request
in order to perfect, maintain or enforce such security interest.

                  E. Additional Partnership Interests. In the event that the
Partnership issues additional Partnership Interests pursuant to Section 4.2
hereof, the General Partner shall make such revisions to this Section 8.7 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.

                                   ARTICLE IX
                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

                  Section 9.1 Records and Accounting


                                       32
<PAGE>

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

                  Section 9.2 Fiscal Year

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

                  Section 9.3 Reports

                          A. Annual Reports. As soon as practicable, but in no
event later than one hundred five (105) days after the close of each Partnership
Year, the General Partner shall cause to be mailed to each Limited Partner as of
the close of the Partnership Year, an annual report containing financial
statements of the Partnership, or of the Company if such statements are prepared
solely on a consolidated basis with the Company, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.

                          B. Quarterly Reports. As soon as practicable, but in
no event later than one hundred five (105) days after the close of each calendar
quarter (except the last calendar quarter of each year), the General Partner
shall cause to be mailed to each Limited Partner as of the last day of the
calendar quarter, a report containing unaudited financial statements of the
Partnership, or of the Company, if such statements are prepared solely on a
consolidated basis with the Company, and such other information as may be
required by applicable law or regulation, or as the General Partner determines
to be appropriate.

                                    ARTICLE X

                                   TAX MATTERS

                  Section 10.1 Preparation of Tax Returns

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

                  Section 10.2 Tax Elections

                  Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code. The General Partner shall have the
right to seek to revoke any such election upon the General


                                       33
<PAGE>

Partner's determination in its sole and absolute discretion that such revocation
is in the best interests of the Partners.

                  Section 10.3 Tax Matters Partner

                  A. General. The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. Pursuant to Section
6230(e)(3) of the Code, upon receipt of notice from the IRS of the beginning of
an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number and profits interest of each of the Limited Partners and any Assignees;
provided, that such information is provided to the Partnership by the Limited
Partners.

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

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

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

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

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

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

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


                                       34
<PAGE>

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

                           C. Reimbursement. The tax matters partner shall
receive no compensation for its services. All third party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be become by the Partnership.
Nothing herein shall be construed to restrict the Partnership from engaging an
accounting firm or a law firm to assist the tax matters partner in discharging
its duties hereunder, as long as the compensation paid by the Partnership for
such services is reasonable.

                  Section 10.4 Withholding

                  Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a recourse loan by the Partnership to such Limited Partner, which
loan shall be repaid by such Limited Partner within fifteen (15) days after
notice from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (ii) the General Partner determines, in its sole
and absolute discretion, that such payment may be satisfied out of the available
funds of the Partnership which would, but for such payment, be distributed to
the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i)
or (ii) shall be treated as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's OP Units to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.4. In the event that a Limited Partner
fails to pay all amounts owed to the Partnership pursuant to this Section 10.4
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner (including, without
limitation, the right to receive distributions). Any amounts payable by a
Limited Partner hereunder shall bear interest at the base rate on corporate
loans at large United States money center commercial banks, as published from
time to time in the Wall Street Journal, plus four (4) percentage points (but
not higher than the maximum lawful rate) from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Limited
Partner shall take such actions as the General Partner shall request in order to
perfect, maintain or enforce the security interest created hereunder.


                                       35
<PAGE>

                                   ARTICLE XI
                            TRANSFERS AND WITHDRAWALS

                  Section 11.1 Transfer

                          A. Definition. The "transfer," when used in this
Article XI with respect to a Partnership Interest or an OP Unit, shall be deemed
to refer to a transaction by which the General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article XI does not include
any redemption or repurchase of OP Units by the Partnership from a Limited
Partner or acquisition of OP Units from a Limited Partner by the Company
pursuant to Section 8.7 hereof or otherwise. No part of the interest of a
Limited Partner shall be subject to the claims of any creditor, any spouse for
alimony or support, or to legal process, and no part of the interest of a
Limited Partner may be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.

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

                  Section 11.2 Transfers of Partnership Interests of General
Partner and the Company

                          A. Except as provided elsewhere in this Agreement, the
General Partner may not transfer any of its General Partner Interest or withdraw
as General Partner, and the Company may not transfer any of its Limited Partner
Interest or engage in an Extraordinary Transaction, except, in any such case,
(i) if such Extraordinary Transaction is, or such transfer or withdrawal is
pursuant to an Extraordinary Transaction that is, permitted under Section
11.2(B) or (ii) if Limited Partners holding at least a majority of the
Percentage Interests of the Limited Partners consent to such transfer or
withdrawal or Extraordinary Transaction, or (iii) if such transfer is to an
entity that is wholly-owned by the Company and is either a Disregarded Entity or
a Qualified REIT Subsidiary under Section 856(i) of the Code.

                          B. The General Partner and the Company are permitted
to engage in the following Extraordinary Transactions without the approval or
vote of the Limited Partners:

                             (i) an Extraordinary Transaction in connection with
which all Limited Partners either will receive, or will have the right to elect
to receive, for each OP Unit an amount of cash, securities, or other property
equal to the product of the REIT Shares Amount and the greatest amount of cash,
securities or other property paid to a holder of one REIT Share in consideration
of one REIT Share pursuant to the terms of the Extraordinary Transaction;
provided that, if, in connection with the Extraordinary Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
the outstanding REIT


                                       36
<PAGE>

Shares, each holder of OP Units shall receive, or shall have the right to elect
to receive, the greatest amount of cash, securities, or other property which
such holder would have received had it exercised its right to Redemption (as set
forth in Section 8.7) and received REIT Shares in exchange for its Partnership
Units immediately prior to the expiration of such purchase, tender or exchange
offer and had thereupon accepted such purchase, tender or exchange offer and
then such Extraordinary Transaction shall have been consummated; and

                             (ii) a merger, or other combination of assets, with
another entity if: (w) immediately after such Extraordinary Transaction,
substantially all of the assets directly or indirectly owned by the Partnership
are owned directly or indirectly by the Partnership or another limited
partnership or limited liability company which is the survivor of a merger,
consolidation or combination of assets with the Partnership (in each case, the
"Surviving Partnership"); (x) the Limited Partners own a percentage interest of
the Surviving Partnership based on the relative fair market value of the net
assets of the Partnership (as determined pursuant to Section 11.2.C) and the
other net assets of the Surviving Partnership (as determined pursuant to Section
11.2.C) immediately prior to the consummation of such transaction; (y) the
rights, preferences and privileges of the Limited Partners in the Surviving
Partnership are at least as favorable as those in effect immediately prior to
the consummation of such transaction and as those applicable to any other
limited partners or non-managing members of the Surviving Partnership; and (z)
such rights of the Limited Partners include the right to exchange their
interests in the Surviving Partnership for at least one of: (a) the
consideration available to such Limited Partners pursuant to Section 11.2.B(i)
or (b) if the ultimate controlling person of the Surviving Partnership has
publicly traded common equity securities, such common equity securities, with an
exchange ratio based on the relative fair market value of such securities (as
determined pursuant to Section 11.2.C) and the REIT Shares.

                          C. In connection with any transaction permitted by
Section 11.2.B, the relative fair market values shall be reasonably determined
by the General Partner as of the time of such transaction and, to the extent
applicable, shall be no less favorable to the Limited Partners than the relative
values reflected in the terms of such transaction.

                  Section 11.3 Limited Partners' Rights to Transfer

                  A. General. Prior to the first anniversary of the issuance of
OP Units to a Limited Partner other than the Company, such OP Units may not be
transferred in whole or in part, directly, indirectly or beneficially, without
the prior written consent of the General Partner, which consent the General
Partner may withhold in its sole discretion; provided, however, that it is
expressly understood that subject to the provisions of Sections 7.9.E, 11.3.C,
11.3.D, 11.3.E, 11.4 and 11.6 below each Limited Partner will be permitted to
make one or more transfers to any Affiliated Transferee of such Limited Partner.
Commencing on the first anniversary of the issuance of OP Units to a Limited
Partner other than the Company, and subject to the provisions of Sections 7.9.E,
11.3.C, 11.3.D, 11.3.E, 11.4 and 11.6 below, a Limited Partner (other than the
Company or any Subsidiary thereof) may transfer all or any portion of its OP
Units to any person, provided such Limited Partner obtains the prior written
consent of the General Partner, which consent may be withheld only if the
General Partner determines in its sole discretion exercised in good faith that
such a transfer would cause the Partnership or any or all of the Partners other
than the Limited Partner seeking to transfer its rights as a Limited Partner to
be


                                       37
<PAGE>

subject to tax liability as a result of such transfer. Any purported transfer
attempted in violation of the foregoing sentence shall be deemed void ab initio
and shall have no force or effect.

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

                  C. No Transfers Violating Securities Laws. The General Partner
may prohibit any transfer of OP Units by a Limited Partner if, in the opinion of
legal counsel to the Partnership, such transfer would require filing of a
registration statement under the Securities Act or would otherwise violate any
federal, or state securities laws or regulations applicable to the Partnership
or the OP Unit.

                  D. No Transfers Affecting Tax Status of Partnership. The
General Partner may prohibit any transfer of OP Units by a Limited Partner if
(i) the General Partner determines that such transfer would result in the
Partnership being treated as an association taxable as a corporation for federal
income tax purposes; (ii) it would adversely affect the ability of the Company
to continue to qualify as a REIT or would subject the Company to any additional
taxes under Section 857 or Section 4981 of the Code; (iii) the General Partner
determines that such transfer is being effectuated through an "established
securities market" or a "secondary market" (or the substantial equivalent
thereof) within the meaning of Section 7704 of the Code, or would otherwise
violate any restrictions imposed by the General Partner pursuant to Section 7.9E
hereof; (iv) such transfer would cause the Partnership to become, with respect
to any employee benefit plan subject to Title I of ERISA, a "party-in-interest"
(as defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (v) such transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101; or (vi) such transfer would subject the
Partnership to be regulated under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the Employee Retirement Income Security Act
of 1974, each as amended.

                  E. No Transfers to Holders of Nonrecourse Liabilities. No
pledge or transfer of any OP Units may be made to a lender to the Partnership or
any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability without the consent of the General Partner, in its sole
and absolute discretion.

                  Section 11.4 Substituted Limited Partners

                          A. Consent of General Partner. No Limited Partner
shall have the right to substitute a transferee as a Limited Partner in its
place without the consent of the General Partner to the admission of a
transferee of the interest of a Limited Partner pursuant to this Section 11.4 as
a Substituted Limited Partner, which consent may be given or withheld by the


                                       38
<PAGE>

General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit a transferee of any such interests to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or any Partner.

                          B. Rights of Substituted Limited Partner A transferee
who has been admitted as a Substituted Limited Partner in accordance with this
Article XI shall have all the rights and powers and subject to all the
restrictions and liabilities of a Limited Partner under this Agreement. The
admission of any transferee as a Substituted Limited Partner shall be
conditioned upon the transferee executing and delivering to the Partnership an
acceptance of all the terms and conditions of this Agreement (including, without
limitation, the provisions of Section 2.5 hereof and such other documents or
instruments as may be required to effect the admission)

                          C. Amendment and Restatement of Exhibit A. Upon the
admission of a Substituted Limited Partner, the General Partner shall amend and
restate Exhibit A hereto to reflect the name, address, Capital Account, number
of OP Units, and Percentage Interest of such Substituted Limited Partner and to
eliminate or adjust, if necessary, the name, address, Capital Account and
Percentage Interest of the predecessor of such Substituted Limited Partner.

                  Section 11.5 Assignees

                  If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
above as a Substituted Limited Partner, as described in Section 11.4 above, then
so long as the General Partner is not prohibiting the proposed transfer pursuant
to Sections 11.3C, 11.3D or 11.3E (in which event the transfer shall be void ab
initio and shall have no force or effect), such transferee shall be considered
an Assignee for purposes of this Agreement, subject, however, to Section 11.6E
hereof. An Assignee shall be entitled to all the rights of an assignee of a
limited partnership interest under the Act, including the right to receive
distributions from the Partnership and the share of Net Income, Net Losses,
gain, loss and Recapture Income attributable to the OP Units assigned to such
transferee, and shall have the rights granted to the Limited Partners under
Section 8.7 hereof, but shall not be deemed to be a holder of OP Units for any
other purpose under this Agreement, and shall not be entitled to vote such OP
Units in any matter presented to the Limited Partners for a vote (such OP Units
being deemed to have been voted on such matter in the same proportion as all
other OP Units held by Limited Partners are voted). In the event any such
transferee desires to make a further assignment of any such OP Units, such
transferee shall be subject to all the provisions of this Article XI to the same
extent and in the same manner as any Limited Partner desiring to make an
assignment of OP Units.

                  Section 11.6 General Provisions

                          A. Withdrawal of Limited Partner. No Limited Partner
may withdraw from the Partnership other than as a result of a permitted transfer
of all of such Limited Partner's OP Units in accordance with this Article XI or
pursuant to redemption of all of its OP Units under Section 8.7 hereof.


                                       39
<PAGE>

                          B. Termination of Status as Limited Partner Any
Limited Partner who shall transfer all of its OP Units in a transfer permitted
pursuant to this Article XI or pursuant to redemption of all of its OP Units
under Section 8.7 hereof shall cease to be a Limited Partner.

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

                          D. Allocations. If any Partnership Interest is
transferred during any quarterly segment of the Partnership's fiscal year in
compliance with the provisions of this Article XI or redeemed or transferred
pursuant to Section 8.7 hereof, Net Income, Net Losses, each item thereof and
all other items attributable to such interest for such fiscal year shall be
divided and allocated between the transferor Partner and the transferee Partner
by taking into account their varying interests during the fiscal year in
accordance with Section 706(d) of the Code, using the interim closing of the
books method (unless the General Partner, in its sole and absolute discretion,
elects to adopt a daily, weekly, or a monthly proration period, in which event
Net Income, Net Losses, each item thereof and all other items attributable to
such interest for such fiscal year shall be prorated based upon the applicable
method selected by the General Partner). All distributions attributable to any
OP Unit with respect to which the Partnership Record Date is before the date of
such transfer, assignment or redemption shall be made to the transferor Partner
or the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions thereafter attributable to
OP Partnership Unit shall be made to the transferee Partner.

                          E. Additional Restrictions. In addition to any other
restrictions on transfer herein contained, including without limitation the
provisions of this Article XI, in no event may any transfer or assignment of a
Partnership Interest by any Partner (including pursuant to Section 8.7 hereof)
be made without the express consent of the General Partner, in its sole and
absolute discretion, (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; or (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest.

                                   ARTICLE XII
                              ADMISSION OF PARTNERS

                  Section 12.1 Admission of Successor General Partner

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


                                       40
<PAGE>

shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.

                  Section 12.2 Admission of Additional Limited Partners

                          A. General. A Person who makes a Capital Contribution
to the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.5 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner. Notwithstanding anything to the contrary in this Section 12.2,
no Person shall be admitted as an Additional Limited Partner without the consent
of the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.

                          B. Allocations to Additional Limited Partner. If any
Additional Limited Partner is admitted to the Partnership on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Additional Limited Partner and
all other Partners and Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the Code, using
the interim closing of the books method (unless the General Partner, in its sole
and absolute discretion, elects to adopt a daily, weekly or monthly proration
method, in which event Net Income, Net Losses and each item thereof shall be
prorated based upon the applicable period selected by the General Partner). All
distributions with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to Partners and Assignees other than
the Additional Limited Partner, and all distributions thereafter shall be made
to all the Partners and Assignees including such Additional Limited Partner.

                  Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership

                  For the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership (including an amendment and restatement of
Exhibit A hereto) and, if necessary, to prepare as soon as practical an
amendment of this Agreement and, if required by law, shall prepare and file an
amendment to the Certificate and may for this purpose exercise the power of
attorney granted pursuant to Section 2.5 hereof.

                                  ARTICLE XIII
                           DISSOLUTION AND LIQUIDATION

                  Section 13.1 Dissolution


                                       41
<PAGE>

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

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

                  B. an election to dissolve the Partnership made by the General
Partner with the Consent of Partners holding a majority of the Percentage
Interests of the Limited Partners;

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

                  D. the sale or exchange of all or substantially all of the
assets and properties of the Partnership for cash or marketable securities; or

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

                  Section 13.2 Winding Up

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

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


                                       42
<PAGE>

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

                             (3) The balance, if any, to the Partners in
accordance with their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all periods.

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

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

                  Section 13.3 Compliance with Timing Requirements of
Regulations

                  Subject to Section 13.4 below, in the event the Partnership is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article XIII to the General Partner
and Limited Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including the year during
which such liquidation occurs), such Partner shall have no obligation to make
any contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever. In the discretion of the General
Partner, a pro rata portion of the distributions that would otherwise be made to
the General Partner and Limited Partners pursuant to this Article XIII may be:
(A) distributed to a trust established for the benefit of the General Partner
and Limited Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership (in which case the
assets of any such trust shall be distributed to the General Partner and Limited
Partners from time to time, in the reasonable discretion of the General Partner,
in the same proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General Partner and
Limited Partners pursuant to this Agreement); or (B)


                                       43
<PAGE>

withheld to provide a reasonable reserve for Partnership liabilities (contingent
or otherwise) and to reflect the unrealized portion of any installment
obligations owed to the Partnership, that such withheld amounts shall be
distributed to the General Partner and Limited Partners as soon as practicable.

                  Section 13.4 Deemed Distribution and Recontribution

                  Notwithstanding any other provision of this Article XIII, in
the event the Partnership is deemed liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged and the Partnership's affairs shall not be wound
up. Instead, for federal income tax purposes and for purposes of maintaining
Capital Accounts pursuant to Exhibit B hereto, unless otherwise provided in
Regulations Section 1.704-1(b)(2)(iv), the Partnership shall be deemed to have
distributed its assets in kind to the General Partner and Limited Partners, who
shall be deemed to have assumed and taken such assets subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership assets in kind to the Partnership, which
shall be deemed to have assumed and taken such assets subject to all such
liabilities.

                  Section 13.5 Rights of Limited Partners

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

                  Section 13.6 Notice of Dissolution

                  In the event a Liquidating Event occurs or an event occurs
that would, but for provisions of an election or objection by one or more
Partners pursuant to Section 13.1 above, result in a dissolution of the
Partnership, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners and to all other parties
with whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).

                  Section 13.7 Cancellation of Certificate of Limited
Partnership

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

                  Section 13.8 Reasonable Time for Winding Up


                                       44
<PAGE>

                  A reasonable time shall be allowed for the orderly winding up
of the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 above, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.

                  Section 13.9 Waiver of Partition

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

                  Section 13.10 Liability of Liquidator

                  The Liquidator shall be indemnified and held harmless by the
Partnership in the same manner and to the same degree as an Indemnitee may be
indemnified pursuant to Section 7.11 hereof.

                                   ARTICLE XIV
                  AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

                  Section 14.1 Amendments

                  A. General. Amendments to this Agreement may be proposed only
by the General Partner. Following such proposal, the General Partner shall
submit any proposed amendment to the Limited Partners. The General Partner shall
seek the written vote of the Partners on the proposed amendment or shall call a
meeting to vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General Partner may
require a response within a reasonable specified time, but not less than fifteen
(15) days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner's recommendation with respect to
the proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed
amendment shall be adopted and be effective as an amendment hereto if it is
approved by the General Partner and it receives the Consent of Partners holding
a majority of the Percentage Interests of the Limited Partners.

                  B. Amendments Not Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A, the General Partner shall have the power,
without the consent of the Limited Partners, to amend this Agreement as may be
required to facilitate or implement any provision of this Agreement which is
within the General Partner's discretion hereunder, including without limitation,
the following:

                     (1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;

                     (2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;

                     (3) to set forth and reflect in the Agreement the
designations, rights, powers, duties, and preferences of the holders of any
additional Partnership Interests issued pursuant to Section 4.2 hereof;


                                       45
<PAGE>

                     (4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this Agreement; and

                     (5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law.

The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.

                  C. Amendments Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General Partner
shall not (except in connection with amendments made to reflect the issuance of
additional Partnership Interests and the relative rights, powers and duties
incident thereto) amend Sections 4.2, 7.5, and 11.2, this Section 14.1.C or
Section 14.2 without the Consent of Limited Partners holding a majority of the
Percentage Interests of the Limited Partners, excluding Limited Partner
Interests held by the Company if the Company is not the sole Limited Partner.

                  D. Other Amendments Requiring Certain Limited Partner
Approval. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner (other than as a result of the issuance of Partnership Interests) to
receive distributions pursuant to Article V or Article XIII or alter the
allocations specified in Article VI (except as provided for in Exhibit B or as
permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof); (iv) alter or
modify the Redemption Right and REIT Shares Amount as set forth in Sections 8.7
and 11.2.B, and the related definitions, in a manner adverse to such Partner,
subject (in the case of the Redemption Right) to the General Partner's
authorization to impose additional restrictions or modify existing restrictions
on the redemption of OP Units; or (v) amend this Section 14.1.D. In addition,
Section 8.7 may only be amended as provided therein.

                  E. Amendment and Restatement of Exhibit A Not An Amendment.
Notwithstanding anything in this Article XIV or elsewhere in this Agreement to
the contrary, any amendment and restatement of Exhibit A hereto by the General
Partner to reflect events or changes otherwise authorized or permitted by this
Agreement, whether pursuant to Section 7.1.A(xx) hereof or otherwise, shall not
be deemed an amendment of this Agreement and may be done at any time and from
time to time, as necessary by the General Partner without the Consent of the
Limited Partners.

                  Section 14.2 Meetings of the Partners

                  A. General. Meetings of the Partners may be called only by the
General Partner. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days


                                       46
<PAGE>

prior to the date of such meeting; provided that a Partner's attendance at any
meeting of Partners shall be deemed a waiver of the foregoing notice requirement
with respect to such Partner. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of Partners is permitted or required under
this Agreement, such vote or Consent may be given at a meeting of Partners or
may be given in accordance with the procedure prescribed in Section 14.1.A
above. Except as otherwise expressly provided in this Agreement, the Consent of
holders of a majority of the Percentage Interests held by Limited Partners shall
control.

                  B. Actions Without a Meeting. Any action required or permitted
to be taken at a meeting of the Partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of a majority of
the Percentage Interests of the Partners (or such other percentage as is
expressly required by this Agreement). Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.

                  C. Proxy. Each Limited Partner may authorize any Person or
Persons to act for such Limited Partner by proxy on all matters in which a
Limited Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be signed by
the Limited Partner or its attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the Limited
Partner executing it, such revocation to be effective upon the Partnership's
receipt of notice thereof in writing.

                  D. Conduct of Meeting. Each meeting of Partners shall be
conducted by the General Partner or such other Person as the General Partner may
appoint pursuant to such rules for the conduct of the meeting as the General
Partner or such other Person deems appropriate.

                                   ARTICLE XV
                               GENERAL PROVISIONS

                  Section 15.1 Addresses and Notices

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

                  Section 15.2 Titles and Captions

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


                                       47
<PAGE>

                  Section 15.3 Pronouns and Plurals

                  Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.

                  Section 15.4 Further Action

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

                  Section 15.5 Binding Effect

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

                  Section 15.6 Creditors; Other Third Parties

                  Other than as expressly set forth herein with regard to any
Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor or other third party having
dealings with the Partnership.

                  Section 15.7 Waiver

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

                  Section 15.8 Counterparts

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

                  Section 15.9 Applicable Law

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

                  Section 15.10 Invalidity of Provisions

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

                  Section 15.11 Entire Agreement


                                       48
<PAGE>

                  This Agreement and all Exhibits attached hereto (which
Exhibits are incorporated herein by reference as if fully set forth herein)
contains the entire understanding and agreement among the Partners with respect
to the subject matter hereof and supersedes any prior written oral
understandings or agreements among them with respect thereto.

                  Section 15.12 No Rights as Shareholders

                  Nothing contained in this Agreement shall be construed as
conferring upon the holders of the OP Units any rights whatsoever as
shareholders of the Company, including, without limitation. any right to receive
dividends or other distributions made to shareholders of the Company.

                  IN WITNESS WHEREOF, the General Partner and the Limited
Partner have executed this Agreement as of the date first written above.

                                      SHELBOURNE PROPERTIES III GP, INC.




                                      By:
                                         --------------------------------
                                      Name:
                                      Title:

                                      SHELBOURNE PROPERTIES III, INC.


                                      By:
                                         --------------------------------
                                      Name:
                                      Title:


                                       49
<PAGE>

                                    EXHIBIT A

                        Partners and Percentage Interest

                                 General Partner


Name                                      Number of
----                                      OP Units         Percentage Interest
                                          -------          -------------------

Shelbourne Properties III GP, Inc.,       3,913                    1%


                                 Limited Partner
                                 ---------------


Name                                      Number of
----                                      OP Units         Percentage Interest
                                          --------         -------------------

Shelbourne Properties III, Inc.           387,419                 99%

<PAGE>

                                    EXHIBIT B

                           CAPITAL ACCOUNT MAINTENANCE

                  A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv). The initial Capital Account balance of each Person who is a
Partner on the Execution Date shall be as set forth in Section 4.1.A of the
Agreement. Such Capital Account shall be increased by (i) the amount of all
Capital Contributions and any deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.

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

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

                  (2) The computation of all items of income, gain, and
         deduction shall be made without regard to the fact that items described
         in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable
         in gross income or are neither currently deductible nor capitalized for
         federal income tax purposes.

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

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


                                      BB-1
<PAGE>

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

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

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

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

                  (3) In accordance with Regulations Section
         1.704-1(b)(2)(iv)(e), the Carrying Value of Partnership assets
         distributed in kind shall be adjusted upward or downward to reflect any
         Unrealized Gain or Unrealized Loss attributable to such Partnership
         property, as of the time any such asset is distributed.

                  (4) In determining Unrealized Gain or Unrealized Loss for
         purposes of this Exhibit B, the aggregate cash amount and fair market
         value of all Partnership assets (including cash or cash equivalents)
         shall be determined by the General Partner (or the Liquidator, if
         applicable) using such reasonable method of valuation as it may adopt.
         The General Partner (or the Liquidator, if applicable) shall allocate
         such aggregate value among the assets of the Partnership (in such
         manner as it determines in its sole and absolute discretion) to arrive
         at a fair market value for individual properties.

                  E. The provisions of this Agreement (including this Exhibit B
and other Exhibits to this Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify (i) the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed; or (ii)
the manner in which items are allocated among the Partners for federal income
tax purposes in order to comply with such Regulations or to comply with Section
704(c) of the Code, the General Partner may make such modification without


                                      BB-2
<PAGE>

regard to Article XIV of the Agreement, provided that it is not likely to have a
material effect on the amounts distributable to any Person pursuant to Article
XIII of the Agreement upon the dissolution of the Partnership. The General
Partner also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q);
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable loss
and items thereof under this Agreement and pursuant to the Code; (iv) the
adoption of reasonable conventions and methods for the valuation of assets and
the determination of tax basis; (v) the allocation of asset value and tax basis;
and (vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and are in the best interests of the Partners.


                                      BB-3
<PAGE>

                                    EXHIBIT C

                            SPECIAL ALLOCATION RULES

1. Special Allocation Rules

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

                  A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there
is a net decrease in Partnership Minimum Gain during any Partnership taxable
year, each Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Partner's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit for such Partnership
taxable year and without regard to any decrease in Partner Minimum Gain during
such Partnership taxable year.

                  B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
taxable year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.702-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of the Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership taxable year, other than allocations pursuant to Section 1.A hereof.

                  C. Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and, after giving effect to the allocations required
under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital


                                      CC-1
<PAGE>

Account Deficit, items of Partnership income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income and gain for
the Partnership taxable year) shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.

                  D. Gross Income Allocation. In the event that any Partner has
an Adjusted Capital Account Deficit at the end of any Partnership taxable year
(after taking into account allocations to be made under the preceding paragraphs
hereof with respect to such Partnership taxable year) each such Partner shall be
specially allocated items of Partnership income and gain (consisting of a pro
rata portion of each item of Partnership income, including gross income and gain
for the Partnership taxable year) in an amount and manner sufficient to
eliminate, to the extent required by Regulations, its Adjusted Capital Account
Deficit.

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

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

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

                  H. Curative Allocations. The allocations set forth in Section
1.A through 1.F of this Exhibit C (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations under Section 704(b) of the
Code. The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to each person is zero.


                                      CC-2
<PAGE>

However, the General Partner will have discretion to accomplish this result in
any reasonable manner; provided, however, that no allocation pursuant to this
Section 1.G shall cause the Partnership to fail to comply with the requirements
of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).

2. Allocations for Tax Purposes

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

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

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

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

                  (2)(a) In the case of an Adjusted Property, such items shall
         first, be allocated among the Partners in a manner consistent with the
         principles of Section 704(c)of the Code and the Regulations thereunder
         to take into account the Unrealized Gain or Unrealized Loss
         attributable to such property and the allocations thereof pursuant to
         Exhibit B; and

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

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

                  C. To the extent that the Treasury Regulations promulgated
pursuant to Section 704(c) of the Code permit the Partnership to utilize
alternative methods to eliminate the disparities between the Carrying Value of
property and its adjusted basis, the General Partner shall have the authority to
elect the method to be used by the Partnership and such election shall be
binding on all Partners.


                                      CC-3
<PAGE>

                                    EXHIBIT D

                              NOTICE OF REDEMPTION

         The undersigned irrevocably (i) elects to redeem ________ OP Units in
Shelbourne Properties III L.P. in accordance with the terms of the Agreement of
Limited Partnership of Shelbourne Properties III L.P., as amended (the
"Partnership Agreement"), and the Redemption Right referred to therein, (ii)
surrenders such OP Units and all right, title and interest therein and (iii)
directs that promptly after the Specified Redemption Date the Cash Amount or
REIT Shares Amount (as determined by the General Partner) deliverable upon
exercise of the Redemption Right be delivered to the address specified below,
and if REIT Shares are to be delivered, such REIT Shares be registered or placed
in the name(s) and at the address(es) specified below. The undersigned hereby
represents, warrants, and certifies that the undersigned (a) has marketable and
unencumbered title to such OP Units, free and clear of the rights of or interest
of any other person or entity, (b) has the full right, power and authority to
redeem and surrender such OP Units as provided herein and (c) has obtained the
consent or approval of all persons or entities, if any, having the right to
consult or approve such redemption or surrender. Capitalized terms used herein
have the meanings assigned to them in the Partnership Agreement.


Dated:                       Name of Limited Partner:
      -------------                                  ---------------------------


                                        ----------------------------------------
                                        (Signature of Limited Partner)


                                        ----------------------------------------
                                        (Street Address)


                                        ----------------------------------------
                                        (City)         (State)         Zip Code)


                             Signature Guaranteed by:
                                                     ---------------------------


If Shares are to be issued, issue to:

Name:

Please insert social security or identifying number: