<PAGE>   1
                                                                   EXHIBIT 10.7


                              AMENDED AND RESTATED

                       IRVINE APARTMENT MANAGEMENT COMPANY


                              PARTNERSHIP AGREEMENT











<PAGE>   2

                               TABLE OF CONTENTS


                                    ARTICLE I

                            FORMATION OF PARTNERSHIP
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                                                                              PAGE

<S>     <C>                                                                   <C>
1.1     Defined Terms...........................................................1
1.2     Formation and Effective Date of Agreement...............................5
1.3     Name and Principal Place of Business....................................5
1.4     Agreement...............................................................5
1.5     Business................................................................5
1.6     Term....................................................................6

                                   ARTICLE II

                                    PARTNERS

2.1     Limited Liability.......................................................6
2.2     Initial Partners........................................................6
2.3     Admission of Substitute Partners........................................6
2.4     Resignation or Withdrawal of a Partner..................................6
2.5     Transactions with the Partnership.......................................6
2.6     Partners Are Not Agents; No Management Authority........................6

                                   ARTICLE III

                            CONTRIBUTIONS TO CAPITAL

3.1     Capital Contributions...................................................7
3.2     Additional Contributions................................................7
3.3     AMC Loan................................................................7
3.4     Third Party Financing...................................................7
3.5     Interest................................................................7

                                   ARTICLE IV

                          MANAGEMENT OF THE PARTNERSHIP

4.1     Board of Directors......................................................7
4.2     Certain Actions Requiring Supermajority Approval of the Board of
        Directors...............................................................8
4.3     Board of Directors' Procedures..........................................9
4.4     Delegation to Managing General Partner..................................9
4.5     No Compensation........................................................10
4.6     Amendment of Filings...................................................10
4.7     Annual Business Plan and Annual Budget.................................10
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                               TABLE OF CONTENTS
                                  (CONTINUED)


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                                                                              PAGE

                                    ARTICLE V

                                     NOTICES

<S>     <C>                                                                   <C>
5.1     Notices................................................................10
5.2     Waiver of Notice.......................................................10

                                   ARTICLE VI

                             ACCOUNTING AND RECORDS

6.1     Financial and Tax Reporting............................................11
6.2     Supervision; Inspection of Books.......................................11
6.3     Reliance on Records and Books of Account...............................11
6.4     Tax Returns............................................................12
6.5     Bank Accounts..........................................................12
6.6     Accounting Decisions and Reliance on Others............................12
6.7     Tax Matters for the Partnership Handled by Tax Matters Partner.........12

                                   ARTICLE VII

                                   ALLOCATIONS

7.1     Allocation of Net Income or Net Loss...................................12
7.2     Special Tax Provisions.................................................12

                                  ARTICLE VIII

                                  DISTRIBUTIONS

8.1     Distributions..........................................................13
8.2     Distributions in Kind..................................................14
8.3     Restriction on Distributions and Withdrawals...........................14
8.4     No Other Withdrawals...................................................14

                                   ARTICLE IX

                        TRANSFER OF PARTNERSHIP INTERESTS

9.1     Transfer...............................................................15
9.2     Rights of Assignees....................................................15
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                               TABLE OF CONTENTS
                                   (CONTINUED)


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                                                                              PAGE

                                    ARTICLE X

                   INDEMNIFICATION AND LIMITATION OF LIABILITY

<S>     <C>                                                                   <C>
10.1    Indemnification........................................................15
10.2    Limitation of Liability................................................16

                                   ARTICLE XI

                              TERMINATION; DEFAULT

11.1    Termination............................................................17
11.2    Authority to Wind Up...................................................17
11.3    Winding Up and Certificate of Dissolution..............................17
11.4    Distribution of Assets.................................................17
11.5    Deficit Capital Account................................................18
11.6    Default................................................................18
11.7    No Action for Dissolution..............................................19

                                   ARTICLE XII

                              INTENTIONALLY DELETED


                                  ARTICLE XIII

                                  MISCELLANEOUS

13.1    Amendment..............................................................19
13.2    Withholding Taxes......................................................19
13.3    Further Assurances.....................................................19
13.4    Binding Effect.........................................................20
13.5    Governing Law..........................................................20
13.6    Entire Agreement.......................................................20
13.7    Counterparts...........................................................20
13.8    Parties in Interest....................................................20
13.9    Pronouns; Statutory References.........................................20
13.10   Headings...............................................................20
13.11   Interpretation.........................................................20
13.12   References to this Agreement...........................................20
13.13   Exhibits...............................................................20
13.14   Severability...........................................................20
13.15   Attorney Fees..........................................................21
13.16   Time is of the Essence.................................................21
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                               TABLE OF CONTENTS
                                   (CONTINUED)


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                                                                              PAGE

<S>     <C>                                                                   <C>
13.17   Remedies Cumulative....................................................21
13.18   Confidentiality and Publicity..........................................21
13.19   Broker's License.......................................................21
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                                      -iv-
<PAGE>   6






                  AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF

                       IRVINE APARTMENT MANAGEMENT COMPANY

              THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this
"AGREEMENT") is entered into effective as of January 1, 2000, by and between
APARTMENT MANAGEMENT COMPANY, LLC, a Delaware limited liability company ("AMC"),
and WESTERN NATIONAL SECURITIES D/B/A WESTERN NATIONAL PROPERTY MANAGEMENT, a
California corporation ("WNPM").

                                 R E C I T A L S

               WHEREAS, AMC and WNPM are parties to that certain Partnership
Agreement of Irvine Apartment Management Company dated as of March 12, 1998, as
amended by that certain First Amendment to Partnership Agreement of Irvine
Apartment Management Company dated as of June 21, 1999 between AMC and WNPM (as
amended, the "ORIGINAL PARTNERSHIP AGREEMENT").

               WHEREAS, pursuant to that certain Purchase and Sale Agreement for
Partnership Interest dated as of January 1, 2000, AMC shall purchase on the
Effective Date (as hereafter defined) a twenty-four percent (24%) Partnership
Interest (as hereafter defined) in the Partnership (as hereafter defined) from
WNPM.

               WHEREAS, AMC and WNPM desire to amend and restate the Original
Partnership Agreement in its entirety to provide for the governance, management
and operation of the Partnership from and after the date of this Agreement, and
to provide for certain other matters, all as more particularly described in this
Agreement, which amendment and restatement will be effective as of January 1,
2000 (the "EFFECTIVE DATE").

               NOW, THEREFORE, with reference to and in reliance on the
foregoing Recitals, which Recitals are hereby incorporated into this Agreement,
and in consideration of the respective covenants and agreements of the parties
set forth herein, the parties hereby amend and restate in its entirety the
Original Partnership Agreement as of the Effective Date and, from and after the
Effective Date, the Partnership shall be governed by the following provisions:

                                    ARTICLE I

                            FORMATION OF PARTNERSHIP

               1.1 DEFINED TERMS: When used in this Agreement, the following
terms have the meanings set forth below:

               "ACT" means the general partnership laws of the State of
California, as amended from time to time.

               "ACCOUNTING PERIOD" means the period beginning on the 1st of
January and ending on the 31st of December; provided, however, the first
Accounting Period will commence on the Effective Date and will end on December
31, 2000; and provided, further, a new



                                       1
<PAGE>   7



Accounting Period will commence on any date on which an additional or Substitute
Partner is admitted to the Partnership or a Partner ceases to be a Partner for
any reason.

               "AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under common control with another Person. The term "control,"
as used in the immediately preceding sentence, means, with respect to a
corporation or limited liability company the right to exercise, directly or
indirectly, fifty percent (50%) or more of the voting rights attributable to the
controlled corporation or limited liability company, and, with respect to any
other Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity
whether by contract or otherwise.

               "AGREEMENT" means this Amended and Restated Partnership
Agreement, as the same may be amended from time to time.

               "AMC REPRESENTATIVES" means the three (3) representatives
designated by AMC, from time to time, to serve on the Board of Directors.

               "ASSETS" means all apartment projects owned by IAC or TIC during
the term of the Property Management Agreements and located in California, and,
at the respective election of IAC or TIC, in each's sole and absolute discretion
and without any obligation to do so, any other apartment projects owned by IAC
or TIC during the term of the Property Management Agreements. WNPM acknowledges
that in connection with any projects not included in the "Assets" as of the
Effective Date, IAC or TIC (as applicable) has the absolute right to appoint
another Person to act as property manager of such projects.

               "ASSIGNEE" means a transferee of all or any portion of a
Partner's Partnership Interest who has not been admitted as a Substitute
Partner.

               "BANKRUPTCY" means with respect to any Person: (a) the filing of
an application by a Partner for, or such Partner's consent to, the appointment
of a trustee, receiver, or custodian of such Partner's other assets; (b) the
entry of an order for relief with respect to a Partner in proceedings under the
United States Bankruptcy Code, as amended or superseded from time to time; (c)
the making by a Partner of a general assignment for the benefit of creditors;
(d) the entry of an order, judgment, or decree by any court of competent
jurisdiction appointing a trustee, receiver, or custodian of the assets of a
Partner unless the proceedings and the person appointed are dismissed within
ninety (90) days; or (e) the failure by a Partner generally to pay such
Partner's debts as the debts become due within the meaning of Section 303(h)(1)
of the United States Bankruptcy Code, as determined by a bankruptcy court, or
the admission in writing of such Partner's inability to pay its debts as they
become due.

               "BOARD OF DIRECTORS" means a committee composed of the AMC
Representatives and the WNPM Representatives.

               "BUDGET" means an operating budget for the Partnership prepared
by the officers of the Partnership and approved by the Board of Directors, and
any revisions thereto approved by the Board of Directors.



                                       2
<PAGE>   8



               "BUSINESS PLAN" means the annual business plan for the
Partnership prepared by Managing General Partner and approved by the Board of
Directors, and any revisions thereto approved by such Board of Directors.

               "CAPITAL ACCOUNT" means a capital account for each Partner which
is equal to the:

                      (i)   the amount of such Partner's capital contributions
        as of the Effective Date; increased by

                      (ii)  the aggregate capital contributions made, or deemed
        to be made, by such Partner after the Effective Date; increased by


                      (iii) all items of income and gain allocated to such
        Partner; decreased by

                      (iv)  the amount of cash (or agreed value of property) of
        cash or property distributions made, or deemed to be made, to such
        Partner; and decreased by

                      (v)   all items of deduction or loss allocated to such
        Partner.

               "CERTIFICATE" means the Statement of Partnership recorded as
Instrument No. 19980152318 in the Official Records of Orange County, California
and as Instrument No. 1998-6752629 in the Official Records of San Diego County,
California, as amended by that certain First Amendment to Certificate of
Partnership (Orange County) and by that certain First Amendment to Certificate
of Partnership (San Diego), each recorded respectively in the Official Records
of Orange and San Diego Counties, and as amended from time to time.

               "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

               "FISCAL YEAR" means the period from July 1st to June 30th of each
year, or as otherwise required by law, provided, however, the first Fiscal Year
will commence on the Effective Date and will end on June 30, 2000.

               "IAC" means Irvine Apartment Communities, L.P., a Delaware
limited partnership.


               "MANAGING GENERAL PARTNER" means AMC, or any successor appointed
by the Board of Directors in accordance with the terms of this Agreement.

               "NET CASH FLOW FROM OPERATIONS" means, for any period, the gross
revenue actually received by the Partnership during such period, minus (1) all
costs of operation of the Partnership actually incurred during such period, (2)
such reserves as the Board of Directors determines are necessary to meet future
obligations, including, without limitation, contingent obligations, and (3)
amounts then due and payable with respect to any loans made to the Partnership
by third Persons.



                                       3
<PAGE>   9



               "NET INCOME OR NET LOSS" means for any Accounting Period the
amount computed on an accrual basis as of the last day thereof of the net income
or loss computed under federal income tax principles and as adjusted pursuant to
the Treasury Regulations promulgated under Section 704(b) of the Code.

               "PARTNER" means each Person who (a) is an initial signatory to
this Agreement, has been admitted to the Partnership as a Partner in accordance
with the Certificate or this Agreement or is a Substitute Partner and (b) has
not resigned, withdrawn, been expelled or dissolved.

               "PARTNERSHIP" means the California general partnership formed by
the Original Partnership Agreement.

               "PARTNERSHIP INTEREST" means the rights of a Partner in the
Partnership, including the Partner's economic interest, any right to vote or
participate in management, and any right to information concerning the business
and affairs of the Partnership. All Partnership Interests are personal property.

               "PARTNERSHIP PERCENTAGE" means the percentage ownership of a
Partner in the Partnership. As of the Effective Date, the Partnership Percentage
of AMC is seventy-five percent (75%) and the Partnership Percentage of WNPM is
twenty-five percent (25%).

               "PERSON" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or
representative capacity.

               "PRIME RATE" means a rate of interest equal to the "prime rate"
announced, from time to time, by Bank of America NT & SA. For purpose of
calculating interest under this Agreement, the Prime Rate will change when and
as Bank of America announces a change in its prime rate.

               "PROPERTY MANAGEMENT AGREEMENTS" means collectively, (i) that
certain Amended and Restated Property Management Agreement between IAC and the
Partnership providing for the management and operation of the Assets owned by
IAC, as amended from time to time, and (ii) that certain Property Management
Agreement between TIC and the Partnership providing for the management and
operation of the Assets owned by TIC, as amended from time to time.

               "SUBSTITUTE PARTNER" means an Assignee who has been admitted to
all the rights of membership pursuant to this Agreement.

               "TAX MATTERS PARTNER" is AMC or any successor appointed by the
Board of Directors in accordance with the terms of this Agreement.

               "TIC" means The Irvine Company, a Delaware corporation., and any
of its Affiliates.

               "TREASURY REGULATIONS" means regulations issued pursuant to the
Code.


                                       4
<PAGE>   10




               "WNPM REPRESENTATIVES" means the two (2) representatives
designated by WNPM, from time to time, to serve on the Board of Directors.

               1.2 FORMATION AND EFFECTIVE DATE OF AGREEMENT. The Partners have
formed a general partnership pursuant to the provisions of the Act. The Partners
agree to execute all documents and to undertake all other acts, as reasonably
may be deemed necessary by any Partner, in order to comply with the requirements
of the laws of the State of California (and all other applicable jurisdictions)
for the formation, continuation, registration, qualification and operation of a
partnership in accordance with and subject to the terms of this Agreement. The
rights and liabilities of the Partners will be determined pursuant to the Act
and this Agreement. To the extent the rights or obligations of any Partner are
different by reason of any provision of this Agreement than they would be in the
absence of such provision, this Agreement will control to the extent permitted
by the Act. The relationship of the parties under this Agreement shall commence
on the effective date hereof, and the Partnership shall dissolve and terminate
in accordance with the provisions of this Agreement.

               1.3 NAME AND PRINCIPAL PLACE OF BUSINESS. Unless and until
amended in accordance with this Agreement and the Act, the name of the
Partnership is "IRVINE APARTMENT MANAGEMENT COMPANY" The business of the
Partnership may be conducted under that name or, upon compliance with applicable
laws, any other name that the Board of Directors deems appropriate or advisable.
The principal place of business of the Partnership in California is 43
Discovery, Irvine, California 92718, or in such other place or places as the
Board of Directors from time to time determines. Upon the effective date of the
Original Partnership Agreement, the Partners signed, filed and published in the
appropriate manner a Certificate of Fictitious Name as required by Sections
17900 and 17930 of the California Business and Professions Code, and signed,
acknowledged and recorded a Certificate of Partnership in the Official Records
of Orange County, San Diego County and in every other County in which the
Partnership does business. The Managing General Partner shall file any other
filings, and any amendments thereto, that the Board of Directors considers
appropriate or advisable.

               1.4 AGREEMENT. For and in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners executing this
Agreement hereby agree to the terms and conditions of this Agreement, as it may
from time to time be amended. It is the express intention of the parties hereto
that this Agreement be the sole statement of agreement between or among them
with respect to the Partnership from and after the Effective Date. The Original
Partnership Agreement shall govern the rights, obligations and liabilities of
the Partners for the period prior to the Effective Date, and any
indemnifications provided for in the Original Partnership Agreement (and any
guaranties thereof) with respect to claims that accrued prior to the Effective
Date shall survive the amendment and restatement of the Original Partnership
Agreement.

               1.5 BUSINESS. The sole purpose of the Partnership is to manage,
operate and lease the Assets for the benefit of IAC and TIC, as the owners of
the Assets, pursuant to the terms of the Property Management Agreements, and to
do any and all acts and things necessary, appropriate, proper, advisable,
incidental to or convenient for the furtherance and accomplishment of the
business, objectives, and purposes herein set forth. The Partnership shall



                                       5
<PAGE>   11


conduct no other business unless the Board of Directors otherwise directs in
accordance with Section 4.2.

               1.6 TERM. The Partnership was formed on March 12, 1998. Unless
the Partners otherwise agree and absent a termination by a Partner upon the
occurrence of an Event of Default, the term of the Partnership will continue
until the expiration or earlier termination of the term of the Property
Management Agreements and for so long thereafter as the Board of Directors may
determine, in its reasonable discretion, is in the best interests of the
Partnership and its Partners, but in no event beyond December 31, 2018, unless
all of the Partners otherwise agree.

                                   ARTICLE II

                                    PARTNERS

               2.1 LIMITED LIABILITY. Except as required under the Act or as
expressly set forth in this Agreement, no Partner is personally liable for any
debt, obligation, or liability of the Partnership, whether that liability or
obligation arises in contract, tort, or otherwise.

               2.2 INITIAL PARTNERS. The Initial Partners of the Partnership are
AMC and WNPM, each of which was admitted to the Partnership as a Partner as of
March 12, 1998.

               2.3 ADMISSION OF SUBSTITUTE PARTNERS. Notwithstanding any other
provision of this Agreement, no Assignee of a Partnership Interest may be
admitted as a Substitute Partner without the prior written consent of at least
three (3) members of the Board of Directors (unless, at the relevant time, there
are fewer than five (5) members of the Board of Directors, then, by a majority
of the members of the Board of Directors in accordance with Section 4.2). If so
admitted, the Substitute Partner will have all the rights and powers and will be
subject to all the restrictions and liabilities of the Partner which originally
assigned the Partnership Interest. The admission of a Substitute Partner does
not release any Partner from liability to the Partnership that may have existed
prior to such substitution.

               2.4 RESIGNATION OR WITHDRAWAL OF A PARTNER. Except as otherwise
specifically required by the Act or this Agreement, and subject to the
provisions for transfer contained in Article X, no Partner may resign or
withdraw from membership in the Partnership or withdraw its interest in the
capital of the Partnership.

               2.5 TRANSACTIONS WITH THE PARTNERSHIP. A Partner may not lend
money to or transact business with the Partnership except in accordance with the
terms of this Agreement. Subject to any limitations set forth in this Agreement
and with the prior written approval of the Board of Directors after full
disclosure of the Partner's involvement, a Partner may lend money to and
transact other business with the Partnership pursuant to agreements approved by
the Board of Directors between such Partner and the Partnership. Subject to
other applicable law, such Partner has the same rights and obligations with
respect thereto as a Person who is not a Partner. This Section 2.5 does not
apply to the making of an AMC Loan.

               2.6 PARTNERS ARE NOT AGENTS; NO MANAGEMENT AUTHORITY. Pursuant to
this Agreement and the Certificate, the sole and exclusive right and authority
to manage the business



                                       6
<PAGE>   12



and affairs of the Partnership is vested in the Board of Directors. The
day-to-day management of the Partnership is vested in the Managing General
Partner, subject at all times to the control, policies and direction of the
Board of Directors. Except as expressly authorized by the Board of Directors or
this Agreement or expressly required by the Act, no Partner shall be an agent of
the Partnership nor shall any Partner have the power or authority to bind or
execute any instrument on behalf of the Partnership. The Partners have no power
to participate in the management of the Partnership except as expressly
authorized by this Agreement or the Certificate and except as expressly required
by the Act.

                                   ARTICLE III

                            CONTRIBUTIONS TO CAPITAL

               3.1 CAPITAL CONTRIBUTIONS. As of the Effective Date, AMC's
Capital Contributions total Seventy-Five Thousand Dollars ($75,000) and WNPM's
Capital Contributions total Twenty-Five Thousand Dollars ($25,000).

               3.2 ADDITIONAL CONTRIBUTIONS. No Partner is required to
contribute or loan additional capital to the Partnership. In no event is WNPM
entitled to make a loan to the Partnership or to make any additional capital
contributions to the Partnership. No third party shall have the right under any
circumstances to require a Partner to make any additional capital contributions
to the Partnership.

               3.3 AMC LOAN. If the Board of Directors determines, in its sole
and absolute discretion, that additional capital is needed in order to enable
the Partnership to meet its existing or anticipated obligations, AMC may elect,
in its sole and absolute discretion and without any obligation to do so, to make
a loan (an "AMC LOAN") to the Partnership on such terms and conditions as are
reasonably acceptable to the Board of Directors and AMC. Each AMC Loan must be
repaid prior to any distributions to the Partners pursuant to this Agreement.

               3.4 THIRD PARTY FINANCING. If AMC elects not to make an AMC Loan,
subject to the provisions of Section 4.2, the Board of Directors may obtain
third party financing on such terms and conditions as are acceptable to the
Board of Directors.

               3.5 INTEREST. Except as provided in this Article III, no Partner
is entitled to any interest with respect to any contributions to the
Partnership.

                                   ARTICLE IV

                          MANAGEMENT OF THE PARTNERSHIP

4.1 BOARD OF DIRECTORS. The Board of Directors has the sole and exclusive power,
authority and control to be exercised by a vote of no less than three (3)
members of the Board of Directors, of all management powers relating to the
operations of the Partnership. No member of the Board of Directors is entitled
to receive any salary or other remuneration or expense reimbursement from the
Partnership solely for his or her service as a member of the Board of Directors.
Except as otherwise expressly provided to the contrary in this Agreement, the
Board of Directors shall act by vote of no less than three (3) of its members.
Without in any

                                       7
<PAGE>   13



way limiting the foregoing and for purposes of illustration and not limitation,
the Board of Directors has the sole power and authority to authorize and approve
the following matters:

               (a) The organizational structure of the Partnership, including,
without limitation, the number of staff positions and general job descriptions
for each position.

               (b) Hiring and firing of the president or any vice president of
the Partnership;

               (c) Compensation (including annual bonuses, if any) for the
president and any vice president or any area manager of the Partnership and
payroll schedules reflecting a range of compensation for all other positions;

               (d) Any subcontract with a Partner or an Affiliate of a Partner
entered into pursuant to the Property Management Agreements and any annual
renewal of any such subcontract;

               (e)    Any determination to accept an AMC Loan;

               (f)    Any Business Plan;

               (g)    Intentionally Deleted;

               (h) Adjusting, settling or compromising any claim against the
Partnership;

               (i) The sale, transfer or other conveyance of any Partnership
property unless contemplated in the then current Business Plan;

               (j) The incurrence, directly or indirectly, of any nonrecourse
debt;

               (k) Entering into any contracts other than the Property
Management Agreements and contracts contemplated in the current Budget or
Business Plan;

               (l) Instituting any litigation other than as contemplated in the
Property Management Agreements;

               (m) Filing Bankruptcy or otherwise seeking relief under any
insolvency laws;

               (n) The termination and liquidation of the Partnership following
a termination or expiration of the Property Management Agreements; and

               (o) Appointment of any successor to AMC as Managing General
Partner.


Notwithstanding the foregoing, the Board of Directors may establish committees
as they see fit, and delegate to such committees, the Managing General Partner
and other Persons such power and authority as the Board of Directors determine
from time to time is appropriate. Any committee or Person acting within the
scope of its authority will have the power and authority of the Board of
Directors.



                                       8
<PAGE>   14



               4.2 CERTAIN ACTIONS REQUIRING SUPERMAJORITY APPROVAL OF THE BOARD
OF DIRECTORS. Notwithstanding the provisions of Section 4.1, the Board of
Directors may not take any of the following actions without the approval of at
least 4 of the members of the Board of Directors (or if there are fewer than 5
members of the Board of Directors, by a majority of the members of the Board of
Directors).

               (a) The incurrence, directly or indirectly, of any recourse debt;

               (b) The admission of new Partners and Substitute Partners;

               (c) Any Budget or the taking of any action that would result in a
material deviation from the Budget;

               (d) The termination and liquidation of the Partnership prior to
March 31, 2001 following a termination or expiration of the Property Management
Agreements; and

               (e) A change in the business purpose of the Partnership as set
forth in Section 1.6 or ceasing to do business prior to the expiration of the
Property Management Agreements.

               (f) Any determination to accept an AMC Loan.


Unless all of the WNPM Representatives have been removed from the Board of
Directors in accordance with the terms of this Agreement, at least one (1) WNPM
Representative must be among the members of the Board of Directors approving an
action described in this Section 4.2.

               4.3 BOARD OF DIRECTORS' PROCEDURES. The procedures governing the
meetings and actions of the Board of Directors are set forth in the bylaws
attached hereto as Exhibit A, as adopted and amended by the Board of Directors
from time to time.

               4.4 DELEGATION TO MANAGING GENERAL PARTNER. Without limiting the
generality of Section 4.1, but subject to the express limitations set forth
elsewhere in this Agreement, the business and affairs of the Partnership will be
managed by, and all partnership power will be exercised under the direction of,
the Board of Directors. As of the Effective Date, the Board of Directors has
delegated all of the powers described in Section 4.1(a), (b), (l), and (n) to
the Managing General Partner and such powers shall remain so delegated until
such delegation is rescinded by the Board of Directors in writing. The Board of
Directors has delegated the powers described in Sections 4.1(c), (d), (g), (h)
and (k) and the management of the day-to-day operations of the business of the
Partnership to the officers of the Partnership. The officers shall carry out the
day-to-day operation of the Partnership's business in a manner consistent with
the Board of Directors' policies and procedures, the Budget, the Business Plan
and any other directive given by the Board of Directors. The Managing General
Partner and officers shall perform their duties in good faith, in a manner
reasonably believed to be in the best interests of the Partnership and its
Partners, and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. In
carrying out of its obligations hereunder, Managing General Partner shall devote
such time to the affairs and operations of the Partnership as is reasonably
necessary for the beneficial carrying on of the business of the Partnership.



                                       9
<PAGE>   15



               4.5 NO COMPENSATION. Unless the Board of Directors otherwise
approves, no Partner, including, without limitation, the Managing General
Partner, is entitled to any compensation or overhead in connection with any
services provided to the Partnership by such Partner.

               4.6 AMENDMENT OF FILINGS. The Managing General Partner has the
duty and authority to amend all filings of the Partnership as and to the extent
necessary to reflect any and all changes or corrections necessary or appropriate
as a result of any action taken by the Board of Directors in accordance with the
terms of this Agreement.

               4.7 ANNUAL BUSINESS PLAN AND ANNUAL BUDGET. At least sixty (60)
days before the beginning of each Fiscal Year, Managing General Partner shall
prepare and submit to the Board of Directors for its review and approval a
proposed draft Business Plan and the officers shall prepare and submit to the
Board of Directors for its review and approval a proposed draft operating
Budget. The draft Budgets must be consistent with the proposed Business Plan
submitted by the Managing General Partner and must be in such detail and be
accompanied by such supporting material as any Board of Directors' member
reasonably requires. The Business Plan must be in the form and detail and must
be accompanied by such supporting material as any Board of Directors' member
reasonably requires. No modification of any item in or aspect of a Budget may be
made without the prior written approval of the Board of Directors. If for
whatever reason the Board of Directors has not, by the beginning of a Fiscal
Year, approved a Budget for such Fiscal Year, then, in the absence of the Board
of Directors' action to the contrary, the officers of the Partnership shall
continue the operation of the Partnership in the ordinary course pending
approval of a Budget for the then current Fiscal Year. For this purpose, the
"ordinary course" means taking such actions and making such necessary
expenditures as, in the good faith judgment of such officers, are necessary in
order to preserve and protect the Partnership's assets and honor existing
commitments of the Partnership.

                                    ARTICLE V

                                     NOTICES

               5.1 NOTICES. Whenever, under the provisions of the Act or this
Agreement, notice is required to be given to any Partner, such notice shall be
given in writing addressed to the Partner at its address as it appears on the
records of the Partnership, and will be deemed effectively given upon personal
delivery, confirmation of receipt of delivery by facsimile, or three (3) days
after deposit in the United States mail, by registered or certified mail, return
receipt requested.

               5.2 WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the Act or this Agreement, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, will be deemed equivalent thereto.



                                       10
<PAGE>   16



                                   ARTICLE VI

                             ACCOUNTING AND RECORDS

               6.1 FINANCIAL AND TAX REPORTING. The Managing General Partner
shall prepare financial statements in accordance with generally accepted
accounting principles as from time to time in effect and shall prepare the
Partnership's income tax information returns using such methods of accounting
and tax year as Managing General Partner and Tax Matters Partner deem necessary
or appropriate under the Code and Treasury Regulations. Managing General Partner
shall submit for the review and approval by AMC (and Tax Matters Partner if
other than AMC) a draft of the Partnership's income tax information returns no
later than February 15th of each year and a final version of the Partnership's
income tax information returns incorporating any comments that AMC (and Tax
Matters Partner, if other than AMC) may have no later than February 28th of each
year.

               6.2 SUPERVISION; INSPECTION OF BOOKS.


               (a) Proper and complete books of account and records of the
business of the Partnership shall be kept under the supervision of the Managing
General Partner at the Partnership's principal office and at such other place as
designated by the Managing General Partner. The Managing General Partner shall
give notice to each Partner of any changes in the location of such books and
records. Such books and records must be open to inspection, audit and copying by
any Partner, or its designated representative, upon reasonable notice at any
time during business hours for any purpose reasonably related to the Partner's
Partnership Interest in the Partnership. Any information so obtained or copied
must be kept and maintained in strictest confidence except as required by law.

               (b) Upon reasonable notice to the Managing General Partner given
within 90 days after the end of each calendar quarter, the other Partner, at its
sole cost and expense, or its representatives may perform such audit procedures
on the books and records of the Partnership as deemed appropriate by such other
Partner in its reasonable discretion. Managing General Partner shall cooperate
to the fullest extent possible and in a timely manner with any such audit, and
Managing General Partner shall not interfere with the performance of any audit
procedure. In no event may any such audit be performed more than four times in
each calendar year.

               6.3 RELIANCE ON RECORDS AND BOOKS OF ACCOUNT. Any Partner may
rely in good faith upon the records and books of account of the Partnership and
upon such information, opinions, reports or statements presented to the
Partnership by its the Board of Directors, Managing General Partner, any of its
Partners, officers, employees or committees, or by any other person, as to
matters the Partner reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Partnership, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Partnership or any other facts pertinent to the existence and
amount of assets from which distributions to Partners might properly be paid.



                                       11
<PAGE>   17



               6.4 TAX RETURNS. Managing General Partner shall, within sixty
(60) days after the end of each Fiscal Year, file a federal income tax
information return and transmit to each Partner a schedule showing such
Partner's distributive share of the Partnership's income, deductions and
credits, and all other information necessary for such Partners timely to file
their respective federal income tax returns. Managing General Partner similarly
shall file, and provide information to the Partners regarding, all appropriate
state and local income tax returns.

               6.5 BANK ACCOUNTS. The Managing General Partner shall maintain
the funds of the Partnership in one or more separate bank accounts in the name
of the Partnership, and shall not permit the funds of the Partnership to be
commingled in any fashion with the funds of any other Person. The authorized
signatories thereto shall be established from time to time by resolution of the
Board of Directors.

               6.6 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS. Managing General
Partner shall make decisions as to accounting matters, except as otherwise
specifically set forth herein. The Managing General Partner may rely upon the
advice of the Partnership's accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes.

               6.7 TAX MATTERS FOR THE PARTNERSHIP HANDLED BY TAX MATTERS
PARTNER. The Tax Matters Partner shall from time to time cause the Partnership
to make such tax elections as it deems to be in the best interests of the
Partnership and the Partners. The Tax Matters Partner, as defined in Code
Section 6231, shall represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting judicial and administrative proceedings, and
shall expend the Partnership funds for professional services and costs
associated therewith. Each Partner shall cooperate with the Tax Matters Partner
and agrees to do or refrain from doing anything reasonably requested by the Tax
Matters member with respect to any such proceedings. The Tax Matters Partner
shall oversee the Partnership's tax affairs in the overall best interests of the
Partnership. If for any reason the Tax Matters Partner can no longer serve in
that capacity or is no longer a Partner, the Board of Directors may designate
another Partner to be the Tax Matters Partner.

                                   ARTICLE VII

                                   ALLOCATIONS

               7.1 ALLOCATION OF NET INCOME OR NET LOSS. For each Accounting
Period, Net Income and Net Loss shall be allocated to the Partners in proportion
to the amounts distributed to such Partners pursuant to Section 8.1.

               7.2 SPECIAL TAX PROVISIONS.

               (a) Treatment as Partnership. The Partners expect and intend that
the Partnership be treated as a partnership for all federal income tax purposes.
Each Partner agrees that it (i) will not, on any federal, state, local or other
tax return, take a position inconsistent with such expectation and intent; (ii)
otherwise assert a position inconsistent with such expectation


                                       12
<PAGE>   18




and intent; or (iii) do any act or thing which could cause the Partnership to be
treated as other than a partnership for federal income tax purposes.

               (b) Tax Allocations. Except as otherwise provided in this Article
VII, items of income, gain, loss or deduction recognized for income tax purposes
will be allocated in the same manner that the corresponding items entering into
the calculation of Net Income and Net Loss are allocated pursuant to this
Agreement.

               (c) Section 704(c) Adjustments. In accordance with Code Section
704(c) and the Treasury Regulations thereunder, items of income, gain, loss and
deduction with respect to an asset, if any, contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its value upon
contribution to the Partnership.

               (d) Section 754 Election. A Code Section 754 election may be made
for the Partnership at the sole and absolute discretion of the Tax Matters
Partner. If an adjustment to the adjusted tax basis of any Partnership asset is
required under Code Section 734(b) or Code Section 743(b) pursuant to a Code
Section 754 election by the Partnership, subsequent allocations of tax items
shall reflect such adjustment consistent with the Treasury Regulations
promulgated under Sections 704, 734 and 743 of the Code.

               (e) Allocations upon Transfers of Partnership Interests. If,
during an Accounting Period, a Partner transfers all or a portion of its
Partnership Interest to another Person in compliance with this Agreement, items
of Net Income and Net Loss, together with corresponding tax items, that
otherwise would have been allocated to the transferring Partner with regard to
such Accounting Period will be allocated between the transferring Partner and
the Substitute Partner in accordance with their respective Partnership
Percentages during the Accounting Period using any method permitted by Section
706 of the Code and selected by the Tax Matters Partner.

                                  ARTICLE VIII

                                  DISTRIBUTIONS

               8.1 DISTRIBUTIONS. Net Cash Flow from Operations shall be
distributed, at such reasonable intervals (not less frequently than quarterly)
as are determined by the Board of Directors, in the following order of priority:

               (a) First, to AMC with respect to any unpaid AMC Loan until all
principal and accrued interest on such AMC Loan is paid in full. If, at the time
any distribution is made pursuant to this Section 8.1(a), there is more than one
AMC Loan outstanding, payments of interest on, and the principal amount of an
AMC Loan shall be made in the reverse order in which the AMC Loans were made.
For example, the accrued but unpaid interest on the outstanding AMC Loans at any
time shall be paid first on the AMC Loan made most recently to the date of the
payment. Payments in connection with an AMC Loan shall be made first, to pay


                                       13
<PAGE>   19


               all accrued but unpaid interest on such AMC Loan and second, to
pay the outstanding principal balances of such AMC Loan.

               (b) Second, to WNPM, until WNPM has received One Hundred Fifty
Thousand Dollars ($150,000) for each calendar year (an "ANNUAL PREFERRED
DISTRIBUTION").

               (c) Third, to AMC, until AMC has received Four Hundred Fifty
Thousand Dollars ($450,000) for each calendar year.

               (d) Fourth, to each Partner, pro rata in accordance with such
Partner's Partnership Percentage.

If there is insufficient Net Cash Flow from Operations in any calendar quarter
to distribute to WNPM one-fourth of the Annual Preferred Distribution, the
unpaid portion of such quarter of the Annual Preferred Distribution (the
"DEFERRED DISTRIBUTION AMOUNT") shall accrue and be payable the following
calendar quarter, as and when the Board of Directors determines there is
sufficient Net Cash Flow from Operations to make such distribution (and to the
extent that the Board of Directors determines that there is insufficient Net
Cash Flow from Operations to make such distribution, such unpaid portion of the
Annual Preferred Distribution shall continue to accrue and shall be paid as soon
as the Board of Directors determines there is sufficient Net Cash Flow from
Operations to make such distribution). The Deferred Distribution Amount shall
accrue interest at a rate of 8% and be paid subsequent to any distribution made
to AMC pursuant to Section 8.1(a) and prior to any distribution made to WNPM
pursuant to Section 8.1(b).

               8.2 DISTRIBUTIONS IN KIND. All distributions shall be made in
cash or cash equivalents unless the Board of Directors has approved a
distribution of assets in kind.

               8.3 RESTRICTION ON DISTRIBUTIONS AND WITHDRAWALS.

               (a) Restriction on Distributions. The Partnership shall not make
any distribution to the Partners unless, immediately after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to
Partners on account of their interests in the Partnership and liabilities as to
which recourse of creditors is limited to specified property of the Partnership,
do not exceed the fair value of the Partnership assets. For purposes of the
preceding sentence, the fair value of any property that is subject to a
liability as to which recourse of creditors is so limited shall be included in
the Partnership assets only to the extent the fair value of the property exceeds
such liability.

               (b) Restriction on Withdrawals. No Partner will be liable to the
Partnership for the amount of a distribution received if, at the time of the
distribution, such Partner did not know that the distribution was in violation
of this Section 8.3. A Partner that receives a distribution in violation of this
Section 8.3, and that knew at the time of the distribution that the distribution
violated such condition, will be liable to the Partnership for the amount of the
distribution.

               8.4 NO OTHER WITHDRAWALS. Except as provided in this Article
VIII, no withdrawals or distributions are required or permitted.



                                       14
<PAGE>   20



                                   ARTICLE IX

                        TRANSFER OF PARTNERSHIP INTERESTS

               9.1 TRANSFER. Except as expressly provided to the contrary in
this Article IX, no Partner may transfer, sell, encumber, mortgage, assign or
otherwise dispose of all or any portion of its Partnership Interest
(hereinafter, a "TRANSFER") without the prior written consent of the other
Partner, which consent may be withheld in such Partner's sole and absolute
discretion. Notwithstanding the foregoing sentence, AMC may transfer its
Partnership Interest to an Affiliate of AMC without the prior written consent of
WNPM (or any other Partner) (and upon such transfer, shall provide written
notice thereof to the other Partner). Any purported transfer of all or any
portion of a Partner's Partnership Interest in contravention of this Article IX
is void and of no effect to, on or against the Partnership, any Partner, any
creditor of the Partnership or any claimant against the Partnership.

               9.2 RIGHTS OF ASSIGNEES. The Assignee of a Partnership Interest
has no right to vote or to participate in the management of the business and
affairs of the Partnership or to become a Partner. The Assignee is only entitled
to receive distributions and to be allocated the Net Profits and Net Losses
attributable to the Partnership Interest transferred to the Assignee.



                                    ARTICLE X

                   INDEMNIFICATION AND LIMITATION OF LIABILITY

               10.1   INDEMNIFICATION.

               (a) Partners. To the fullest extent permitted by the Act and by
applicable law, the Partners and the partners, members, shareholders,
controlling Persons, officers, directors and employees of the Partners (herein
referred to as "INDEMNITEES") shall, in accordance with this Section 10.1 be
indemnified and held harmless by the Partnership from and against any and all
loss, claims, damages, liabilities, expenses, judgments, fines, settlements and
other amounts arising from any and all claims (including reasonable attorneys'
fees and expenses), demands, actions, suits or proceedings (civil, criminal,
administrative or investigative) (collectively, "CLAIMS") in which they may be
involved, as a party or otherwise, by reason of their management of, or
involvement in, the affairs of the Partnership, or rendering of advice or
consultation with respect thereto, or which relate to the Partnership, its
properties, business or affairs (including, without limitation, any claims,
demands, actions, suits or proceedings arising out of any noncompliance with the
Department of Real Estate's ("DRE") rules and regulations, except to the extent
arising out of the gross negligence or wilful misconduct of WNPM or any WNPM
Indemnitee (as hereafter defined)), if such Indemnitee acted in good faith and
in a manner such Indemnitee reasonably believed to be in, or not opposed to, the
best interests of the Partnership, and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct of such Indemnitee was unlawful.
The termination of a proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, shall not, of itself, create
a presumption that the Indemnitee did not act in good faith and in a manner
which the

                                       15
<PAGE>   21



Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Partnership or that the Indemnitee had reasonable cause to believe that
the Indemnitee's conduct was unlawful (unless there has been a final
adjudication in the proceeding that the Indemnitee did not act in good faith and
in a manner which the Indemnitee reasonably believed to be in or not opposed to
the best interests of the Partnership; or that the Indemnitee did have
reasonable cause to believe that the Indemnitee's conduct was unlawful).

               (b) Persons. The Partnership may also indemnify any Person who
was or is a party or is threatened to be made a party to any threatened,
pending, or completed action by or in the right of the Partnership to procure a
judgment in its favor by reason of the fact that such Person is or was an
officer, employee or agent of the Partnership, against expenses actually or
reasonably incurred by such Person in connection with the defense or settlement
of such action, if such Person acted in good faith and in a manner such Person
reasonably believed to be in, or not opposed to, the best interests of the
Partnership, except that indemnification shall be made in respect of any claim,
issue or matter as to which such Person has been adjudged to be liable for
misconduct in the performance of the Person's duty to the Partnership only to
the extent the court in which such action or suit was brought, or another court
of appropriate jurisdiction, determines upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
Person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper. To the extent the Person has been successful on
the merits or otherwise in defense of any proceedings referred to herein, or in
defense of any claim, issue or matter therein, the Person shall be indemnified
by the Partnership against expenses actually and reasonably incurred by the
Person in connection therewith. Notwithstanding the foregoing, no Person is
entitled to indemnification hereunder for any conduct arising from the gross
negligence or willful misconduct of such Person or reckless disregard in the
performance of its duties hereunder.

               (c) Expenses. Expenses (including reasonable attorneys' fees and
expenses) incurred in defending any proceeding under Sections 10.1(a) or (b) may
be paid by the Partnership in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of the Indemnitee to
repay such amount if it is ultimately determined that the Indemnitee is not
entitled to be indemnified by the Partnership as authorized hereunder.

               (d) Exclusive Right. The indemnification provided by this Section
10.1 shall not be deemed to be exclusive of any other rights to which any Person
may be entitled under any agreement, or as a matter of law, or otherwise, both
as to action in a Person's official capacity and to action in another capacity.

               (e) Insurance. The Board of Directors may purchase and maintain
insurance on behalf of the Partnership, any employees or agents of the
Partnership and any other Indemnitees at the expense of the Partnership, against
any liability asserted against or incurred by them in any such capacity whether
or not the Partnership would have the power to indemnify such Persons against
such liability under the provisions of this Agreement.

               (f) AMC Indemnification. AMC hereby indemnifies, defends and hold
harmless WNPM, its partners, controlling Persons, shareholders, officers,
directors and employees (the "WNPM INDEMNITEES") from and against all Claims
arising out of the


                                       16
<PAGE>   22


Partnership's reliance on WNPM's brokers license pursuant to Section 13.19 and
out of any noncompliance by the Partnership with the DRE's rules and
regulations, except to the except arising out of WNPM or any WNPM Indemnitee's
gross negligence or intentional misconduct.

               10.2 LIMITATION OF LIABILITY. Except as expressly required to the
contrary by the Act or other applicable law, (a) notwithstanding anything to the
contrary herein contained, the debts, obligations and liabilities of the
Partnership shall be solely the debts, obligations and liabilities of the
Partnership and (b) no Partners will be obligated personally for any such debt,
obligation or liability of the Partnership solely by reason of being a Partner
of the Partnership. Neither Partner has any obligation to make any capital
contribution to the Partnership in order to fund any indemnification obligation
described in Section 10.1.

                                   ARTICLE XI

                              TERMINATION; DEFAULT

               11.1 TERMINATION. The Partnership will be dissolved, its assets
disposed of and its affairs wound up upon the first to occur of the following:

               (a) Expiration. The expiration of its stated term;

               (b) Vote. The vote of the Board of Directors;

               (c) Judicial Dissolution. The entry of a decree of judicial
dissolution under the Act.

               (d) Default. A nondefaulting Partner's election to terminate the
Agreement pursuant to Section 11.6 of the Agreement.

               (e) Property Management Agreements. At AMC's election, upon
termination of the Property Management Agreements.

               (f) Guaranty. At WNPM's election, in the event , as of the end of
any calendar quarter, IAC's net worth is less than Thirty Million Dollars
($30,000,000).

               11.2 AUTHORITY TO WIND UP. Upon the occurrence of any event
specified in Section 11.1, the Partnership will continue solely for the purpose
of winding up its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors. The Board of Directors has all necessary
power and authority required to marshall the assets of the Partnership, to pay
its creditors, to distribute assets and otherwise wind up the business and
affairs of the Partnership. In particular, the Board of Directors has the
authority to continue to conduct the business and affairs of the Partnership
insofar as such continued operation remains consistent, in the judgment of the
Board of Directors, with the orderly winding up of the Partnership.

               11.3 WINDING UP AND CERTIFICATE OF DISSOLUTION. The winding up of
the Partnership will be completed when all debts, liabilities and obligations of
the Partnership have been paid and discharged or reasonably adequate provision
therefore has been made, and all of the remaining property and assets of the
Partnership have been distributed by the Board of

                                       17
<PAGE>   23


Directors Upon the completion of winding up of the Partnership, the Board of
Directors shall make all filings necessary to terminate the existence of the
Partnership.

               11.4 DISTRIBUTION OF ASSETS. Upon dissolution and winding up of
the Partnership, the affairs of the Partnership shall be wound up and the
Partnership liquidated by the Board of Directors. The assets of the Partnership
shall be distributed as follows in accordance with the Act:

               (a) To third party creditors of the Partnership in the order of
priority provided by law; and

               (b) To WNPM, until WNPM, together with any amounts distributed to
WNPM pursuant to Section 8.1, has received the product of (i) $12,500 (i.e.,
1/12th of the Preferred Distribution Amount), and (ii) the number of months (or
portions thereof) from January 1st of the calendar year in which such
dissolution and winding up occurs through the date of dissolution. In the event
of a dissolution pursuant to Section 11.1(f) prior to March 31, 2001, the date
of dissolution for purposes of calculating the amounts due WNPM pursuant to
Section 11.4(b), shall be deemed to be March 31, 2001;

               (c) To each Partner, pro rata in accordance with such Partner's
Partnership Percentage until each Partner's Capital Contribution has been
returned; and

               (d) To AMC.

By way of example and not of limitation, if dissolution occurs on March 31, 2001
and WNPM has received the sum of $10,000 pursuant to Section 8.1 for the
calendar year 2001, the amount required to be distributed to WNPM pursuant to
this Section 11.4(b) is $27,500.

               11.5 DEFICIT CAPITAL ACCOUNT. Upon liquidation of the
Partnership, each Partner shall look solely to the assets of the Partnership for
the return of such Partner's capital in the Partnership. Except as expressly
required to the contrary by the Act, no Partner is personally liable, either to
the other Partner or to any third Person, for a deficit capital account balance
of such Partner, it being expressly understood that the payment of the
Partnership's debts and the distribution of liquidation proceeds shall be made
solely from existing Partnership assets.

               11.6 DEFAULT. The following each constitute an "EVENT OF DEFAULT"
under this Agreement.

               (a) A material breach of a Partner's obligation under the
Agreement which continues for thirty (30) days after delivery of written notice;
or

               (b) (i) Bankruptcy of a Partner; or

                   (ii) The entry of any order against any Partner decreeing
               the dissolution of such Partner, which order is not vacated or
               otherwise terminated within thirty (30) days;

               (c) Fraud or willful misconduct by a Partner;



                                       18
<PAGE>   24



               (d) Any attempted dissolution of the Partnership in violation of
Section 11.7;

               (e) Any attempted withdrawal from the Partnership in violation of
this Agreement;

               (f) WNPM's failure to maintain a valid California real estate
broker's license in good standing and full force and effect throughout the term
of this Agreement as required by Section 13.19, provided, however, such failure
will not be deemed to be an Event of Default by WNPM under this Agreement if
such failure is the result of AMC's gross negligence, intentional misconduct or
default of its obligations under this Agreement;

               (g) The transfer of fifty percent (50%) or more of the voting
rights or equity interests in WNPM or the failure of Michael Hayde to control
the day to day operation and management of WNPM, which Event of Default shall be
an Event of Default of WNPM.


Upon the occurrence of an Event of Default, the nondefaulting Partner may elect
to either (1) purchase the defaulting Partner's Partnership Interest, for a
price equal to the lesser of such Partner's initial Capital Account balance or
then Capital Account balance, or (ii) to terminate the Agreement and liquidate
the Partnership, in the manner set forth in this Article XI. If the
nondefaulting Partner elects to purchase the defaulting Partner's Partnership
Interest, the nondefaulting Partner shall pay the price described in the
preceding sentence no later than ninety (90) days after delivery of a notice of
default. If the Event of Default is the result of the act or omission of the
Managing General Partner, such Managing General Partner shall be deemed to be
immediately removed from such position.

               11.7 NO ACTION FOR DISSOLUTION. Except as expressly permitted in
this Agreement, a Partner shall not take any voluntary action that directly
causes a dissolution of the Partnership. The Partners acknowledge that
irreparable damage would be done to the goodwill and reputation of the
Partnership if any Partner should bring an action in court to dissolve the
Partnership under circumstances where dissolution is not required by Section
11.1. This Agreement has been drawn carefully to provide fair treatment of all
parties and equitable payment in liquidation of the Partnership Interests.
Accordingly, except where the Board of Directors has failed to liquidate the
Partnership as required by this Article XI, each Partner hereby waives and
renounces its right to initiate legal action to seek the appointment of a
receiver or trustee to liquidate the Partnership or to seek a decree of judicial
dissolution of the Partnership on the ground that (a) it is not reasonably
practicable to carry on the business of the Partnership in conformity with the
Certificate or this Agreement, or (b) dissolution is reasonably necessary for
the protection of the rights or interests of the complaining Partner. Damages
for breach of this Section 11.7 are monetary damages only (and not specific
performance), and the damages may be offset against distributions by the
Partnership to which such Partner would otherwise be entitled. Each Partner
hereby irrevocably waives any right which it may have to maintain any action for
partition with respect to the property of the Partnership during the term of the
Partnership.


                                       19
<PAGE>   25




                                   ARTICLE XII

                              INTENTIONALLY DELETED

                                  ARTICLE XIII

                                  MISCELLANEOUS

               13.1 AMENDMENT. This Agreement may be amended only with the prior
written consent of both of the Partners.

               13.2 WITHHOLDING TAXES. If the Partnership is obligated to
withhold and pay any taxes with respect to any Partner, any tax required to be
withheld may be withheld from any distribution otherwise payable to such
Partner, or in lieu thereof upon remittance to the appropriate tax authority may
be charged to that Partner's Capital Account as if the amount of such tax had
been distributed to such Partner.

               13.3 FURTHER ASSURANCES. The Partners shall execute and deliver
any further instruments or documents and perform any additional acts which are
or may become necessary to effectuate and carry on the Partnership created by
this Agreement.

               13.4 BINDING EFFECT. Subject to the restrictions on transfer set
forth in Article X, this Agreement is binding on and inures to the benefit of
the Partners and their respective permitted transferees, successors, assigns and
legal representatives.

               13.5 GOVERNING LAW. The laws of the State of California,
including, without limitation, the Act, govern the organization and internal
affairs of the Partnership and the liability of the Partners of the Partnership.

               13.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter herein.

               13.7 COUNTERPARTS. This Agreement may be executed in one (1) or
more counterparts with the same force and effect as if each of the signatories
had executed the same instrument.

               13.8 PARTIES IN INTEREST. Except as expressly provided in the
Act, nothing in this Agreement confers any rights or remedies under or by reason
of this Agreement on any Persons other than the Partners and their respective
permitted successors and assigns, nor does anything in this Agreement relieve or
discharge the obligation or liability of any third Person to any party to this
Agreement, nor does any provision give any third Person any right of subrogation
or action over or against any party to this Agreement.

               13.9 PRONOUNS; STATUTORY REFERENCES. All pronouns and all
variations thereof are deemed to refer to the masculine, feminine, or neuter,
singular or plural, as the context in which they are used may require. Any
reference to the Code, the Regulations, the Act, or other statutes or laws
includes all amendments, modifications, or replacements of the specific sections
and provisions concerned.



                                       20
<PAGE>   26



               13.10 HEADINGS. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.

               13.11 INTERPRETATION. If any claim is made by any Partner
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied because this
Agreement was prepared by or at the request of a particular Partner or its
counsel.

               13.12 REFERENCES TO THIS AGREEMENT. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated.

               13.13 EXHIBITS. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.

               13.14 SEVERABILITY. If any provision of this Agreement or the
application of such provision to any person or circumstance is held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid will not be affected
thereby.

               13.15 ATTORNEY FEES. If any dispute between the Partnership and
the Partners or among the Partners should result in litigation or arbitration,
the prevailing party in such dispute is entitled to recover from the other party
all reasonable fees, costs and expenses of enforcing any right of the prevailing
party, including, without limitation, reasonable attorneys' fees and expenses
and expert witness fees.

               13.16 TIME IS OF THE ESSENCE. All dates and times in this
Agreement are of the essence.

               13.17 REMEDIES CUMULATIVE. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
entitled at law or in equity.

               13.18 CONFIDENTIALITY AND PUBLICITY. The parties agree to keep
this transaction, this Agreement and any documents received from each other in
connection herewith confidential, except to the extent necessary to comply with
applicable law and regulations, or in order to carry out the obligations set
forth in this Agreement. No press release or other public disclosure may be made
by either party or any of its agents concerning this transaction without the
prior written consent of the other parties.

               13.19  BROKER'S LICENSE.

               (a) Throughout the term of this Agreement, the Partnership and
each of the Partners shall take all necessary acts to assure that all activities
governed by the DRE are conducted through properly licensed entities and persons
and in accordance with all DRE requirements.


                                       21
<PAGE>   27



               (b) Throughout the term of this Agreement, until the dissolution
of the Partnership under the terms of Paragraph 13.19(c) below: (i) WNPM shall
maintain in full force and effect, and in good standing, a corporate real estate
brokers license with the DRE; (ii) the broker of record for WNPM may be changed
from time to time by WNPM, subject to AMC's approval which shall not be
unreasonably withheld (with such broker with whom WNPM's corporate license is
held known as the "BROKER OF RECORD"); (iii) each person performing activities
for the Partnership for which DRE licensing is required (each a "LICENSED
Person") shall be properly licensed either as a salesperson or as a broker with
the Broker of Record, and each such salesperson may have such salesperson's
license affiliated only with the Broker of Record; (iv) WNPM and the Broker of
Record may impose such rules, procedures and regulations as either WNPM or the
Broker of Record may elect from time to time in order to ensure that each such
Licensed Person and all activities for which a DRE license is required are in
full compliance with all applicable DRE rules and regulations; (v) WNPM and the
Broker of Record shall be responsible for the supervision and management of all
activities of the Partnership for which a DRE license is required and shall
assure that all such activities are conducted consistently with the DRE rules
and regulations; (vi) the Partnership and each of the Partners shall cooperate
fully in the development and implementation of policies and procedures, the
preparation of reports, the conduct of meetings and other activities as may be
reasonably requested by WNPM or the Broker of Record to permit the Broker of
Record to properly monitor and supervise all activities for which DRE licensing
is required and to assure compliance with the DRE rules and regulations; and
(viii) no less often than annually, the Partnership and each of the Partners, at
the Partnership's expense, shall cause a DRE compliance audit to be conducted of
all activities of the Partnership for which a license is required, which
compliance audit shall be conducted by a firm reasonably selected by WNPM.

               (c) If, and at such time as, the California statutes and
regulations relating to licensing by the DRE permit limited liability companies
to be licensed real estate brokers for the purpose of property management and
the leasing of real property on behalf of third parties, the Partners agree to
use best efforts to form a Delaware limited liability company on substantially
the same terms and conditions set forth in this Agreement, to obtain proper DRE
licensure for that entity as a real estate broker, to transfer the business of
this Partnership to the new entity, and to dissolve the Partnership, so long as
the Partners can do so with no material adverse income tax consequences to
either Partner



                                       22
<PAGE>   28



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

APARTMENT MANAGEMENT COMPANY, LLC,
a Delaware limited liability company

By:     Irvine Apartment Communities, L.P.,
        a Delaware limited partnership

        By:    Irvine Apartment Communities, LLC
               a Delaware limited liability company
               its general partner

               By:
                  ----------------------------------------------------
                      Max Gardner
                      Its Executive Vice President

               By:
                  ----------------------------------------------------
                      Clarence Barker
                      Its President

WESTERN NATIONAL SECURITIES, d/b/a WESTERN NATIONAL PROPERTY MANAGEMENT,
a California corporation

By:
   ------------------------------------
        Michael Hayde
        Chief Executive Officer


                                       23
<PAGE>   29


                                    EXHIBIT A
                            BYLAWS OF THE PARTNERSHIP

A-I     BOARD OF DIRECTORS' MEETINGS.

               A-1.1 DATE, TIME AND PLACE OF MEETINGS OF THE BOARD OF DIRECTORS;
SECRETARY. The Board of Directors shall meet from time to time, no less
frequently than quarterly, but as often as necessary or desirable to carry out
its management functions. The Board of Directors shall meet by telephone
conference or by other means of communications acceptable to the Board of
Directors, or at the principal office of the Partnership or elsewhere in Orange
County as the Board of Directors may agree. At any Board of Directors' meeting,
the members of the Board of Directors (the "Members") shall appoint a person to
preside at the meeting and a person to act as secretary of the meeting. The
secretary of the meeting shall prepare minutes of the meeting, which shall be
placed in the minute books of the Partnership.

               A-1.2 POWER TO CALL MEETINGS. Unless otherwise prescribed by the
Act or by the Certificate, meetings of the Board of Directors may be called by
any Member for the purpose of addressing any matters on which the Board of
Directors may vote.

               A-(a) NOTICE OF MEETING. Written notice of a meeting of the Board
of Directors shall be sent or otherwise given to each Member in accordance with
Section A-1.3 not less than three (3) business days nor more than thirty (30)
business days before the date of the meeting. The notice shall specify the
place, date and hour of the meeting and the general nature of the business to be
transacted. No other business may be transacted at this meeting unless otherwise
agreed by the Members.


               A-1.3 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of the Board of Directors shall be given either personally or by
first-class mail or telegraphic or other written communication, charges prepaid,
addressed to the Member at the address of that Member appearing on the books of
the Partnership or given by the Member to the Partnership for the purpose of
notice. If no such address appears on the Partnership's books or is given,
notice shall be deemed to have been given if sent to that Member by first-class
mail or telegraphic or other written communication to the Partnership's
principal executive office. Notice will be deemed effectively given upon
personal delivery, confirmation of receipt of delivery by facsimile, or three
(3) days after deposit in the United States mail, by registered or certified
mail, return receipt requested. If any notice addressed to a Member at the
address of that Member appearing on the books of the Partnership is returned to
the Partnership by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the Member at
that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the Member on
written demand of the Member at the principal executive office of the
Partnership for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any meeting
shall be executed by the Member or any secretary or any agent of the Managing
General Partner giving the notice, and shall be filed and maintained in the
minute book of the Partnership.



                                      A-1
<PAGE>   30



               A-1.4 VALIDITY OF ACTION. Any action approved at a meeting, other
than by unanimous approval of those entitled to vote, shall be valid only if the
general nature of the proposal so approved was stated in the notice of meeting
or in any written waiver of notice.

               A-1.5 QUORUM. The presence in person or by proxy of at least
three (3) Members of the Board of Directors shall constitute a quorum at a
meeting of the Board of Directors. The Members present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the loss of a quorum, if any action taken after
loss of a quorum (other than adjournment) is approved by at least two (2)
Members.

               A-1.6 ADJOURNED MEETING; NOTICE. Any Board of Directors meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the Members at that meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
that meeting, except as provided in Section A-1.5. When any meeting of the Board
of Directors is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place are announced at a meeting at which
the adjournment is taken, unless a new record date for the adjourned meeting is
subsequently fixed, or unless the adjournment is for more than thirty (30) days
after the date set for the original meeting, in which case the Members shall set
a new record date. At any adjourned meeting, the Partnership may transact any
business that might have been transacted at the original meeting.

               A-1.7 WAIVER OF NOTICE OR CONSENT. Subject to the terms and
conditions of the Agreement, the actions taken at any meeting of the Board of
Directors however called and noticed, and wherever held, have the same validity
as if taken at a meeting duly held after regular call and notice, if a quorum
(or if required by the Agreement, a supermajority) is present either in person
or by proxy. All such waivers, consents or approvals shall be filed with the
Partnership's records and made a part of the minutes of the meeting.

               Attendance of a person at a meeting shall constitute a waiver of
notice of that meeting, except when the Member objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting. Neither the
business to be transacted nor the purpose of any meeting of the Board of
Directors need be specified in any written waiver of notice except as provided
in Section A-1.4.

               A-1.8 ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
that may be taken at a meeting of the Board of Directors may be taken without a
meeting, if a consent in writing setting forth the action so taken, is signed
and delivered to the Partnership by the appropriate number of Members required
for such action. All such consents shall be filed with the Members or the
secretary, if any, of the Partnership and shall be maintained in the Partnership
records. Any Member giving a written consent, or the Member's proxy holders, may
revoke the consent by a writing received by the Members or secretary, if any, of
the Partnership before written consents of the number of votes required to
authorize the proposed action have been filed.



                                      A-2
<PAGE>   31



               A-1.9 TELEPHONIC PARTICIPATION BY MEMBER AT MEETINGS. Members may
participate in any Board of Directors meeting through the use of any means of
conference telephones or similar communications equipment as long as all Members
participating can hear one another. A Member so participating is deemed to be
present in person at the meeting.

               A-1.10 PROXIES. Every Member entitled to vote on any matter has
the right to do so either in person or by one or more agents authorized by a
written proxy signed by the Member and filed with the Board of Directors or
secretary, if any, of the Partnership. A proxy shall be deemed signed if the
Member's name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission, electronic transmission or otherwise) by the Member or
the Member's attorney-in-fact. A proxy may be transmitted by an oral telephonic
transmission if it is submitted with information from which it may be determined
that the proxy was authorized by the Member or the Member's attorney-in-fact. A
validly executed proxy that does not state that it is irrevocable shall continue
in full force and effect unless (a) revoked by the Member executing it, before
the vote pursuant to that proxy, by a writing delivered to the Partnership
stating that the proxy is revoked, or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy; or (b) written notice of the death or incapacity of the maker of that
proxy is received by the Partnership before the vote pursuant to that proxy is
counted; provided, however, no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy.

A-II    OFFICERS.

               A-2.1 APPOINTMENT OF OFFICERS. The officers of the Partnership,
if deemed necessary by the Board of Directors, may include a president, vice
president, secretary, assistant secretary and controller, and any other officers
the Board of Directors deems appropriate. The officers shall serve at the
pleasure of the Board of Directors, subject to all rights, if any, of an officer
under any contract of employment. Any individual may hold any number of offices.
The officers shall exercise such powers and perform such duties as specified in
this Agreement and as shall be determined from time to time by the Board of
Directors.

               A-2.2 REMOVAL, RESIGNATION AND FILLING OF VACANCY OF OFFICERS.
Subject to the rights, if any, of an officer under a contract of employment, any
officer may be removed, either with or without cause, by the Board of Directors
at any time. Any officer may resign at any time by giving written notice to the
Board of Directors. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice. Unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Partnership under any contract to which the officer is a
party. A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
this Agreement for regular appointments to that office.

               A-2.4 DUTIES AND POWERS OF PRESIDENT. The president shall be the
chief executive officer of the Partnership, and shall, subject to the control of
the Board of Directors, have general management of the business of the
Partnership and shall see that all orders and resolutions of the Board of
Directors and Managing General Partner are carried into effect. The President
shall have the general powers and duties of management usually vested in the
office of

                                      A-3
<PAGE>   32



president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors.

               A-2.5 DUTIES AND POWERS OF VICE-PRESIDENT. The vice-president, or
if there shall be more than one, the vice-presidents in the order determined by
a resolution of the Board of Directors, shall, in the absence or disability of
the president, perform the duties and exercise the powers of the president and
shall perform such other duties and have such other powers as may be prescribed
by the Board of Directors.

               A-2.6 DUTIES AND POWERS OF SECRETARY. The secretary shall attend
all meetings of the Board of Directors, unless directed not to do so by a
majority of the Members and shall record all the proceedings of the meetings in
a book to be kept for that purpose, and shall perform like duties for the
standing committees when required. The secretary shall keep, or cause to be
kept, at the principal executive office, a register, or a duplicate register,
showing the names of all Members, Partners, their addresses, and their
Partnership Interests. The secretary shall have the general duties, powers and
responsibilities of a secretary of a corporation. The secretary shall give, or
cause to be given, notice of all meetings of the Board of Directors and shall
perform such other duties as may be prescribed by the Board of Directors.

               A-2.7 DUTIES AND POWERS OF CONTROLLER. The controller shall keep
and maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
Partnership, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, and Partnership Interests. The books of
account shall at all reasonable times be open to inspection by any Partner.

               The controller shall have the custody of the funds and securities
of the Partnership, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Partnership, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Partnership in such depositories as may be designated by the Members.

               The controller shall disburse the funds of the Partnership as may
be ordered by the Board of Directors and Managing General Partner in accordance
with the terms of the Agreement, taking proper vouchers for such disbursements,
and shall render to the president and the Members, at their regular meetings, or
when Board of Directors so require, at a meeting of the Board of Directors an
account of all its transactions and of the financial condition of the
Partnership.

               The controller shall perform such other duties and shall have
such other responsibility and authority as may be prescribed from time to time
by the Board of Directors. The controller shall have the general duties, powers
and responsibility of a controller of a corporation, and shall be the chief
financial and accounting officer of the Partnership.

               A-2.8 ACTS OF OFFICERS AS CONCLUSIVE EVIDENCE OF AUTHORITY. Any
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the Partnership and any other Person,
when signed by the president or any vice president, and any secretary, or the
controller, is not invalidated as to the Partnership by any lack


                                      A-4
<PAGE>   33


of authority of the signing officers in the absence of actual knowledge on the
part of the other Person that the signing officers had no authority to execute
the same.

               A-2.9 SIGNING AUTHORITY OF OFFICERS. Subject to any restrictions
imposed by the Partners, any officer, acting alone, is authorized to endorse
checks, drafts, and other evidences of indebtedness made payable to the order of
the Partnership, but only for the purpose of deposit into the Partnership's
accounts. All checks, drafts, and other instruments obligating the Partnership
to pay money in any amount must be signed on behalf of the Partnership by any
two (2) officers acting together. Any two (2) officers acting together, shall be
authorized to sign contracts and obligations on behalf of the Partnership. The
foregoing restrictions may be modified by resolution of the Board of Directors.



                                      A-5