SECOND AMENDMENT
                                     TO THE
                              AMENDED AND RESTATED
                          LIMITED PARTNERSHIP AGREEMENT
                                       OF
                          PLM EQUIPMENT GROWTH FUND III

         This Second Amendment ("Amendment") to the Amended and Restated Limited
Partnership   Agreement   ("Agreement")   of  PLM  Equipment   Growth  Fund  III
("Partnership") is executed as of November 21, 1996, by its general partner, PLM
Financial Services,  Inc., a Delaware corporation ("General Partner"),  pursuant
to Article XVIII of the Agreement.  All capitalized  terms not otherwise defined
herein shall have the meanings set forth in the Agreement.

                                    RECITALS

         The Partners entered into a Limited Partnership Agreement as of October
15,  1987,  a First  Amended and Restated  Limited  Partnership  Agreement as of
February 9, 1988 and a Second Amended and Restated Limited Partnership Agreement
as of March 10, 1988.

         The  General  Partner  now amends the  Agreement,  pursuant  to Article
XVIII,  paragraph two,  subsections  (i) and (ii), to add for the benefit of the
Limited Partners, to the General Partner's  representations and obligations,  to
cure any ambiguity or to correct any inconsistency that may exist among Sections
6.01,  6.02 and 9.02 of the  Agreement.  In executing this Amendment the General
Partner  represents,  warrants  and agrees,  and will take all action to ensure,
that this  Amendment  does  not,  and will not,  detrimentally  affect  the Cash
Distributions  of the Limited  Partners or  assignees or the  management  of the
Partnership by the General Partner.

         Now, therefor, the Agreement is amended as follows:

         1.       Section 6.02 is amended to read in its entirety as follows:

         "The General Partner shall not transfer its interest as General Partner
in the  Partnership  (which  transfer  shall be  deemed as  "withdrawal"  of the
General   Partner  for  purposes  of  Section  9.02)  or  its  interest  in  the
Partnership's capital,  earnings or assets (except in connection with the pledge
of the  General  Partner's  assets or right in  connection  with  loans or other
indebtedness)  except (a) upon the  approval  of a majority  in  interest of the
Limited  Partners,  or (b) to an Affiliate upon its merger,  consolidation  with
another  person  or  its  transfer  pursuant  to  a  reorganization  of  all  or
substantially  all of its assets to another  person,  and the  assumption of the
rights and duties of the General Partner by such Person; provided, however, that
such  successor  or  transferee  shall  on the  date of such  transfer,  merger,
consolidation or reorganization  assume all of the duties and obligations of the
General Partner set forth in this Agreement."

         IN  WITNESS  WHEREOF,  the  General  Partner  has  duly  executed  this
Amendment as of November 21, 1996.

PLM FINANCIAL SERVICES, INC.
a Delaware corporation,
General Partner and as
attorney-in-fact for and on
behalf of the Limited Partners

By:      /s/ J. Michael Allgood
         ------------------------
         Vice President and Chief Financial Officer