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                                                                   EXHIBIT 10.40

                        AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                          PGP NORTHERN INDUSTRIAL, L.P.
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                                TABLE OF CONTENTS

                                                                          Page

ARTICLE 1         DEFINED TERMS............................................  1

ARTICLE 2         ORGANIZATIONAL MATTERS................................... 13
      Section 2.1       Organization....................................... 13
      Section 2.2       Name............................................... 13
      Section 2.3       Registered Office and Agent; Principal
                        Office............................................. 13
      Section 2.4       Power of Attorney.................................. 14
      Section 2.5       Term............................................... 15

ARTICLE 3         PURPOSE.................................................. 15
      Section 3.1       Purpose and Business............................... 15
      Section 3.2       Powers............................................. 16
      Section 3.3       Technical Revisions................................ 16

ARTICLE 4         CAPITAL CONTRIBUTIONS.................................... 16
      Section 4.1       Initial Capital Contributions of the
                        Partners........................................... 16
      Section 4.2       Additional Capital Contributions by the
                        General Partner.................................... 18
      Section 4.3       Issuances of Additional Partnership
                        Interests.......................................... 18
      Section 4.4       Preemptive Rights.................................. 20

ARTICLE 5         DISTRIBUTIONS............................................ 21
      Section 5.1       Requirement and Characterization of
                        Distributions...................................... 21
      Section 5.2       General Partner Election........................... 22
      Section 5.3       Amounts Withheld................................... 22
      Section 5.4       Distributions Upon Liquidation..................... 22
      Section 5.5       Other Assets Present............................... 22
      Section 5.6       Seismic Costs...................................... 23

ARTICLE 6         ALLOCATIONS.............................................. 23
      Section 6.1       Allocations of Net Income and Net Loss............. 23
      Section 6.2       Other Allocations.................................. 25

ARTICLE 7         MANAGEMENT AND OPERATIONS OF BUSINESS.................... 25
      Section 7.1       Management......................................... 25
      Section 7.2       Limitations on General Partner..................... 29
      Section 7.3       Certificate of Limited Partnership................. 30
      Section 7.4       Management Fee and Reimbursement of the

                        General Partner.................................... 31
      Section 7.5       Outside Activities of the General
                         Partner........................................... 33
      Section 7.6       Contracts with Affiliates.......................... 33
      Section 7.7       Indemnification.................................... 34
      Section 7.8       Liability of the General Partner................... 36
      Section 7.9       Other Matters Concerning the General


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                                                                           Page

                         Partner........................................... 37
      Section 7.10      Title to Partnership Assets........................ 38
      Section 7.11      Reliance by Third Parties.......................... 38

ARTICLE 8         RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............... 39
      Section 8.1       Limitation of Liability............................ 39
      Section 8.2       Management of Business............................. 39
      Section 8.3       Outside Activities of Limited Partners............. 39
      Section 8.4       Return of Capital.................................. 40
      Section 8.5       Rights of Limited Partners Relating to
                        the Partnership.................................... 40
      Section 8.6       No Redemption Right................................ 41
      Section 8.7       Representations and Warranties..................... 41

ARTICLE 9         BOOKS, RECORDS, ACCOUNTING AND REPORTS................... 43
      Section 9.1       Records and Accounting............................. 43
      Section 9.2       Fiscal Year........................................ 43
      Section 9.3       Reports............................................ 43

ARTICLE 10        TAX MATTERS.............................................. 44
      Section 10.1      Preparation of Tax Returns......................... 44
      Section 10.2      Tax Elections...................................... 44
      Section 10.3      Tax Matters Partner................................ 45
      Section 10.4      Organizational Expenses............................ 46
      Section 10.5      Withholding........................................ 46

ARTICLE 11        TRANSFERS AND WITHDRAWALS................................ 47
      Section 11.1      Transfer........................................... 47
      Section 11.2      Transfer of the General Partner's
                        Partner Interest and Limited Partner
                        Interest........................................... 48
      Section 11.3      Limited Partners' Rights to Transfer............... 48
      Section 11.4      Substituted Limited Partners....................... 50
      Section 11.5      Assignees.......................................... 51
      Section 11.6      General Provisions................................. 51
      Section 11.7      No Exchange........................................ 52

ARTICLE 12        ADMISSION OF PARTNERS.................................... 52
      Section 12.1      Admission of Successor General Partner............. 52
      Section 12.2      Admission of Additional Limited
                         Partners.......................................... 53
      Section 12.3      Amendment of Agreement and Certificate
                        of Limited Partnership............................. 53

ARTICLE 13        DISSOLUTION, LIQUIDATION AND TERMINATION................. 54
      Section 13.1      Dissolution........................................ 54
      Section 13.2      Winding Up......................................... 55
      Section 13.3      Compliance with Timing Requirements of
                        Regulations........................................ 57
      Section 13.4      Deemed Distribution and Re-contribution............ 57
      Section 13.5      Rights of Limited Partners......................... 57
      Section 13.6      Notice of Dissolution.............................. 58


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                                                                          Page

      Section 13.7      Termination of Partnership and
                        Cancellation of Certificate of Limited
                        Partnership........................................ 58
      Section 13.8      Reasonable Time for Winding-Up..................... 58
      Section 13.9      Waiver of Partition................................ 58

ARTICLE 14        AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS............. 58
      Section 14.1      Amendments......................................... 58
      Section 14.2      Meetings of the Partners........................... 60

ARTICLE 15        GENERAL PROVISIONS....................................... 61
      Section 15.1      No Assurances...................................... 61
      Section 15.2      Addresses and Notices.............................. 62
      Section 15.3      Titles and Captions................................ 62
      Section 15.4      Pronouns and Plurals............................... 62
      Section 15.5      Further Action..................................... 62
      Section 15.6      Binding Effect..................................... 62
      Section 15.7      Creditors.......................................... 62
      Section 15.8      Waiver............................................. 63
      Section 15.9      Counterparts....................................... 63
      Section 15.10     Applicable Law..................................... 63
      Section 15.11     Invalidity of Provisions........................... 63
      Section 15.12     Entire Agreement................................... 63
      Section 15.13     No Rights as Shareholders.......................... 63
      Section 15.14     Venue.............................................. 64

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                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                          PGP NORTHERN INDUSTRIAL, L.P.

      THIS AGREEMENT OF LIMITED PARTNERSHIP OF PGP NORTHERN INDUSTRIAL, L.P.
(this "Agreement"), dated as of October 20, 1997, is entered into by and between
Pacific Gulf Properties Inc., a Maryland corporation, as the sole general
partner (the "General Partner"), and Eden Plaza Associates, LLC, a California
limited liability company ("Eden"), as the initial "Original Limited Partner"
(as hereafter defined).

      WHEREAS, the General Partner and Eden desire to form a Delaware limited
partnership (the "Partnership") pursuant to this Agreement of Limited
Partnership and the "Act" (as hereinafter defined);

      NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

                                    ARTICLE 1

                                  DEFINED TERMS

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

      Section 1.1 "Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.

      Section 1.2 "Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.

      Section 1.3 "Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each Partnership taxable year: (i)
increased by any amounts which such Partner is obligated to restore pursuant to
any provision of this Agreement or is deemed to be obligated to restore pursuant
to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
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      Section 1.4 "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership taxable year.

      Section 1.5 "Adjusted Property" means any property, the Carrying Value of
which has been adjusted pursuant to Exhibit "B" hereof.

      Section 1.6 "Affiliate" means, with respect to any Person: (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person; (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.

      Section 1.7 "Agreed Value" means: (i) in the case of any Contributed
Property set forth on Exhibit "D" and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit "D"; (ii)
in the case of any Contributed Property not set forth in Exhibit "D" and as of
the time of its contribution to the Partnership, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed; and (iii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder.

      Section 1.8 "Agreement" means this Agreement of Limited Partnership, as it
may be amended, supplemented or restated from time to time.

      Section 1.9 "Assignee" means a Person to whom one or more Limited
Partnership Units have been transferred in a manner permitted under this
Agreement, but who has not become a Substituted Limited Partner, and who has the
rights set forth in Section 11.5.

      Section 1.10 "Available Cash" means, with respect to any period for which
such calculation is being made, (i) the sum of:

            (a) the Partnership's gross revenues for such period from all
sources related to the operation of the Partnership assets (excluding the
proceeds of the sale or financing of Partnership assets); and

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            (b) the amount of any reduction during such period in the reserves
of the Partnership referred to in clause (ii)(d) below (including, without
limitation, reductions resulting from the General Partner's determination that
such amounts are no longer necessary);

      (ii)  less the sum of:

            (a) all payments made by the Partnership during such period on
Partnership debts;

            (b) all costs and expenses of operating the Partnership and owning,
operating, maintaining, repairing, improving, acquiring and selling Partnership
assets paid during such period;

            (c) to the extent not already including in clause (ii)(b) above, any
management fee paid during such period pursuant to Section 7.4; and

            (d) the amount of any reserves and other cash or similar balances
(including, but not limited to, reserves for working capital, reserves, debt
service, property taxes, insurance and capital improvements reserves) set aside
during such period which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion.

      Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.

      Additionally, if and after the Partnership acquires Non- Original Limited
Partner Related Assets, or becomes obligated, indebted or liable for or on
account of Non-Original Limited Partner Related Assets or the ownership or
operation thereof, and so long as the General Partner has not consummated the
transactions and made the election described in Sections 4.3B and 5.2,
respectively, of this Agreement, then for purposes of determining distributions
of Available Cash to the Original Limited Partners and their heirs, successors
and assigns under the terms of this Agreement, Available Cash shall be
calculated separately with respect to Original Limited Partner Related Assets
and the ownership and operation thereof, together with the operation and
existence of the Partnership insofar as such concerns the Original Limited
Partner Related Assets, and shall not include any revenues, expenses, assets, or
liabilities of the Partnership relating to the Non-Original Limited Partner
Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto. (Without limiting the
foregoing, Available Cash shall not take into account any items referred to in
Paragraph 1.10(ii) which were

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not incurred or otherwise attributable to the Original Limited
Partner Related Assets.)

      Section 1.11 "Book-Tax Disparities" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit "B" and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.

      Section 1.12 "Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Los Angeles, California are authorized or
required by law to close.

      Section 1.13 "Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit "B" hereof.

      Section 1.14 "Capital Contribution" means, with respect to any Partner,
any cash, cash equivalents or the Agreed Value of Contributed Property which
such Partner contributes or is deemed to contribute to the Partnership pursuant
to Article 4 hereof.

      Section 1.15 "Carrying Value" means: (i) with respect to a Contributed
Property or Adjusted Property, the 704(c) Value of such property, reduced (but
not below zero) by all Depreciation with respect to such property charged to the
Partners' Capital Accounts following the contribution of or adjustment with
respect to such property; and (ii) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax purposes,
all as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Exhibit "B" hereof, and to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by the General
Partner.

      Section 1.16 "Certificate" means a Certificate of Limited Partnership
relating to the Partnership filed in the office of the Delaware Secretary of
State, as amended from time to time in accordance with the terms hereof and the
Act.

      Section 1.17 "Cigna Debt" shall have the meaning given thereto in the
Master Contribution Agreement.

      Section 1.18 "Closing" shall have the meaning given thereto in the Master
Contribution Agreement.

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      Section 1.19 "Code" means the Internal Revenue Code of 1986, as amended
and in effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provisions of future
law.

      Section 1.20 "Consent" means the consent or approval of a proposed action
by a Partner given in accordance with Section 14.2 hereof.

      Section 1.21 "Contributed Property" means each property or other asset, in
such form as may be permitted by the Act (but excluding cash), contributed or
deemed contributed to the Partnership (including deemed contributions to the
Partnership on termination pursuant to Section 708 of the Code). Once the
Carrying Value of a Contributed Property is adjusted pursuant to Exhibit "B"
hereof, such property shall no longer constitute a Contributed Property for
purposes of Exhibit "B" hereof, but shall be deemed an Adjusted Property for
such purposes.

      Section 1.22 "Current Year Deficit" means with respect to any calendar
year, the amount, if any, by which the aggregate cash dividend paid to the
common shareholders of the General Partner on account of one share of common
stock of the General Partner for such calendar year exceeds the aggregate cash
distributed to the Limited Partners pursuant to Sections 5.1A(1) and 5.1A(2) on
account of one Limited Partnership Unit for such calendar year. A Current Year
Deficit for any calendar year shall not carry forward or be used in calculating
the Current Year Deficit for any subsequent calendar year.

      Section 1.23 "Depreciation" means, for each taxable year, an amount equal
to the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.

      Section 1.24 "Eden" shall mean Eden Plaza Associates, LLC, a California
limited liability company.

      Section 1.25 "Effective Date" shall mean the date of the Closing.

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      Section 1.26 "Equity Affiliate" means any Subsidiary of the General
Partner, and any entity in which the General Partner has a direct or indirect
equity interest.

      Section 1.27 "Excess Distributions" means distributions to a Limited
Partner for all periods in excess of allocations of Net Income to the Limited
Partner for all periods pursuant to Sections 6.1B(2), (3) and (4) .

      Section 1.28 "Exchange Rights Agreement" means that certain Exchange
Rights Agreement entered into concurrently herewith by and between the
Partnership, the General Partner, and Eden concurrently herewith.

      Section 1.29 "General Partner" shall mean Pacific Gulf Properties Inc., a
Maryland corporation, or any successor general partner of the Partnership in
compliance with this Agreement.

      Section 1.30 "General Partner Interest" means a Partnership Interest held
by the General Partner, in its capacity as general partner.

      Section 1.31 "General Partner Security Rights" has the meaning set forth
in Section 4.3B.

      Section 1.32 "Incapacity" or "Incapacitated" means: (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when: (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect; (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner; (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors; (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above; (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any

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

      Section 1.33 "Indemnitee" means any Person made a party to a proceeding by
reason of (i) his status as the General Partner, an Affiliate of the General
Partner, or as a director, officer, employee, partner, agent or representative
of the General Partner or an Affiliate of the General Partner, or (ii) his or
its liabilities pursuant to a loan guarantee or otherwise for or as a result of
any indebtedness or obligation of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness or obligation which
the Partnership or any Subsidiary of the Partnership has assumed or taken assets
subject to).

      Section 1.34 "IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.

      Section 1.35 "Limited Partner" means any Person named as a Limited Partner
on Exhibit "A" attached hereto, as such Exhibit may be amended from time to
time, or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner of the Partnership.

      Section 1.36 "Limited Partner Interest" means a Partnership Interest of a
Limited Partner in the Partnership. A Limited Partner Interest may be expressed
as a number of Limited Partnership Units.

      Section 1.37 "Limited Partner Percentage Interest" means, as to a Limited
Partner, its interest in the Partnership relative to all other Limited Partners,
as determined by dividing the Limited Partnership Units owned by such Limited
Partner by the total number of Limited Partnership Units then outstanding and as
specified in Exhibit "A" attached hereto, as such Exhibit may be amended from
time to time.

      Section 1.38 "Limited Partnership Unit" means a fractional, undivided
share of the Limited Partnership Interests of all Limited Partners issued
pursuant to Article 4 hereof. The number of Limited Partnership Units
outstanding and the Limited Partner Percentage Interest represented by such
Limited Partnership Units are set forth in Exhibit "A" attached hereto, as such
Exhibit may be amended from time to time. The ownership of Limited Partnership
Units shall be evidenced by such form of

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certificate for units as the General Partner adopts from time to time unless the
General Partner determines that the Limited Partnership Units shall be
uncertificated securities. If the General Partner elects to evidence the Limited
Partnership Units with a certificate, such certificate may be imprinted with a
legend setting forth such restrictions placed on the units as specified in this
Agreement and such restrictions will be binding upon all holders of the
certificate along with the terms and conditions set forth in this Agreement.

      Section 1.39 "Liquidating Event" has the meaning set forth in Section
13.1.

      Section 1.40 "Liquidator" has the meaning set forth in Section 13.2.

      Section 1.41 "Management Agreement" means a Property Management Agreement
between the Partnership and the General Partner or an Affiliate of the General
Partner substantially in the form of Exhibit "E" attached hereto.

      Section 1.42 "Master Contribution Agreement" means that certain Master
Contribution Agreement, as amended, by and between the General Partner and Eden
providing for the formation of this Partnership and the contributions of cash by
the General Partner and the Original Properties by Eden.

      Section 1.43 "Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period over
the Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit "B".

      Additionally, if and after the Partnership acquires Non- Original Limited
Partner Related Assets, or becomes obligated, indebted or liable for or on
account of Non-Original Limited Partner Related Assets or the ownership or
operation thereof, and so long as the General Partner has not consummated the
transactions and made the election described in Sections 4.3B and 5.2,
respectively, of this Agreement, then for purposes of determining allocations of
Net Income to the Original Limited Partners and their heirs, successors and
assigns under this Agreement, Net Income shall be calculated separately with
respect to Original Limited Partner Related Assets and the ownership and
operation thereof, together with the operation and existence of the Partnership
insofar as such concerns the Original Limited Partner Related Assets and the
ownership and operation thereof, and shall not include any revenues, expenses,
assets, or liabilities of the Partnership relating to the Non-Original Limited
Partner Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto.

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      Section 1.44 "Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit "B".

      Additionally, if and after the Partnership acquires Non- Original Limited
Partner Related Assets, or becomes obligated, indebted or liable for or on
account of Non-Original Limited Partner Related Assets or the ownership or
operation thereof, and so long as the General Partner has not consummated the
transactions and made the election described in Sections 4.3B and 5.2,
respectively, of this Agreement, then for purposes of determining allocations of
Net Loss to the Original Limited Partners and their heirs, successors and
assigns under this Agreement, Net Loss shall be calculated separately with
respect to Original Limited Partner Related Assets and the ownership and
operation thereof, together with the operation and existence of the Partnership
insofar as such concerns the Original Limited Partner Related Assets and the
ownership and operation thereof, and shall not include any revenues, expenses,
assets, or liabilities of the Partnership relating to the Non-Original Limited
Partner Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto.

      Section 1.45 "No Exchange Period" shall have the meaning given thereto in
the Exchange Rights Agreement.

      Section 1.46 "Non-Original Limited Partner Related Assets" means all of
the real properties and all other assets and property of the Partnership other
than such as constitute "Original Limited Partner Related Assets" (as defined
below).

      Section 1.47 "Nonrecourse Built-in-Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a Nonrecourse
Liability, the amount of any taxable gain that would be allocated to the
Partners pursuant to Section 2.B of Exhibit "C" if such properties were disposed
of in a taxable transaction in full satisfaction of such liabilities and for no
other consideration.

      Section 1.48 "Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership taxable year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).

      Section 1.49 "Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).

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      Section 1.50 "No Sale Period" means the period from the date hereof to the
date which is four (4) years after the Effective Date.

      Section 1.51 "Original Limited Partners" means the parties listed on
Exhibit "A" as attached hereto at the time of the initial execution and delivery
of this Agreement, without regard to any subsequent changes to said Exhibit, and
with respect to any such parties which are partnerships or limited liability
companies, the partners or members, directly or indirectly, of such partnerships
or limited liability companies (or the partners or members thereof) if and when
the Limited Partnership Units received by such partnerships or limited liability
companies under the Master Contribution Agreement are distributed by such
partnerships or limited liability companies to such partners or members and the
provisions of Section 11.3, below, have been satisfied.

      Section 1.52 "Original Limited Partner Related Assets" means all of the
real properties and all other assets and property contributed, assigned,
transferred or conveyed to the Partnership in connection with the transactions
contemplated by the Master Contribution Agreement, together with all other
assets and properties acquired, owned, or used by the Partnership in any way
relating thereto, as well as all replacements thereof and substitutions
therefor.

      Section 1.53 "Original Property" or "Original Properties" means the
"Property" or "Properties" (as defined in the Master Contribution Agreement),
together with all other assets and properties contributed to the Partnership by
Eden pursuant to the terms and provisions of the Master Contribution Agreement.

      Section 1.54 "Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and all Limited Partners collectively.

      Section 1.55 "Partner Minimum Gain" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).

      Section 1.56 "Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).

      Section 1.57 "Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).

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      Section 1.58 "Partnership" means the limited partnership formed under this
Agreement and any successor thereto.

      Section 1.59 "Partnership Interest" means an ownership interest in the
Partnership representing a Capital Contribution by either a Limited Partner or
the General Partner, and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement.

      Section 1.60 "Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a Partnership Minimum Gain, for a
Partnership taxable year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).

      Section 1.61 "Partnership Record Date" means the record date established
by the General Partner for the distribution of Available Cash pursuant to
Article 5 hereof with respect to a calendar quarter, which record date shall be
the same as the record date established by the General Partner for the making of
dividend distributions to its shareholders on account of their common stock
holdings in the General Partner with respect to the same calendar quarter.

      Section 1.62 "Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.

      Section 1.63 "Person" means an individual or a corporation, partnership,
trust, limited liability company, unincorporated organization, association or
other entity.

      Section 1.64 "Plan" means any plan or arrangement, whether or not approved
by shareholders or partners, and whether formal or informal, utilized by the
General Partner to provide incentives, benefits or other compensation to its
employees, consultants or advisors, or the employees, consultants or advisors of
any Equity Affiliate.

      Section 1.65 "Recapture Income" means any gain recognized by the
Partnership upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or asset.

      Section 1.66 "Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

      Section 1.67 "REIT" means a real estate investment trust under Section 856
of the Code.

                                      -11-
<PAGE>   16
      Section 1.68 "REIT Share" shall mean a share of common stock of the
General Partner, par value $.01 per share.

      Section 1.69 "Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit "C" to eliminate
Book-Tax Disparities.

      Section 1.70 "Securities Act" shall mean the Securities Act of 1933, as
amended.

      Section 1.71 "704(c) Value" of any Contributed Property means the value of
such property as set forth in Exhibit "D", or if no value is set forth in
Exhibit "D", the fair market value of such property or other consideration at
the time of contribution, as determined by the General Partner using such
reasonable method of valuation as it may adopt. Subject to Exhibit "B" hereof,
the General Partner shall, in its sole and absolute discretion, use such method
as it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.

      Section 1.72 "Seismic Costs" means all costs and expenses paid or incurred
by the Partnership or the General Partner on or after the Closing to repair,
retrofit or upgrading the Original Properties to cause the Original Properties
to be in compliance with all federal, state, county and city statutes, laws,
ordinances, orders, rules and regulations related to seismic safety and
compliance as such statutes, laws, ordinances, orders, rules and regulations
existed as of the Closing; provided, however, that the total amount of all
Seismic Costs shall not exceed $200,000.

      Section 1.73 "Subscription Documents" means those certain subscription
documents executed and delivered by a partner or member of an Original Limited
Partner which is itself a partnership or limited liability company concurrently
with such partner or member being admitted as an additional Original Limited
Partner pursuant to Section 11.3.

      Section 1.74 "Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which a majority of (i) the voting
power of the voting equity securities, or (ii) the outstanding equity interests,
is owned, directly or indirectly, by such Person.

      Section 1.75 "Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Partnership pursuant to Section 11.4.

                                      -12-
<PAGE>   17
      Section 1.76 "Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i) the
fair market value of such property (as determined under Exhibit "B" hereof) as
of such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit "B" hereof) as of such date.

                                    ARTICLE 2

                             ORGANIZATIONAL MATTERS

      Section 2.1       Organization

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

      Section 2.2       Name

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

      Section 2.3       Registered Office and Agent; Principal Office

      The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be c/o Pacific Gulf Properties Inc.,
4220 Von Karman, Second Floor, Newport Beach, California 92660-2002, or such
other place as the General Partner may from time to time designate by notice to
the Limited Partners. The Partnership may maintain offices at such other place
or places within or outside the State of Delaware as the General Partner deems
advisable.

                                      -13-
<PAGE>   18
      Section 2.4       Power of Attorney

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

            (1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices: (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the Certificate
and all amendments or restatement thereof) that the General Partner or the
Liquidator deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Delaware and in all other jurisdictions in which the Partnership may or plans
to conduct business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its terms; (c)
all conveyances and other instruments or documents that the General Partner or
the Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Partner pursuant to, or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner; (e) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interest; and (f) any and all
financing statements, continuation statements and other documents necessary or
desirable to create, perfect, continue or validate the security interest granted
by a Limited Partner pursuant to Section 10.5 of this Agreement or to exercise
or enforce the Partnership's rights with respect to such security interest; and

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

Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except

                                      -14-
<PAGE>   19
in accordance with Article 14 hereof or as may be otherwise expressly provided
for in this Agreement.

      B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's Assignee's Limited
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney in accordance with the provisions of this Agreement. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's or
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.

      Section 2.5       Term

      The term of the Partnership shall commence on the Effective Date and shall
continue until December 31, 2097, unless the Partnership is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.

                                    ARTICLE 3

                                     PURPOSE

      Section 3.1       Purpose and Business

      The purpose and nature of the business to be conducted by the Partnership
is: (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act; provided, however, that such business
shall be limited to and conducted in such a manner as to permit the General
Partner at all times to be classified as a REIT, unless the General Partner
ceases to qualify as a REIT for reasons other than the conduct of the business
of the Partnership; (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or to own interests in any
entity engaged in any of the foregoing; and (iii) to do

                                      -15-
<PAGE>   20
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the General Partner's right, in its sole
discretion, to cease qualifying as a REIT, the Partners acknowledge the General
Partner's current status as a REIT inures to the benefit of all of the Partners
and not solely the General Partner.

      Section 3.2       Powers

      The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership; provided, however, that the
Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion: (i) could
adversely affect the ability of the General Partner to continue to qualify as a
REIT; (ii) could subject the General Partner to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.

      Section 3.3       Technical Revisions

      The Limited Partners agree to, and the General Partner is hereby
authorized to make, any modifications or amendments to this Agreement that may
be necessary for the General Partner to maintain its status as a real estate
investment trust or in order for it to avoid a penalty or tax; provided,
however, that such modification or amendment does not materially alter or affect
adversely any Limited Partner's rights, duties, or obligations under this
Agreement.

                                    ARTICLE 4

                              CAPITAL CONTRIBUTIONS

      Section 4.1       Initial Capital Contributions of the Partners

      A.    (1) Concurrently with the Closing, the General Partner shall
contribute to the Partnership cash up to, but not exceeding, a maximum of
$4,000,000, as described and in accordance with the terms, provisions, and
conditions of the Master Contribution Agreement as necessary for the purposes
of paying down and/or restructuring the Cigna Debt.

            (2) Concurrently with the Closing, the General Partner shall pay or
credit Eden with the "Commissions" and "Qualifying Eden Closing Costs" (pursuant
to and as defined in the Master Contribution Agreement). The Commissions and
Qualifying Eden

                                      -16-
<PAGE>   21
Closing Costs paid or credited to Eden by the General Partner shall constitute
Capital Contributions by the General Partner.

            (3) Concurrently with the Closing, the General Partner shall
contribute to (or pay on behalf of) the Partnership or the General Partner the
cash necessary to pay the transaction costs, closing costs and prorations to be
paid by the Partnership or the General Partner or which are designated as
Partnership or General Partner expenses pursuant to the Master Contribution
Agreement. The amounts so contributed or paid by the General Partner shall
constitute Capital Contributions by the General Partner.

      B. Concurrently with the Closing, Eden shall transfer, assign, convey, and
deliver all right, title, and interest in and to the real properties,
improvements, and other assets relating to the Original Properties as described
and in accordance with the terms, provisions, and conditions of the Master
Contribution Agreement. As stated therein, the Original Properties shall be
subject to debt in an amount no less than $12,000,000 (including holdbacks as
described therein) at the Closing, $12,000,000 of which shall be guaranteed by
Eden, but without recourse to the partners or members of Eden; provided,
however, that nothing contained herein shall preclude amortization of such debt
in accordance with the applicable loan documents. The Agreed Value of the
Original Properties is set forth on Exhibit "D". The Capital Contribution of the
Original Limited Partners to the Partnership shall be equal to the Agreed Value
of the Original Properties. The number of Limited Partnership Units issued to
the Original Limited Partners on account of such Capital Contribution shall be
equal to the Agreed Value of the Original Properties divided by the "PGP Share
Price" (as defined in the Master Contribution Agreement).

      C. In consideration of their initial Capital Contributions, the Limited
Partners shall receive Limited Partnership Units in the amounts set forth on
Exhibit "A", and such amounts shall represent the initial Limited Partner
Percentage Interests shown on said Exhibit. The Limited Partner Percentage
Interests shall be adjusted in Exhibit "A" from time to time by the General
Partner to the extent necessary to reflect accurately redemptions, additional
Capital Contributions, the issuance of additional Limited Partnership Units
(pursuant to any merger or otherwise), or similar or other events having an
effect on any Limited Partner's Limited Partner Percentage Interest. Except as
provided hereinabove and as expressly provided in Sections 4.3 and 10.5, the
Partners shall have no obligation whatsoever to make any additional or further
Capital Contributions, loans, or advances of any kind to the Partnership, or to
in any way finance the operation of the Partnership or any of the debt or
obligations of the Partnership.

      D. Except as provided in Section 13.3 of this Agreement and as otherwise
expressly provided herein, the Capital Contribution of each Partner will be
returned to that Partner

                                      -17-
<PAGE>   22
only in the manner and to the extent provided in Article 5 and Article 13
hereof, and no Partner may withdraw from the Partnership or otherwise have any
right to demand or receive the return of its Capital Contribution to the
Partnership, except as specifically provided herein. Under circumstances
requiring a return of any Capital Contribution, no Partner shall have the right
to receive property other than cash, except as specifically provided herein. No
Partner shall be entitled to interest on any Capital Contribution or Capital
Account. The General Partner shall not be liable for the return of any portion
of the Capital Contribution of any Limited Partner, and the return of such
Capital Contributions shall remain solely from Partnership assets.

      E. No Limited Partner shall have any further personal liability to
contribute money to, or in respect of, the liabilities or the obligations of the
Partnership, nor shall any Limited Partner be personally liable for any
obligations of the Partnership, except as otherwise provided in this Agreement
or in the Act. No Limited Partner shall be required to make any contributions to
the capital of the Partnership other than as expressly provided in this
Agreement.

      Section 4.2       Additional Capital Contributions by the General Partner

      From time to time at or following the Closing, the General Partner may,
but shall not be obligated to, contribute additional capital to the Partnership
to pay for any and all costs and expenses of (a) operating the Partnership;
financing, refinancing and paying off or down Partnership debt (subject to the
limitations in Section 7.2 hereof; and (c) owning, operating, maintaining,
repairing, improving, acquiring and selling both Original and Non-Original
Limited Partner Related Assets, including but not limited to Seismic Costs and
any other Capital Contributions made to correct or repair any items of seismic
compliance, deferred maintenance and capital improvements to the Original
Properties.

      Section 4.3       Issuances of Additional Partnership Interests

      A. The General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner) or other
Persons additional Limited Partnership Units or other Partnership Interests in
one or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including, rights, powers and duties senior to the
Limited Partners (including the Original Limited Partners and their heirs,
successors and assigns), except that, notwithstanding the foregoing, with
respect to the Original Limited Partners Related Assets, any such additional
Limited Partnership Units or Partnership Interests shall, if at all, only carry
or give to their holders rights to

                                      -18-
<PAGE>   23
receive distributions (as to amount, timing, and priority) junior to the rights
of the Original Limited Partners as set forth in this Agreement with respect to
the Original Limited Partners Related Assets unless and until (and not before)
the General Partner has made the election provided for in Section 5.2 of this
Agreement. Following the making of such election, the rights as to distributions
pertaining to such additional Limited Partnership Units or Partnership Interests
may be equal or junior to those of the Original Limited Partners and their
heirs, successors and assigns. Subject to the foregoing, the rights, privileges,
benefits, burdens, and restrictions relating to any such additional Limited
Partnership Units or Partnership Interests shall be determined by the General
Partner in its sole and absolute discretion (but without creating different
priorities as between the Limited Partner Interests and the General Partner
Interests received by the General Partner and the Original Limited Partners in
connection with the contributions provided for under the Master Contribution
Agreement), subject to Delaware law, including, without limitation: (i) the
allocations of items of Partnership income, gain, loss, deduction and credit to
each such class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership distributions;
and (iii) the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided that no such additional
Limited Partnership Units or other Partnership Interests shall be issued to the
General Partner, as the General Partner, or a Limited Partner, or to an
Affiliate of either the General Partner or a Limited Partner, unless the
additional Partnership Interests are issued for a fair economic consideration
determined at the time of or within ninety (90) days prior to the issuance, or
unless the issuance of such additional Partnership Interests is otherwise
permitted under the terms and provisions of this Agreement. A determination by
an independent investment banker or financial advisor that the consideration
paid or proposed to be paid by the General Partner in this regard is a fair
economic consideration, or is otherwise fair from a financial point of view, to
the Partnership shall be conclusive and binding upon all parties hereto for all
purposes, and shall constitute a conclusive, non-rebuttable presumption that the
consideration so paid represented fair, good faith, and proper action by the
General Partner with the Partnership as concerns the General Partner's dealings
and transactions with the Partnership in relation to such issuance.

      B. If the General Partner makes the election provided for in Section 5.2
of this Agreement, then thereafter the General Partner shall be authorized at
any time, in its sole discretion, and without the need for any vote, consent or
approval from, or consultation with, any Limited Partner, and further without
the need for any appraisal, valuation, or any other analysis or evaluation of
any property, assets, rights, debts, liabilities, obligations, claims, title,
encumbrances, or any other matters of any sort from any person, to contribute,
assign, convey, and

                                      -19-
<PAGE>   24
transfer all, but not less than all, of the General Partner's rights, title,
claims, interests, debts, duties, liabilities, and obligations, in, to, and
relating to all, but not less than all, of the General Partner's assets,
properties, debts, liabilities, and obligations (excluding the General Partner's
rights, title, claims, interests, debts, duties, liabilities, and obligations
in, to, and relating to its interest in the Partnership, and also excluding same
as such relates to any other entity in which the General Partner has an interest
but which does not own a direct or indirect interest in real property) to the
Partnership. In exchange therefor, the Partnership shall immediately issue to
the General Partner (A) that number of Limited Partnership Units equal to the
number of the outstanding shares of common stock of the General Partner at the
time of such contribution by the General Partner to the Partnership, and (B)
options, warrants, and other rights to acquire additional Limited Partnership
Units in the Partnership and other securities of the Partnership on a
unit-for-unit basis equivalent to, and on the same terms and conditions as, all
options, warrants, and other rights and securities issued and then outstanding
("General Partner Security Rights") with regard to any shares of capital stock
or other securities of any kind of the General Partner then or thereafter
issued. After consolidation of the General Partner's affairs into the
Partnership as described in this Section, upon the exercise by any holder of any
General Partner Security Rights and the General Partner's issuance of its
securities to the exercising party with respect thereto, or the issuance of any
other securities of the General Partner, the General Partner promptly shall
contribute to the Partnership any consideration received upon such exercise (net
of all costs, fees, expenses, and commissions relating thereto), and the
Partnership shall thereupon issue to the General Partner an equivalent number of
Limited Partnership Units (in the case of issuances by the General Partner of
shares of its common stock) or an equivalent number of other interests in the
Partnership which have parallel and comparable rights and privileges to the
rights and privileges of the securities issued by the General Partner (in the
case of issuances by the General Partners other than shares of its common
stock.)

      Section 4.4       Preemptive Rights

      Only the General Partner shall have the right to make the additional
Capital Contributions described in Section 4.2. Except as provided in Section
4.2 hereof, no Person shall have any preemptive, preferential or other similar
right with respect to: (i) the making of additional Capital Contributions or
loans to the Partnership; or (ii) the issuance or sale of any Limited
Partnership Units or other Partnership Interests.

                                      -20-
<PAGE>   25
                                    ARTICLE 5

                                  DISTRIBUTIONS

      Section 5.1       Requirement and Characterization of Distributions

      A. Subject to Section 5.6, on or before ninety (90) days after the end of
each calendar quarter the General Partner shall distribute to the Partners who
are partners on the Partnership Record Date for such calendar quarter an amount
equal to 100% of the Available Cash for such calendar quarter in the following
order of priority:

            (1) First, to the Limited Partners pro rata in accordance with their
respective Limited Partner Percentage Interests, until such time as the
distribution made pursuant to this Section 5.1A(1) on account of each Limited
Partnership Unit held by a Limited Partner for the calendar quarter in which the
distributions are made equals the cash dividend paid to the common shareholders
of the General Partner on account of one share of common stock of the General
Partner for such calendar quarter;

            (2) Second, if there then exists a Current Year Deficit, to the
Limited Partners pro rata in accordance with their respective Limited Partner
Percentage Interests until such time as the distribution made pursuant to this
Section 5.1A(2) eliminates the Current Year Deficit; provided, however, that if
Available Cash is not sufficient to eliminate the Current Year Deficit for the
calendar year on account of which the distributions are made, any remaining
Current Year Deficit shall not be carried forward and shall be disregarded in
determining distributions to be made pursuant to this Section 5.1A in subsequent
quarters; and

            (3) Thereafter, to the General Partner.

      B. Distributions made pursuant to this Section 5.1 shall be made in the
foregoing order of priority, with all Available Cash being distributed at the
highest level of priority until that level of priority is completely satisfied
before any Available Cash is distributed at a lower level of priority, and
distributions at a lower level of priority not being made or being only
partially made if Available Cash is insufficient therefor.

      C. Anything contained herein to the contrary notwithstanding, the
quarterly distribution of Available Cash made on account of each Limited
Partnership Unit for the calendar quarter which contains the Effective Date
shall not exceed the dividend paid to common shareholders of the General Partner
on account of a share of common stock of the General Partner for the calendar
quarter which contains the Effective Date, multiplied by

                                      -21-
<PAGE>   26
a fraction (x) the numerator of which is the number of days from and including
the Effective Date to and including the last day of such calendar quarter, and
(y) the denominator of which is the total number of days in such calendar
quarter.

      Section 5.2       General Partner Election

      The General Partner may elect, at any time, in its sole and absolute
discretion, to have all future calculations of Available Cash based upon all
Partnership assets without distinction between Original and Non-Original Limited
Partner Related Assets, and to have all future distributions to Limited Partners
made pursuant to the following terms in lieu of the terms of Section 5.1 (an
election under this Section, once made, shall be irrevocable):

            A. First, the General Partner shall make distributions or payments
to the Limited Partners regardless of the availability or amount of Available
Cash, in an amount, on account of each Limited Partnership Unit held by a
Limited Partner for the calendar quarter in which the distributions are made,
equal to the cash dividend paid to the common shareholders of the General
Partner on account of one share of common stock of the General Partner for such
calendar quarter; and

            B. Thereafter, to the General Partner.

      Section 5.3       Amounts Withheld

      All amounts withheld pursuant to the Code or any provisions of any state
or local tax law and Section 10.5 hereof with respect to any allocation, payment
or distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Sections 5.1 or 5.2 for all
purposes under this Agreement.

      Section 5.4       Distributions Upon Liquidation

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

      Section 5.5       Other Assets Present

      Notwithstanding the foregoing, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of this Agreement, then distributions of Available Cash
to the General Partner and the Original Limited Partners (and the Original
Limited Partners' heirs, successors

                                      -22-
<PAGE>   27
and assigns) under the terms of the foregoing shall be calculated and made only
with respect to Original Limited Partner Related Assets and the ownership and
operation thereof, together with the operation and existence of the Partnership
insofar as such concerns the Original Limited Partner Related Assets.
Distributions under the terms of the foregoing shall not include any revenues,
expenses, assets, or liabilities of the Partnership relating to the Non-Original
Limited Partner Related Assets, the ownership or operation thereof, or the
operation or existence of the Partnership with respect thereto, all of which
shall be as separately determined by the General Partner in its sole and
absolute discretion.

      Section 5.6       Seismic Costs

      Anything contained herein to the contrary notwithstanding, from the
amounts otherwise distributable to the Original Limited Partners pursuant to
Sections 5.1A(1), 5.1A(2) and 5.2A, the General Partner shall instead pay or
establish a reserve to pay (or to reimburse the General Partner to the extent
the General Partner has paid) the Seismic Costs. The amount so reserved or paid
(or reimbursed to the General Partner) in each calendar quarter shall equal the
greater of either (a) $25,000; or (b) the amount which, when added to all
amounts previously reserved or paid (or reimbursed to the General Partner)
equals the total amount of all Seismic Costs incurred by the Partnership and the
General Partner to the date of such quarterly distribution. The Seismic Costs
shall be incurred and paid (or reimbursed to the General Partner) in such order
as the General Partner may determine in its sole and absolute discretion. No
amounts shall be distributed to the Limited Partners pursuant to Sections
5.1A(1), 5.1A(2) or 5.2A unless and until the full amount set forth in the
second sentence of this Section 5.6 has been reserved or paid (or reimbursed to
the General Partner)in full. Nevertheless, all amounts on account of Seismic
Costs which would otherwise have been distributed to the Limited Partners but
for the provisions of this Section 5.6 shall be treated as having been
distributed to the Limited Partners pursuant to Sections 5.1A(1), 5.1A(2) or 5.2
for all purposes under this Agreement. When all Seismic Costs have been paid (or
reimbursed to the General Partner) in full, any funds remaining in such Seismic
Costs reserve shall be distributed to the Original Limited Partners pro rata in
accordance with their respective Limited Partner Percentage Interests.

                                    ARTICLE 6

                                   ALLOCATIONS

      Section 6.1       Allocations of Net Income and Net Loss

      For purposes of maintaining the Capital Accounts and in determining the
rights of the General and Limited Partners among

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themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Exhibit "B" hereof) shall be allocated among the
General and Limited Partners in each taxable year (or portion thereof) as
provided herein below.

      A. Net Loss for a particular period shall be allocated as follows:

            (1) First, to the General and Limited Partners in proportion to and
to the extent of their positive Capital Account balances, if any.

            (2) Second, to the Limited Partners, in proportion to and to the
extent of, their respective aggregate Excess Distributions, until the amount
allocated under this Section 6.1A(2) for the current fiscal year and all prior
fiscal years equals the Excess Distributions of all Limited Partners.

            (3) Third, to the General Partner.

      B. Net Income for a particular period shall be allocated as follows:

            (1) First, to the Partners that have previously been allocated Net
Loss pursuant to Section 6.1A in amounts and among such Partners in the reverse
order (and in the corresponding amounts) of all Net Loss previously allocated to
them until the amount of Net Income allocated pursuant to this Section 6.1B(1)
equals the aggregate amount of all Net Loss theretofore allocated pursuant to
Section 6.1A.

            (2) Second, if applicable, to the Limited Partners in proportion to
their respective Limited Partner Percentage Interests until the aggregate Net
Income allocated pursuant to this Section 6.1B(2) for the current taxable period
and all previous taxable periods equals the aggregate amount of Available Cash
distributed to the Limited Partners pursuant to Section 5.1A(1).

            (3) Third, if applicable, to the Limited Partners in proportion to
their respective Limited Partner Percentage Interests until the aggregate Net
Income allocated pursuant to this Section 6.1B(3) for the current taxable period
and all previous taxable periods equals the aggregate amount of Available Cash
distributed to the Limited Partners pursuant to Section 5.1A(2).

            (4) Fourth, if applicable, to the Limited Partners in proportion to
their respective Limited Partner Percentage Interests until the aggregate Net
income allocated pursuant to this Section 6.1B(4) for the current taxable period
and all previous taxable periods equals the aggregate amount of Available Cash
distributed to the Partners pursuant to Section 5.2A; and

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<PAGE>   29
            (5) Fifth, to the General Partner.

      Section 6.2       Other Allocations

      A. For purposes of Regulations Section 1.752, the Partners agree that
$12,000,000 of the Partnership debt secured by the Original Properties at the
Closing shall be allocated to Eden as a result of Eden's guaranty of $12,000,000
of such debt, which guaranty is nonrecourse to the partners and members of Eden;
provided, however, that nothing contained herein shall preclude amortization of
such debt in accordance with the applicable loan documents.

      B. Any gain allocated to the General Partner and the Original Limited
Partners upon the sale or other taxable disposition of any Partnership asset
shall, to the extent possible, after taking into account other required
allocations of gain pursuant to Exhibit "C", be characterized as Recapture
Income in the same proportions and to the same extent as such Partners have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.

      C. If and after the Partnership acquires Non-Original Limited Partner
Related Assets, or becomes obligated, indebted or liable for or on account of
Non-Original Limited Partner Related Assets or the ownership or operation
thereof, and so long as the General Partner has not consummated the transactions
and made the election described in Sections 4.3B and 5.2, respectively, of this
Agreement, then allocations of Net Income, Net Loss, and any other items to the
Original Limited Partners and their heirs, successors and assigns under this
Agreement shall be calculated separately with respect to Original Limited
Partner Related Assets and the ownership and operation thereof, together with
the operation and existence of the Partnership insofar as such concerns the
Original Limited Partner Related Assets and the ownership and operation thereof.
Such allocations and calculations shall not include any revenues, expenses,
assets, or liabilities of the Partnership relating to the Non-Original Limited
Partner Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto, all of which shall be as
separately determined by the General Partner in its sole and absolute
discretion.

                                    ARTICLE 7

                      MANAGEMENT AND OPERATIONS OF BUSINESS

      Section 7.1       Management

      A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the

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<PAGE>   30
General Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs of the
Partnership. The General Partner may not be removed by the Limited Partners with
or without cause. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, shall have full power and authority to do all things deemed necessary
or desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set forth
in Section 3.1 hereof, including, without limitation:

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

            (2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having jurisdiction
over the business or assets of the Partnership;

            (3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership (including the
exercise or grant of any conversion, option, privilege, or subscription right or
other right available in connection with any assets at any time held by the
Partnership) or the merger or other combination of the Partnership with or into
another entity;

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

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<PAGE>   31
real, personal and mixed property of the Partnership in the name of the
Partnership or in the name of a nominee or trustee and the creation, by grant or
otherwise, of easements or servitudes;

            (5) the management, operation, leasing, collection of rents,
marketing, landscaping, repair, alteration, renovation, rehabilitation,
demolition or improvement of the Original Properties or any other real property
or improvements owned by the Partnership or any Subsidiary of the Partnership
and the performance of any and other acts necessary or appropriate to the
operation of such properties, including, without limitation, applications for
rezoning or objections to rezoning of such properties;

            (6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner considers useful or
necessary to the conduct of the Partnership's operations or the implementation
of the General Partner's powers under this Agreement, including, without
limitation, the execution and delivery of leases on behalf of or in the name of
the Partnership, contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents and the
payment of their expenses and compensation out of the Partnership's assets;

            (7) the opening and closing of bank accounts, the investment of
Partnership funds in securities, certificates of deposit and other instruments,
and the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;

            (8) the holding, managing, investing and reinvesting cash and other
assets of the Partnership;

            (9) the collection and receipt of revenues and income of the
Partnership;

            (10) the establishment of one or more divisions of the Partnership,
the selection and dismissal of employees of the Partnership (including, without
limitation, employees having titles such as "president," "vice president,"
"secretary" and "treasurer" of the Partnership), and agents, outside attorneys,
accountants, consultants and contractors of the Partnership, and the
determination of their compensation and other terms of employment or hiring
(whether or not any of the foregoing are also employed by, consultants to,
independent contractors for, or otherwise do business with the General Partner
or its Affiliates in related or unrelated matters);

          (11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate (whether or
not such is done as part of a group, combined or other policy or policies under
which the Partnership and the General Partner (or its Affiliates) are also
insured, so

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<PAGE>   32
long as the General Partner fairly allocates the expense thereof among the
covered parties);

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

          (13) the control of any and all matters affecting the rights and
obligations of the Partnership, including the settlement, compromise, submission
to arbitration or any other form of dispute resolution, or abandonment of, any
claim, cause of action, liability, debt or damages, due or owing to or from the
Partnership, the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other forms of dispute resolution,
and the representation of the Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or other forms of dispute resolution,
the incurring of legal expense, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by law and consistent with
the terms of this Agreement, including in each and all of the foregoing
instances any such matter or thing in which the General Partner or its
Affiliates have a direct interest;

          (14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any other
Person (including without limitation, the contribution or loan of funds by the
Partnership to such Persons);

          (15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of valuation as the
General Partner may adopt;

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

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

          (18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in

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<PAGE>   33
which the Partnership does not have an interest pursuant to contractual or other
arrangements with such Person;

          (19) the making, execution and delivery of any and all deeds, leases,
notes, mortgages, deeds of trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or legal instruments or
agreements in writing necessary or appropriate, in the judgment of the General
Partner, for the accomplishment of any of the powers of the General Partner
enumerated in this Agreement; and

          (20) the issuance of additional Limited Partnership Units or
Partnership Interests, as appropriate, in connection with Capital Contributions
by Additional Limited Partners and additional Capital Contributions by Partners
pursuant to Article 4 hereof.

      B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement, the
Act or any applicable law, rule or regulation, to the fullest extent permitted
under the Act or other applicable law, rule or regulation. The execution,
delivery or performance by the General Partner or the Partnership of any
agreement authorized or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement or
of any duty stated or implied by law or equity.

      C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.

      D. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
hereof.

      Section 7.2       Limitations on General Partner

      Anything contained herein to the contrary notwithstanding, without the
prior Consent of all Original Limited Partners, the General Partner shall not
cause the Partnership to do any of the

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<PAGE>   34
following during the No Sale Period unless and until (on a property-by-property
basis if applicable) such is accomplished in a manner which is fully tax
deferred to, and does not produce any income tax liability for, an Original
Limited Partner as a result thereof:

      A. sell, transfer or otherwise dispose of any of the Original Properties;

      B. pay down the Cigna Debt or, if the Cigna Debt is refinanced, any
refinanced debt, or change any of the terms of the Cigna Debt or refinanced debt
such that the debt is less than $12,000,000, not secured by the Original
Properties, or not guaranteed by Eden (other than as contemplated by the Master
Contribution Agreement or as required by the loan documents or any other
agreement ancillary thereto), nor take any other action which would result in a
reduction of the allocation of debt to the Original Limited Partners for
purposes of computing such parties' basis for income tax purposes; provided,
however, that nothing contained herein shall preclude amortization of such debt
in accordance with the applicable loan documents;

      C. fail to use reasonable, good faith and diligent efforts to avoid a
foreclosure of the Cigna Debt or, if the Cigna Debt is refinanced, any
refinanced debt, or a bankruptcy filing by or against the Partnership;

      D. elect to dissolve the Partnership.

      Section 7.3       Certificate of Limited Partnership

      The General Partner has filed the Certificate with the Secretary of State
of Delaware as required by the Act. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate and do all of the things
to maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.5.A(4) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner.

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<PAGE>   35
      Section 7.4       Management Fee and Reimbursement of the General Partner

      A. The General Partner and/or its Affiliates shall have the right, but not
the obligation, in the sole discretion of the General Partner, to perform all or
any of the property management services on account of the property owned or
managed by the Partnership. If the General Partner elects to so perform, or to
have an Affiliate so perform, the property management services, then the General
Partner or its Affiliate shall be reimbursed by the Partnership for the expenses
it incurs in providing such services in amounts determined by the General
Partner, in its good faith discretion, to be comparable to amounts which would
be reimbursable on account of expenses to reputable unrelated third party
property management companies which have substantial experience in performing
property management services for properties of the type owned or managed by the
Partnership for institutional owners with portfolios under management which are
substantially similar in size, nature, and condition of property owned or
managed by the Partnership. In addition, if the General Partner elects to so
perform, or to have an Affiliate so perform, the property management services
described herein, it is agreed that a management fee of four percent (4%) of
gross income shall be paid by the Partnership to the General Partner or its
Affiliates for the property management services as contemplated hereunder. The
reimbursements and fees payable to the General Partner or its Affiliates under
this Section shall be paid no less frequently than monthly. Except as provided
in this Section 7.4A and elsewhere in this Agreement (including the provisions
of Articles 5 and 6 regarding distributions, payments, and allocations to which
it may be entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership. In furtherance of this Section,
the General Partner may cause the Partnership to enter into one or more property
management agreements with the General Partner or an Affiliate of the General
Partner, substantially in the form of the Management Agreement.

      B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
costs and expenses that it incurs relating to the ownership and operation of, or
for the benefit of, the Original Properties, the Partnership or any of its other
assets or related to the administration of the Partnership and the Limited
Partnership Units. After consummation of the transactions and election described
in, respectively, Sections 4.3B and 5.2 of this Agreement as a result of which
the assets of the General Partner are conveyed to the Partnership, such
reimbursement shall include reimbursement to the General Partner for all general
and administrative costs, fees, and expenses incurred by the General Partner due
to its status as a public company, a qualified real estate investment trust, or
otherwise, and any and all other expenses incurred by the General Partner for
any matter, reason or thing whatsoever. Any reimbursement

                                      -31-
<PAGE>   36
under this Section shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.7 hereof.

      C. It is also acknowledged and agreed that, after consummation of the
transactions and election described in, respectively, Sections 4.3B and 5.2 of
this Agreement as a result of which the assets of the General Partner are
conveyed to the Partnership, the General Partner will directly or indirectly
incur costs and expenses, and may issue stock or other securities, or both, to
persons employed or not employed, or retained or not retained, directly by the
Partnership. Such costs, expenses, and issuances may include, but not be limited
to, payment of general and administrative expenses by the General Partner,
including compensation and bonuses to its officers and directors, and the award
of stock grants and options to purchase securities of the General Partner. In
light of the foregoing, it is agreed that, after consummation of the
transactions and election described in, respectively, Section 4.3B and 5.2 of
this Agreement, appropriate actions shall be taken by the Partnership, as
determined by the General Partner, in its sole discretion, to either (i)
reimburse the General Partner an appropriate portion of any such cost, expense,
or issuance, or (ii) adjust the General Partner's Interest in the Partnership so
as to prevent dilution of the General Partner's Interest.

      D. Without limiting the generality of Section 7.4C above, it is agreed
that if, at any time or from time to time after consummation of the transactions
and election described in, respectively, Sections 4.3B and 5.2 of this
Agreement, options to purchase REIT Shares or any other securities granted to
employees, consultants or advisors of the General Partner or any Equity
Affiliate under any Plan or otherwise as compensation or incentive are
exercised, or REIT Shares or any other securities are granted or awarded to
employees, consultants or advisors of the General Partner or any Equity
Affiliate under any Plan or otherwise as compensation or incentive, then the
Partnership promptly shall issue to the General Partner Limited Partnership
Units or other interests in the Partnership with comparable rights, benefits,
and privileges in an amount equal to the REIT Shares or other securities granted
and/or issued, as the case may be. If Limited Partnership Units or other
interests in the Partnership are issued to the General Partner as a result of
the exercise of options to purchase REIT Shares or other securities, then
concurrently with the issuance of the Limited Partnership Units or other
interests to the General Partner, the General Partner shall pay to the
Partnership the cash consideration received by the General Partner on account of
such exercise.

      E. After consummation of the transactions and elections described in
Sections 4.3B and 5.2 of this Agreement, in the event that the General Partner
shall elect to purchase from its shareholders REIT Shares for the purpose of
delivering such REIT Shares to satisfy an obligation under any dividend
reinvestment program adopted by the General Partner, any employee stock

                                      -32-
<PAGE>   37
purchase plan adopted by the Company, or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid by the
General Partner for such REIT Shares and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursed to the General Partner, subject to the
conditions that: (i) if such REIT Shares subsequently are to be sold by the
General Partner, the General Partner shall pay to the Partnership any proceeds
received by the General Partner for such REIT Shares (provided that a transfer
of REIT Shares for Limited Partnership Units pursuant to the Exchange Rights
Agreement would not be considered a sale for such purposes); and (ii) if such
REIT Shares are not re-transferred by the General Partner within 30 days after
the purchase thereof, the General Partner shall cause the Partnership to cancel
a number of Limited Partnership Units held by the General Partner equal to the
number of such REIT Shares (adjusted for stock dividends, stock splits,
reorganizations, reclassifications, mergers, and the like with regard to the
REIT Shares prior to such cancellation of Limited Partnership Units).

      Section 7.5       Outside Activities of the General Partner

      The General Partner and its Affiliates shall be permitted to purchase,
own, operate, manage and otherwise deal with and profit from any property, real,
personal or mixed, not owned by the Partnership for their own account and
benefit, whether or not competitive with the business and affairs of the
Partnership, and neither the Partnership, any Limited Partner, or any other
Person shall have any right, claim, interest or cause of action therein or as a
result thereof. Without limiting the generality of the above, nothing in this
Agreement shall obligate the General Partner or its Affiliates to first offer
the Partnership an opportunity to invest in any investment which has been
offered to or found by the General Partner or its Affiliates, whether or not
such investment is of a nature that may be invested in by the Partnership or
would compete directly or indirectly with the business of the Partnership. The
Limited Partners hereby acknowledge that the General Partner currently owns a
variety of real estate investments and may in the future acquire additional real
estate investments that may be competitive with the business of the Partnership.

      Section 7.6       Contracts with Affiliates

      A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.

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<PAGE>   38
      B. Subject to the restrictions contained in Section 7.2 hereof, the
Partnership may transfer assets to joint ventures, other partnerships,
corporations or other business entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions consistent with this
Agreement and applicable law as the General Partner, in its sole and absolute
discretion, believes are advisable.

      C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase or otherwise acquire any property from, the Partnership,
directly or indirectly, except pursuant to transactions that are determined by
the General Partner in good faith to be fair and reasonable.

      D. The General Partner, in its sole and absolute discretion and without
the approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of the Partnership,
Subsidiaries of the Partnership or any Affiliate of any of them in respect of
services performed, directly or indirectly, for the benefit of the Partnership
or any Subsidiaries of the Partnership. Any or all of the foregoing may be
jointly established with the General Partner or its Affiliates, provided that in
such case the allocation of expense shall be shared among the parties on whose
behalf such plans exist as determined by the General Partner in good faith to be
fair and reasonable.

      Section 7.7       Indemnification

      A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the General Partner in its
capacity as general partner of the Partnership as set forth in this Agreement,
in which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, whether or not suit or other legal proceedings are
commenced, unless it is established by a court of competent jurisdiction, and
all appeals relating thereto have been fully completed or the applicable appeal
periods have expired, that: (i) the act or omission of the Indemnitee was
material to the matter giving rise to the proceedings and either was committed
in intentional bad faith or was the result of active and deliberate dishonesty;
(ii) the Indemnitee actually received an improper and unpermitted personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee knew, or was reckless in not knowing, that the act or
omission was unlawful. Without limitation, the

                                      -34-
<PAGE>   39
foregoing indemnity shall extend to any liability of any Indemnitee pursuant to
a loan guaranty, recourse obligation, general partner liability, or otherwise
for any indebtedness of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken subject to), and the General
Partner is hereby authorized and empowered, on behalf of the Partnership, to
enter into one or more indemnity agreements consistent with the provisions of
this Section 7.7 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct as set forth in this Section
7.7A. The termination of any proceeding by conviction of an Indemnitee, or an
entry of an order of probation against an Indemnitee prior to judgment, in each
case after all appeals relating thereto have been fully completed or the
applicable appeal periods have expired, creates a rebuttable presumption that
such Indemnitee acted in a manner contrary to that specified in this Section
7.7A with respect to the subject matter of such proceeding. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 7.7.

      B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.

      C. The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitees are indemnified.

      D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.

      E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or

                                      -35-
<PAGE>   40
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.

      F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the Indemnification provisions set forth in this
Agreement.

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

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

      Section 7.8       Liability of the General Partner

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

      B. The Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership and the shareholders of the General Partner
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (except as otherwise provided herein)
in deciding whether to cause the Partnership to take (or decline to take) any
actions, and that the General Partner shall not be liable for monetary damages
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner
has acted in good faith.

                                      -36-
<PAGE>   41
      C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.

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

      Section 7.9       Other Matters Concerning the General Partner

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

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

      C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.

      D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order: (i) to protect the ability of the General Partner to
continue to qualify as a REIT; or (ii) to avoid the

                                      -37-
<PAGE>   42
General Partner incurring any taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners.

      Section 7.10      Title to Partnership Assets

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

      Section 7.11      Reliance by Third Parties

      Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, engage or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that: (i)
at the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed

                                      -38-
<PAGE>   43
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.

                                    ARTICLE 8

                   RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

      Section 8.1       Limitation of Liability

      The Limited Partners shall have no liability under this Agreement, except
as expressly provided in this Agreement (including Section 10.5 hereof) or under
the Act.

      Section 8.2       Management of Business

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

      Section 8.3       Outside Activities of Limited Partners

      A. Subject to the terms and provisions hereof, it is agreed that any
Partner (General and/or Limited) and any Affiliate of any Partner (including any
officer, director, employee, agent, or representative of any Partner) shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights, claims, or interests by virtue of this Agreement
or any relationships, duties or obligations hereunder (including, but not
limited to, any fiduciary or similar duties created by this Agreement, under the
Act, or otherwise existing at law or in equity) in any business ventures or
investments of any General Partner or Limited Partner, or any Affiliate of any
of the foregoing. None of the Limited Partners nor any other Person shall have
any rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any other Person, and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to

                                      -39-
<PAGE>   44
the Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person could be taken by such Person.

      B. It is further agreed that none of the Partners, General or Limited, or
any of their Affiliates, have any duty, obligation, or liability to present to
the Partnership any business or investment opportunity which may arise in the
course of activity for or on behalf of the Partnership, or otherwise, for
investment by the Partnership or any of the Partners (even if within the line
and scope of the business and affairs of the Partnership), and instead any
Partner, General or Limited, and any Affiliate may pursue such opportunity for
such Partner's or Affiliate's own benefit and account, without any
participation, right, or claim therein by the Partnership or any other Partner,
and without notification or disclosure to the Partnership or any other Partner.

      Section 8.4       Return of Capital

      No Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. Except
to the extent provided by Exhibit "C" hereof or as otherwise expressly provided
in this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.

      Section 8.5       Rights of Limited Partners Relating to the Partnership

      A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.B hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):

            (1) to obtain a copy of the most recent annual and quarterly balance
sheet, income statement, and related financial statements prepared by the
Partnership;

            (2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;

            (3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;


                                      -40-
<PAGE>   45
            (4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments thereto
have been executed; and

            (5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services contributed by
each Partner and which each Partner has agreed to contribute in the future, and
the date on which each became a Partner to the extent the foregoing is
materially different from information contained in financial statements or other
reports provided to Limited Partners.

            (6) to obtain quarterly and annual balance sheets and income
statements regularly prepared by the Partnership in order to verify the
correctness of distributions of cash, if any, to the Limited Partner in
accordance with the terms and provisions of this Agreement.

      B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, desirable or necessary any information that: (i) the General Partner
reasonably believes to be in the nature of trade secrets or other information,
the disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreement with an
unaffiliated third party to keep confidential. If the General Partner desires to
disclose any information of the type described in the preceding paragraphs (i)
or (ii) to a Limited Partner, the General Partner may require, as a condition to
such disclosure, that the Limited Partner agree in writing that such information
will be held in strictest confidence and no distribution of such information
will be made.

      Section 8.6       No Redemption Right

      No Limited Partner (other than the General Partner) shall have the right
to require the Partnership to redeem all or a portion of the Limited Partnership
Units held by such Limited Partner.

      Section 8.7       Representations and Warranties

      Each Limited Partner represents and warrants to the General Partner and
the Partnership that:

      A. He, she or it has received and reviewed that certain Prospectus of the
General Partner dated May 27, 1997, that certain Prospectus Supplement dated
June 5, 1997, and that certain Registration Statement, filed March 19, 1997, as
amended

                                      -41-
<PAGE>   46
and filed April 10, 1997, of which the Prospectus and Prospectus Supplement are
a part, filed with the Securities and Exchange Commission under the Act and has
had access to such additional financial and other information, including without
limitation the General Partner's most current Form 10-Q and Form 10-K, the
General Partners' 1996 Annual Report to Shareholders' and the General Partners'
Notice of 1997 Annual Meeting of Shareholders and accompanying Proxy Statement,
and has been afforded the opportunity to ask questions of representatives of the
General Partner, and to receive answers to those questions, as they have deemed
necessary.

      B. He, she or it acknowledges that the Limited Partnership Units are being
acquired in a transaction not involving any public offering within the meaning
of the Securities Act and that the Limited Partnership Units have not been
registered under the Securities Act and agrees not to offer, sell, transfer or
otherwise dispose of the Limited Partnership Units (except for such transfer as
described in subsection D, below) in the absence of registration under the
Securities Act unless such Limited Partner delivers to the Partnership and the
General Partner an opinion of a lawyer reasonably satisfactory to the
Partnership and the General Partner, in form and substance satisfactory to the
Partnership and the General Partner, to the effect that the proposed sale,
transfer or other disposition may be effected without registration under the
Securities Act and under applicable state securities or blue sky laws.

      C. He, she or it is either (a) an "accredited investor" within the meaning
of Rule 501(a) of Regulation D under the Securities Act, or (b) a person who
either alone or with his, her or its purchaser representative (as defined in
Rule 501(h) of Regulation D under the Securities Act) has such knowledge and
experience in financial and business matters that he, she or it is capable of
evaluating the merits and risks of an investment in the Limited Partnership
Units or any other security acquired hereunder. He, she or it has such knowledge
and experience in financial and business matters as to be capable of evaluating
alone, or together with his, her or its purchaser representative or personal
advisor the merits and risks of an investment in the Limited Partnership Units
or any other security delivered hereunder and protecting his, her or its own
interests in connection with the investment and has obtained, in his, her or its
judgment, alone, or together with his, her or its purchaser representative or
personal advisor sufficient information from the General Partner to evaluate the
merits and risks of an investment in the Limited Partnership Units or any other
security delivered hereunder. He, she or it acknowledges that he, she or it has
the financial ability to bear the economic risk of his, her or its investment in
the Limited Partnership Units, has adequate means for providing for his, her or
its current needs and personal contingencies and has no need for liquidity with
respect to the investment in the Limited Partnership Units. If other than an
individual, it has not been organized solely for


                                      -42-
<PAGE>   47
the purpose of acquiring the Limited Partnership Units or other security
acquired under this Agreement.

      D. Although Eden may elect to transfer the Limited Partnership Units to
its constituent entities, and those constituent entities may, in turn, elect to
transfer the Limited Partnership Units to their respective constituent entities,
they are not acquiring any Limited Partnership Units with a view to the
distribution of the Limited Partnership Units or any present intention of
offering or selling any of the Limited Partnership Units in a transaction that
would violate the Securities Act or the securities laws of any State or any
other applicable jurisdiction.

                                    ARTICLE 9

                     BOOKS, RECORDS, ACCOUNTING AND REPORTS

      Section 9.1       Records and Accounting

      The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business. Any records maintained by or on
behalf of the Partnership in the regular course of its business may be kept on,
or be in the form of, punch cards, magnetic tape, photographs, micrographics or
any other information storage device, provided that the records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with generally accepted
accounting principles, or such other basis as the General Partner determines to
be necessary or appropriate.

      Section 9.2       Fiscal Year

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

      Section 9.3       Reports

      A. The Partnership shall mail to each Limited Partner no later than ninety
(90) days after the close of each Partnership Year an annual report containing
financial statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the General Partner,
for such Partnership year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner in its
discretion (such selection may include any such accountants who also perform
accounting or auditing work for the General Partner and its Affiliates).

                                      -43-
<PAGE>   48
      B. The Partnership shall mail to each Limited Partner no later than ninety
(90) days after the close of each calendar quarter (except the last calendar
quarter of each year), a report containing unaudited financial statements of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, and such other information as may
be required by applicable law or regulation, or as the General Partner
determines to be appropriate.

      C. All accounting and other professional fees associated with the
preparation, compilation, review, audit, and any other matters relating to the
Partnership's records, financial statements and reports, tax returns, and any
other Partnership items described in the preceding paragraphs shall be at the
expense of the Partnership, not the General Partner.

                                   ARTICLE 10

                                   TAX MATTERS

      Section 10.1      Preparation of Tax Returns

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

      Section 10.2      Tax Elections

      Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code; provided, however, that if requested by a transferee of a
Partnership Interest, the General Partner shall file an election on behalf of
the Partnership pursuant to Section 754 of the Code to adjust the basis of the
Partnership property in the case of a transfer of a Partnership Interest made in
accordance with the provisions of this Agreement. The General Partner intends to
elect the so-called "traditional method" of making Section 704(c) allocations
pursuant to Regulations Section 1.704-3 with respect to property contributed as
of the date hereof. The General Partner shall have the right to seek to revoke
any tax election it makes (including, without limitation, the election under
Section 754 of the Code) upon the General Partner's determination, in its sole
and absolute discretion, that such revocation is in the best interest of the
Partners.

                                      -44-
<PAGE>   49
      Section 10.3      Tax Matters Partner

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

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

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

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

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

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

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

                                      -45-
<PAGE>   50
            (6) to take any other action of behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding to
the extent permitted by applicable law or regulations.

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

      D. The tax matters partner shall receive no special compensation for its
services as such. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne or reimbursed by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
to assist the tax matters partner in discharging its duties hereunder, including
an accounting firm which also renders services to the General Partner and its
Affiliates.

      Section 10.4      Organizational Expenses

      The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.

      Section 10.5      Withholding

      Each Limited Partner hereby authorizes the Partnership to withhold from,
or pay on behalf of or with respect to, such Limited Partner any amount of
federal, state, local or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code and
similar state and local income tax laws, if any. Any amount paid on behalf of or
with respect to a Limited Partner shall constitute a loan by the Partnership to
such Limited Partner, which loan shall be repaid by such Limited Partner within
fifteen (15) days after notice from the General Partner that such payment must
be made, unless: (i) the Partnership withholds such payment from a distribution
which would otherwise be made to the Limited Partner; or (ii) the General
Partner determines, in its sole and absolute discretion, that such payment may
be satisfied out of the available funds of the Partnership which would, but for
such payment, be distributed to the Limited Partner. Any amounts withheld
pursuant to the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Limited Partner. Each Limited Partner hereby unconditionally
and irrevocably grants to the Partnership a


                                      -46-
<PAGE>   51
security interest in such Limited Partner's Partnership Interest to secure such
Limited Partner's obligation to pay to the Partnership any amounts required to
be paid pursuant to this Section 10.5. In the event that a Limited Partner fails
to pay any amounts owed to the Partnership pursuant to this Section 10.5 when
due, the General Partner may, in its sole and absolute discretion, elect to make
the payment to the Partnership on behalf of such defaulting Limited Partner, and
shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Without limitation, in such event the General
Partner shall have the right to receive distributions that would otherwise be
distributable to such defaulting Limited Partner until such time as such loan,
together with all interest thereon, has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amounts payable by a Limited Partner hereunder shall bear interest at the lesser
of (A) the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four (4) percentage points, or (B) the maximum lawful rate of interest on
such obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each Limited
Partner shall at its own expense take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.

                                   ARTICLE 11

                            TRANSFERS AND WITHDRAWALS

      Section 11.1      Transfer

      A. The term "transfer" when used in this Article 11 with respect to a
Limited Partnership Unit shall be deemed to refer to a transaction by which the
General Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to assign all
or any part of its Limited Partner Interest to another Person, and includes a
sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange
or any other disposition by law or otherwise. The term "transfer" when used in
this Article 11 does not include any acquisition of Partnership Interests or
Limited Partnership Units by the General Partner from any Limited Partner, nor
does it include any grant of a security interest or any related action involving
levy, execution, or the like contemplated under Section 10.5 of this Agreement.

      B.    No Partnership Interest shall be transferred, in whole or in part
(including any interest therein), except in accordance with the terms and
conditions set forth in this Article 11.  Any


                                      -47-
<PAGE>   52
transfer or purported transfer of a Partnership Interest not made in accordance
with this Article 11 shall be null and void ab initio, and the Partnership shall
have no duty or obligation to recognize the transferee as a partner or holder of
any interest whatsoever in the Partnership, and the transferee shall have no
rights, interests or claims in or against the Partnership or any Partner.

      Section 11.2      Transfer of the General Partner's Partner Interest and
                        Limited Partner Interest

      The General Partner may transfer any of its General Partner Interest or
withdraw as General Partner, or transfer any of its Limited Partner Interest,
without consent or approval from any Limited Partners. Such transfer includes
transfer to an entity which is wholly-owned by the General Partner and is a
Qualified REIT Subsidiary under Section 856(d) of the Code.

      Section 11.3      Limited Partners' Rights to Transfer

      A. Subject to the provisions of Sections 11.3C, 11.3D, 11.3E, 11.3F and
11.4, a Limited Partner (other than the General Partner) may transfer, with or
without the consent of the General Partner, all or any portion of its
Partnership Interest, or any of such Limited Partner's economic rights as a
Limited Partner. In addition, those Original Limited Partners which are
themselves partnerships or limited liability companies shall have the right to
transfer, assign, and convey their Limited Partnership Units to their
constituent partners or members, provided that such constituent partners or
members shall first have executed and delivered the Subscription Documents and a
written agreement to be bound by the terms, provisions, and conditions of this
Agreement, the Exchange Rights Agreement, and the Master Contribution Agreement,
and that at the time of such transfer, assignment, and conveyance to such
constituent partners, the representations and warranties made by such
constituent partners or members in the aforementioned Subscription Documents and
the related agreement are true and correct in all material respects.

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

      C. The General Partner may prohibit any transfer by a Limited Partner if,
in the opinion of legal counsel to the Partnership or the General Partner, such
transfer would require filing of a registration statement under the Securities
Act of

                                      -48-
<PAGE>   53
1933 or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Limited Partnership Units.

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

      E. No transfer of any Limited Partnership Unit may be made to a lender to
the Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion. Without limiting the restriction of the
foregoing sentence, if any such consent is given, a condition to such consent
shall be that the lender enter into an arrangement with the Partnership or the
General Partner to exchange or redeem at a price agreeable to the lender, the
General Partner, and the transferring Partner (each in their respective
discretion) all Limited Partnership Units in which a security interest is held
immediately prior to the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.

      F. The Limited Partners acknowledge that each certificate or instrument
representing Limited Partnership Units shall bear the following legend and any
other legend required under any applicable state securities law:

      "NEITHER THE LIMITED PARTNERSHIP UNITS IN THE PARTNERSHIP REPRESENTED BY
      THIS CERTIFICATE OR

                                      -49-
<PAGE>   54
      INSTRUMENT NOR ANY PART THEREOF OR INTEREST THEREIN HAS BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT') AND NEITHER MAY
      BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
      DISPOSED OF, IN WHOLE OR IN PART, UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
      PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF
      THE AGREEMENT OF LIMITED PARTNERSHIP OF PGP NORTHERN INDUSTRIAL, L.P., AS
      AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE
      PARTNERSHIP); AND, IN ALL EVENTS, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
      HYPOTHECATION OR OTHER DISPOSITION OF THE LIMITED PARTNERSHIP UNITS
      REPRESENTED BY THIS CERTIFICATE (OR ANY SECURITY ISSUED ON ACCOUNT HEREOF
      OR WITH RESPECT HERETO) MAY BE MADE UNLESS THE PARTNERSHIP HAS BEEN
      FURNISHED WITH AN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION BOTH MUST
      BE ACCEPTABLE TO THE PARTNERSHIP IN ITS SOLE DISCRETION) FOR THE HOLDER
      THAT, BECAUSE OF THE AVAILABILITY OF AN EXEMPTION, NO SUCH REGISTRATION,
      QUALIFICATION OR OTHER COMPLIANCE IS REQUIRED UNDER THE ACT, APPLICABLE
      BLUE SKY OR STATE SECURITIES LAWS, OR OTHERWISE."

      Section 11.4      Substituted Limited Partners

      A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner. Notwithstanding
the foregoing, in the event of transfers of Limited Partnership Units by
Original Limited Partners in accordance with the second sentence of Section
11.3A, the transferees shall be admitted as Substituted Limited Partners, and
the General Partner hereby consents to such.

      B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.

      C. Upon admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit "A" to reflect the name, address, number of Limited
Partnership Units, and Limited Partner Percentage Interest of such Substituted
Limited Partner.

                                      -50-
<PAGE>   55
      Section 11.5      Assignees

      If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Limited Partnership Units assigned to such transferee, but shall not be
deemed to be a holder of Limited Partnership Units for any other purpose under
this Agreement, and shall not be entitled to vote such Limited Partnership Units
for any other purpose under this Agreement, and shall not be entitled to vote
such Limited Partnership Units in any matter presented to the Limited Partners
for a vote (such Limited Partnership Units being deemed to have been voted on
such matters in the same proportion as all other Limited Partnership Units held
by Limited Partners are voted). In the event any such transferee desires to make
a further assignment of any such Limited Partnership Units, such transferee
shall be subject to all of the provisions of this Article 11 to the same extent
and in the same manner as any Limited Partner desiring to make an assignment of
Limited Partnership Units.

      Section 11.6      General Provisions

      A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all such Limited Partner's Limited Partnership
Units in accordance with this Article 11 or pursuant to any agreement consented
to by the Partnership pursuant to which the Limited Partner's interests in the
Partnership are conveyed and the Limited Partner's withdrawal is provided for.

      B. Any Limited Partner who shall transfer all of its Limited Partnership
Units in a transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such Limited Partnership
Units as Substitute Limited Partners. Similarly, any Limited Partner who shall
transfer all of its Limited Partnership Units pursuant to any agreement of the
type referred to in the preceding paragraph shall cease to be a Limited Partner.

      C. Transfers pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.

      D. Without limiting the restriction of Section 11.6C, if any Partnership
Interest is transferred or assigned during any quarterly segment of the
Partnership's fiscal year in compliance with the provisions of this Article 11
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses,

                                      -51-
<PAGE>   56
each item thereof and all other items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor Partner
and the transferee Partner by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption occurs shall be allocated to
a redeeming Partner. All distributions of Available Cash attributable to such
Limited Partnership Unit with respect to which the Partnership Record Date is
before the date of such transfer, assignment, or redemption shall be made to the
transferor Partner, all distributions of Available Cash thereafter attributable
to such Limited Partnership Unit shall be made to the transferee Partner.

      Section 11.7      No Exchange

      Notwithstanding anything in this Section 11 to the contrary, each of the
Limited Partners hereby agrees that, during the No Exchange Period, it shall be
prohibited from tendering its Limited Partnership Units for exchange or
redemption under the Exchange Rights Agreement.

                                  ARTICLE 12

                             ADMISSION OF PARTNERS

      Section 12.1      Admission of Successor General Partner

      A successor to all of the General Partner Interest pursuant to Section
11.2 hereof who is proposed to be admitted as successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. The admission of any such transferee shall not cause a dissolution of
the Partnership and such transferee shall carry on the business of the
Partnership in accordance with the forms and provisions of this Agreement. In
each case, the admission shall be subject to the successor General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect the admission. In the case of such admission on any day
other than the first day of a Partnership Year, all items attributable to the
General Partner Interest for such Partnership Year shall be allocated between
the transferring General Partner and such successor as provided in Section
11.6.D hereof.

                                      -52-
<PAGE>   57
      Section 12.2      Admission of Additional Limited Partners

      A. Except as otherwise provided elsewhere in this Agreement, after the
admission of Eden to the Partnership as the initial Original Limited Partner on
the date hereof, a Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof, and (ii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as an Additional Limited Partner.

      B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.

      C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which an
admission of any Additional Limited Partner occurs shall be allocated among all
of the Partners and Assignees, including such Additional Limited Partner. All
distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
assignees, other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and Assignees,
including such Additional Limited Partner.

      Section 12.3      Amendment of Agreement and Certificate of Limited
                        Partnership

      For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment to this Agreement (including an amendment of Exhibit "A") and, if


                                      -53-
<PAGE>   58
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.

                                  ARTICLE 13

                   DISSOLUTION, LIQUIDATION AND TERMINATION

      Section 13.1      Dissolution

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

      A. the expiration of its term as provided in Section 2.5 hereof;

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

      C. an election to dissolve the Partnership made by the General Partner, in
its sole and absolute discretion;

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

      E. the sale of all or substantially all of the assets and properties of
the Partnership; provided, however, that the sale of one or more, but less than
all, of the Original Properties shall not be a Liquidating Event so long as the
Partnership retains at least one of the Original Properties; or

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

                                      -54-
<PAGE>   59
      Section 13.2      Winding Up

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

            (1) First, to the satisfaction of all of the Partnership's debts and
liabilities to creditors other than the Partners (whether by payment or the
reasonable provision for payment thereof);

            (2) Second, to the satisfaction of all of the Partnership's debts
and liabilities to the General Partner and its Affiliates (whether by payment or
the reasonable provision for payment thereof);

            (3) Third, to the satisfaction of all of the Partnership's debts and
liabilities to the other Partners (whether by payment or the reasonable
provision for payment thereof); and

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

            The General Partner shall not receive any special compensation for
any services performed pursuant to this Article 13.

      B. Notwithstanding the foregoing, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of this Agreement, then distributions under the terms of
Section 13.2A shall be calculated and made only with respect to Original Limited
Partner

                                      -55-
<PAGE>   60
Related Assets and the ownership and operation thereof, together with the
operation and existence of the Partnership insofar as such concerns the Original
Limited Partner Related Assets. Distributions under the terms of Section 13.2A
shall not include any revenues, expenses, assets, or liabilities of the
Partnership relating to the Non-Original Limited Partner Related Assets, the
ownership or operation thereof, or the operation or existence of the Partnership
with respect thereto, all of which shall be as separately determined by the
General Partner in its sole and absolute discretion.

      C. Anything contained herein to the contrary notwithstanding, pursuant to
the Exchange Rights Agreement all Limited Partnership Units then held by any
Limited Partner (other than Limited Partnership Units held by the General
Partner) will be mandatorily exchanged or redeemed prior to any distribution, or
the determination of any entitlement to any distribution, pursuant to Section
13.2A. As a result of such mandatory exchange or redemption of Limited
Partnership Units, no Limited Partner (other than the General Partner in its
capacity as a Limited Partner) will receive, nor shall he, she or it be entitled
to receive, any distribution upon a Liquidating Event.

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

      E. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made pursuant to this Article 13 may be:

            (1) distributed to one or more trust(s) established for the benefit
of the creditors and the General Partner and Limited Partners for the purposes
of liquidating Partnership

                                      -56-
<PAGE>   61
assets, collecting amounts owed to the Partnership, and paying any contingent,
conditional or unmatured liabilities or obligations of the Partnership or the
General Partner arising out of or in connection with the Partnership. The assets
of any such trust(s) shall be distributed to the creditors and General Partner
and Limited Partners from time to time, in the reasonable direction of the
Liquidator, in the same manner and proportions as the amount distributed to such
trust(s) by the Partnership would otherwise have been distributed to the
creditors and General Partner and Limited Partners pursuant to this Agreement;
and

            (2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership, provided that
such withheld or escrowed amounts shall be distributed to the creditors and
General Partner and Limited Partners in the manner and order of priority set
forth in Section 13.2A as soon as practicable.

      Section 13.3      Compliance with Timing Requirements of Regulations

      In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
(provided, however, in no event shall the Partnership be liquidated prior to the
date which would be the Settlement Date within the meaning of the Exchange
Rights Agreement for Partners who tender an Exchange Notice (within the meaning
of the Exchange Rights Agreement) on or before the fifth (5th) day after the
date of receipt of the notice of liquidation by the Partnership.

      Section 13.4      Deemed Distribution and Re-contribution

      Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.

      Section 13.5      Rights of Limited Partners

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

                                      -57-
<PAGE>   62
to the return of its Capital Contributions, distributions, or allocations.

      Section 13.6      Notice of Dissolution

      In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.

      Section 13.7      Termination of Partnership and Cancellation of
                        Certificate of Limited Partnership

      Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, a certificate of cancellation shall be filed,
the Partnership shall be terminated, and all qualifications of the Partnership
as a foreign limited partnership in jurisdictions other than the State of
Delaware shall be canceled and such other actions as may be necessary to
terminate the Partnership shall be taken.

      Section 13.8      Reasonable Time for Winding-Up

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

      Section 13.9      Waiver of Partition

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

                                  ARTICLE 14

                 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS

      Section 14.1      Amendments

      A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the General Partner) holding twenty-five
percent (25%) or more of the Limited Partner Percentage Interests. Following
such proposal, the General Partner shall submit any proposed amendment to the
Limited Partners. The General Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem appropriate. For purposes of
obtaining a written vote, the General Partner may require a response within a

                                      -58-
<PAGE>   63
reasonable specified time, but not less than fifteen (15) days, and failure to
respond in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 13.1C, 14.1B, 14.1C, or 14.1D, a proposed amendment shall be
adopted and be effective as an amendment hereto if it is approved by the General
Partner and it receives the Consent of Partners holding a majority of the
Limited Partner Percentage Interests of all Limited Partners; provided, however,
that, except as otherwise provided in Sections 4.3A and 5.2 hereof, any
amendment which materially and adversely alters the right of a Limited Partner
(including an Original Limited Partner) to receive distributions of Available
Cash or allocations of Net Income, Net Loss or any other items in the amounts,
in the priorities or at the times described in this Agreement shall require the
consent of such Limited Partner in order to become effective.

      B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent or approval of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:

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

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

            (3) to set forth the designations, rights, powers, duties, and
preferences of other holders of any additional Partnership Interests issued
pursuant to Section 4.3, or otherwise pursuant to the terms of this Agreement;

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

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

            (6) the purposes set forth in Section 3.3.

                                      -59-
<PAGE>   64
      The General Partner shall provide notice to the Limited Partners when any
action under this Section 14.1.B is taken.

      C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without Consent of each Partner adversely affected if such
amendment would: (i) convert a Limited Partner's interest in the Partnership
into a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.3
and Section 14.1.B(3) hereof); (iv) cause the termination of the Partnership
prior to the time set forth in Sections 2.5 or 13.1; or (v) amend this Section
14.1.C.

      D. Notwithstanding Section 14.1.A and 14.1.B hereof, the General Partner
shall not amend Sections 7.4, 7.5, 14.1A, 14.1C or 14.2 without Consent of
Limited Partners holding a majority of the Limited Partner Percentage Interests
of the Limited Partners, excluding Limited Partner Interests held by the General
Partner; and, to the extent that any such amendment would affect the amount,
priority, or timing of distributions to any of the Original Limited Partners or
their heirs, successors and assigns under this Agreement, the General Partner
shall not amend Sections 7.4, 7.5, 14.1A, 14.1C, or 14.2 without Consent of
Original Limited Partners holding a majority of the Limited Partner Percentage
Interests of the Original Limited Partners (in each case including their heirs,
successors and assigns), unless the transactions and election described in,
respectively, Sections 4.3B and 5.2 of this Agreement have occurred and been
made, in which case the special Consent of the Original Limited Partners as
herein provided shall not be required.

      Section 14.2      Meetings of the Partners

      A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the General Partner) holding twenty-five percent
(25%) or more of the Limited Partner Percentage Interests. The request shall
state the nature of the business to be transacted. Notice of any such meeting
shall be given to all Partners not less than seven (7) days nor more than thirty
(30) days prior to the date of such meeting. Partners may vote in person or by
proxy at such meeting. Whenever the vote or consent of the Partners is permitted
or required under this Agreement, such vote or consent may be given at a meeting
of the Partners or may be given in accordance with the procedures prescribed in
Sections 14.1A or 14.2B hereof. Except as otherwise expressly provided in this
Agreement, whenever the Consent of the Limited Partners is required the Consent
of holders of a majority of the Limited Partner Percentage Interests held by
Limited Partners (including

                                      -60-
<PAGE>   65
Limited Partnership Interests held by the General Partner) shall control.

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

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

      D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the General Partner and may be
held at the same time, and as part of, meetings of the shareholders of the
General Partner. Anything contained herein to the contrary notwithstanding, all
meetings of the Partners shall be held within the State of California at such
location as may be designated by the General Partner.

                                   ARTICLE 15

                               GENERAL PROVISIONS

      Section 15.1  No Assurances. Eden acknowledges and agrees that it is
solely responsible for its tax planning and the structuring of this Agreement to
accommodate such tax planning, and that neither the Partnership nor the General
Partner makes any representation or provides any assurance to Eden that the
provisions of this Agreement affecting or impacting Eden's tax planning,
structuring or liability will be respected or upheld by any agency or authority
or achieve the result desired by the

                                      -61-
<PAGE>   66
Limited Partners. Therefore, notwithstanding the provisions of this Agreement,
and without limiting the generality of the foregoing, Eden acknowledges and
agrees that neither the Partnership nor the General Partner makes any
representation or provides any assurance that the allocation provided in section
6.2 will be respected or upheld by any agency or authority or achieve the result
desired by the Limited Partners, or that the Cigna Debt or any refinanced debt
terms or allocation will be respected or upheld by any agency or authority or
achieve the result desired by the Limited Partners.

      Section 15.2      Addresses and Notices

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

      Section 15.3      Titles and Captions

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

      Section 15.4      Pronouns and Plurals

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

      Section 15.5      Further Action

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

      Section 15.6      Binding Effect

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

      Section 15.7      Creditors

                                      -62-
<PAGE>   67
      Other than as expressly set forth herein with respect to the Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.

      Section 15.8      Waiver

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

      Section 15.9      Counterparts

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

      Section 15.10     Applicable Law

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

      Section 15.11     Invalidity of Provisions

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

      Section 15.12     Entire Agreement

      This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.

      Section 15.13     No Rights as Shareholders

      Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Limited Partnership Units any rights whatsoever as
shareholders of the General Partner, including, without limitation, any right to
receive dividends or other distributions made to shareholders of the General
Partner or to vote or to consent or to receive notice as shareholders in respect
of any meeting of shareholders for the election of directors of the General
Partner or any other matter. Nothing contained in this Section shall be deemed a
waiver or

                                      -63-
<PAGE>   68
relinquishment of any parties rights under the Exchange Rights Agreement.

      Section 15.14     Venue

      Any action initiated by any party under this Agreement shall be brought
and prosecuted in the State of California which the parties acknowledge and
agree is a convenient forum in which to

                                      -64-
<PAGE>   69
litigate such action, and the parties waive any right to commence or transfer
such action in or to any other state.

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

                        GENERAL PARTNER:

                        PACIFIC GULF PROPERTIES INC., a Maryland
                        corporation

                        By:__________________________________________
                              Glenn L. Carpenter, President and Chief
                              Executive Officer

                        By:__________________________________________
                              Donald G. Herrman, Executive Vice
                              President, Chief Financial Officer and
                              Secretary

                        EDEN:

                        EDEN PLAZA ASSOCIATES, LLC, a California
                        limited liability company

                        By:   ________________________________________
                                 Elbert P. Bressie, Managing Member

                                      -65-
<PAGE>   70
                                    EXHIBIT A

                Partners Contributions and Partnership Interests

<TABLE>
<CAPTION>
                                                                                                            Limited
                                                                                               Limited      Partner
Name and Address                           Cash          Agreed Value of       Total        Partnership   Percentage
   of Partner                          Contribution   Contributed Property  Contribution       Units       Interest
----------------                       ------------   --------------------  ------------     ----------    ---------
<S>                                    <C>            <C>                   <C>              <C>            <C>
General Partner

Pacific Gulf                           $4,300,000**                N/A      $   4,300,000**        N/A         N/A
Properties Inc.
4220 Von Karman, Second Floor
Newport Beach, California 92660
Attn:  Don Herrman

Limited Partners

Eden Plaza                                    N/A        $2,857,062.21*     $2,857,062.21      143,391         100%
 Associates, LLC
520 Third Street, Suite 555
San Francisco, California  94107
Attn:  Elbert Bressie
</TABLE>


                             * SEE NOTE ON EXHIBIT D
                          ** ESTIMATE SUBJECT TO CHANGE

                                       -1-
<PAGE>   71
                                    EXHIBIT B
                           CAPITAL ACCOUNT MAINTENANCE

1.    Capital Accounts of the Partners

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

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

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

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

                                       -1-
<PAGE>   72
            (3) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of such
property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.

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

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

            (6) Any items specifically allocated under Section 1 of Exhibit "C"
hereof shall not be taken into account.

      C. Generally, a transferee (including an Assignee) of a Limited
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor; provided, however, that if the transfer causes a termination of
the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed solely for federal income tax purposes, to have been
contributed to the successor Partnership. The Capital Accounts of such successor
Partnership shall be maintained in accordance with the principles of this
Exhibit "B".

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

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

                                       -2-
<PAGE>   73
            (3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the
Carrying Value of Partnership assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time any such asset is
distributed.

            (4) In determining Unrealized Gain or Unrealized Loss for purposes
of this Exhibit "B", the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) shall be determined by
the General Partner using such reasonable method of valuation as it may adopt,
or in the case of a liquidating distribution pursuant to Article 13 of the
Agreement, shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its sole and
absolute discretion to arrive at a fair market value for individual properties).

      E. The provisions of this Agreement (including this Exhibit "B" and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for federal income tax purposes in
order to comply with such Regulations or to comply with Section 704(c) of the
Code, the General Partner may make such modification without regard to Article
14 of the Agreement, provided that it is not likely to have a material effect on
the amounts distributable to any Person pursuant to Article 13 of the Agreement
upon the dissolution of the Partnership. The General Partner also shall (i)
where appropriate, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q),
make any adjustments that are necessary or appropriate to maintain equality
between Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership's balance sheet, as computed for book purposes; and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable loss
and items thereof under this Agreement and pursuant to the Code; (iv)
conventions for the

                                       -3-
<PAGE>   74
determination of cost recovery, depreciation and amortization deductions, as it
determines in its sole discretion are necessary or appropriate to execute the
provisions of this Agreement, to comply with federal and state tax laws, and are
in the best interest of the Partners.

2.    No Interest

      No interest shall be paid by the Partnership on Capital Contributions or
on balances in Partners' Capital Accounts.

3.    No Withdrawal

      No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.

4.    Non-Original Limited Partner Related Assets

      Notwithstanding the foregoing, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of this Agreement, then allocations provided for in this
Exhibit "B" shall be calculated separately with respect to Original Limited
Partner Related Assets and the ownership and operation thereof, together with
the operation and existence of the Partnership insofar as such concerns the
Original Limited Partner Related Assets and the ownership and operation thereof.
Such allocations and calculations shall not include any revenues, expenses,
assets, or liabilities of the Partnership relating to the Non-Original Limited
Partner Related Assets, the ownership or operation thereof, or the operation or
existence of the Partnership with respect thereto, all of which shall be
separately determined by the General Partner in its sole and absolute
discretion.

                                       -4-
<PAGE>   75
                                    EXHIBIT C

                            SPECIAL ALLOCATION RULES

1.    Special Allocation Rules

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

      A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1
of the Agreement or any other provisions of this Exhibit "C", if there is a net
decrease in Partnership Minimum Gain during any Partnership taxable year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704- 2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of Partner Minimum Gain during such Partnership taxable
year.

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

                                       -1-
<PAGE>   76
Partnership taxable year, other than allocations pursuant to Section 1.A hereof.

      C. Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
and after giving effect to the allocations required under Sections 1.A and 1.B
hereof such Partner has an Adjusted Capital Account Deficit, items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership taxable
year) shall be specifically allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.

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

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

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

      G. Curative Allocations. The allocations set forth in Section 1.A through
1.F of this Exhibit "C" (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations under Section 704(b) of the Code.
The Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accord-

                                       -2-
<PAGE>   77
ingly, the General Partner is hereby authorized to divide other allocations of
income, gain, deduction and loss among the Partners so as to prevent the
Regulatory Allocations from distorting the manner in which Partnership
distributions will be divided among the Partners. In general, the Partners
anticipate that this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to each person is zero.
However, the General Partner will have discretion to accomplish this result in
any reasonable manner; provided, however, that no allocation pursuant to this
Section 1.G shall cause the Partnership to fail to comply with the requirements
of Regulations Sections 1.7041(b)(2)(ii)(d), -2(e) or -2(i).

2.    Allocations for Tax Purposes

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

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

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

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

            (2)         (a) In the case of an Adjusted Property, such items
                        shall

                        (1) first, be allocated among the Partners in a manner
                        consistent with the principals of Section 704(c) of the
                        Code and the Regulations thereunder to take into account
                        the Unrealized Gain or Unrealized Loss attribut-

                                       -3-
<PAGE>   78
                        able to such property and the allocations
                        thereof pursuant to Exhibit "B"; and

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

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

            (3)   all other items of income, gain, loss and deduction shall be
                  allocated among the Partners in the same manner as their
                  correlative item of "book" gain or loss is allocated pursuant
                  to Section 6.1 of the Agreement and Section 1 of this Exhibit
                  "C".

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

3.    No Withdrawal

      No Partner shall be entitled to withdrawal any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.

4.    Non-Original Limited Partner Related Assets

      Notwithstanding the foregoing, if and after the Partnership acquires
Non-Original Limited Partner Related Assets, or becomes obligated, indebted or
liable for or on account of Non-Original Limited Partner Related Assets or the
ownership or operation thereof, and so long as the General Partner has not
consummated the transactions and made the election described in Sections 4.3B
and 5.2, respectively, of this Agreement, then allocations provided for in this
Exhibit "C" shall be calculated separately with respect to Original Limited
Partner Related Assets and the ownership and operation thereof, together with
the operation and existence of the Partnership insofar as such concerns the
Original Limited Partner Related Assets and the ownership and operation thereof.
Such allocations and calculations shall not

                                       -4-
<PAGE>   79
include any revenues, expenses, assets, or liabilities of the Partnership
relating to the Non-Original Limited Partner Related Assets, the ownership or
operation thereof, or the operation or existence of the Partnership with respect
thereto, all of which shall be separately determined by the General Partner in
its sole and absolute discretion.

                                       -5-
<PAGE>   80
                                    EXHIBIT D

                          VALUE OF CONTRIBUTED PROPERTY

<TABLE>
<CAPTION>
Underlying Property    704(c) Value        Agreed Value
-------------------    ------------        ------------
<S>                    <C>                 <C>
Eden Plaza,            $18,498,185.50      $2,857,062.21
Eden Rock #5,
Eden Rock #9,
Eden Rock #10.
</TABLE>


[*704(c) VALUE IS THE AGREED VALUE PLUS THE AMOUNT OF THE CIGNA
DEBT AT CLOSING PRIOR TO ANY REDUCTION]

[**THE AGREED VALUE OF THE ORIGINAL PROPERTIES SHALL BE THE "EDEN
CAPITAL CONTRIBUTION" AS DEFINED IN THE MASTER CONTRIBUTION AGREEMENT]
<PAGE>   81
                                    EXHIBIT E

                          PROPERTY MANAGEMENT AGREEMENT

      THIS PROPERTY MANAGEMENT AGREEMENT (this "AGREEMENT") is made and entered
into as of ______________, by and between PGP SOUTHERN INDUSTRIAL, L.P., a
Delaware limited partnership ("OWNER") and Pacific Gulf Properties Inc., a
Maryland corporation ("MANAGER") with reference to the following.

                                    RECITALS

      A. The Owner is the owner of an industrial park located on the land
identified in Exhibit A attached hereto (the "PROJECT"). Manager is the sole
general partner of Owner.

      B. Manager is experienced in managing and operating properties similar to
the Project, and Manager possesses the personnel, skills and experience
necessary for the efficient management and operation of the Project.

      C. Owner desires to engage Manager to manage and operate the Project, and
Manager desires to render such management services to Owner, upon and subject to
the terms and conditions set forth below.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, Owner and Manager agree as follows:

      1.    ENGAGEMENT OF MANAGER.

            1.1 Exclusive Manager. Owner engages Manager as, and Manager agrees
to serve as, the sole and exclusive manager of the Project, with the authority
to direct, supervise and manage the operation of the Project, for the period of
time and upon the terms and conditions hereinafter set forth.

            1.2 Employment of Personnel. Manager shall investigate, hire, train,
pay, supervise and discharge the personnel reasonably necessary to be employed
in order to properly maintain and operate the Project. All salaries, wages and
other compensation of personnel employed by Manager hereunder, including
so-called fringe benefits, medical health insurance, pension plans, social
security taxes, Worker's Compensation insurance and the like (collectively, the
"PERSONNEL COMPENSATION"), shall be payable by Manager from, and reimbursable to
Manager out of, gross revenues generated from the operation of the Project,
including, without limitation, all rent and/or lease payments, security,
cleaning, and other deposits, common area maintenance charges, taxes, insurance,
casualty

                                       -1-
<PAGE>   82
and/or condemnation loss proceeds and other income due to Owner from each
Project ("PROJECT REVENUES"). Personnel Compensation shall not reduce the
"MANAGEMENT FEE" (defined below).

      2.    DUTIES OF MANAGER.

            2.1 Performance of Duties. During the term of this Agreement,
Manager agrees, for and in consideration of the compensation set forth herein,
to supervise and direct the management and operation of the Project on behalf of
Owner and for the account of Owner in an efficient and satisfactory manner as an
industrial park. Manager shall at all times maintain an organization, systems
and personnel sufficient to enable it to carry out all its duties, obligations
and functions under this Agreement. Manager will perform its duties under this
Agreement in accordance with all laws, codes and regulations applicable to the
Project.

            2.2 Service Contracts. Manager shall make or renew in Owner's name
as agent of Owner and at Owner's expense, contracts and/or leases for water,
electricity, gas, telephone, vermin extermination, landscape, trash removal and
other services deemed by Manager or Owner to be necessary or advisable for the
operation of the Project. In entering into any contracts or leases herein
contemplated, Manager shall include as a condition thereof the right to
terminate on thirty (30) calendar days' prior written notice with or without
cause, unless Manager obtains the prior written consent of Owner.

            2.3 Leasing. Manager shall be responsible for coordinating the
leasing activities of the Project. Manager is hereby authorized to contract, in
Owner's name as agent of Owner and at Owner's expense, with such brokers and
leasing agents as Manager deems necessary or appropriate to facilitate the
leasing activities of the Project. Manager is hereby authorized to prepare,
execute, deliver and renew all leases, lease amendments and lease renewals and
extensions, and to terminate tenancies, evict tenants and recover possession of
rented space within the Project, prosecute legal actions in the name of Owner in
connection with the foregoing, settle, compromise and/or release such actions or
reinstate such tenancies, as Manager deems necessary or appropriate, all on
Owner's behalf and as agent of Owner and at Owner's expense. References of all
prospective tenants shall be investigated carefully by Manager, and Manager
shall use reasonable efforts to ensure that space in the Projects is rented to
desirable and financially responsible tenants.

                                       -2-
<PAGE>   83
            2.4 Payment of Expenses. Manager shall establish and maintain on
behalf of Owner at a bank or banks as Manager may, from time to time, determine,
an account for the Project (an "Account"). Manager shall collect all Project
Revenue, and deposit all such income in the Account for the Project. From the
Account, Manager shall make such disbursements to pay Project operating
expenses, including, without limitation, Personnel Compensation, as are
necessary, in Manager's reasonable judgment, to manage, operate and maintain the
Project as provided in this Agreement. All items specified herein to be at
Owner's expense shall be considered operating expenses of the Project.

            2.5 Funding Of Account. Owner agrees to deposit moneys into the
Account in the amount and to the extent that Project Revenues are insufficient
to pay any operating expenses, including Personnel Compensation, hereunder.
Manager shall notify Owner in writing as to the amount of any such
insufficiency.

      3. INSURANCE. The Manager shall obtain, upon Owner's request and approval,
at Owner's cost and expense, such insurance as may be required by Owner in
connection with the Project, including, without limitation, comprehensive
general public liability, contractual liability and such other insurance as
Owner deems necessary or desirable. Owner shall designate Manager as an
additional named insured on each such insurance policy.

      4.    MANAGER'S COMPENSATION.

            4.1 Management Fee. In consideration of the management services to
be rendered by Manager pursuant to Article 2 of this Agreement, Manager shall
receive as compensation a monthly sum equal to four percent (4%) of all Project
Revenues from the Project collected during each month during the term of this
Agreement (the "MANAGEMENT FEE").

            4.2 Payment of Management Fee. The Management Fee shall be paid on
the first day of each calendar month during the term of this Agreement, based
upon the Project Revenues from the Project collected for the preceding calendar
month. If the term of this Agreement begins on a date other than the first day
of a month or ends on a date other than the last day of a month, the Management
Fee shall be prorated based on the number of days in such month.

            4.3 Other Compensation. Manager shall be separately compensated for
any services other than the usual and customary services performed in its
capacity as the manager of the Project; provided that Manager shall not perform
any extraordinary services without obtaining the prior written approval of
Owner.

                                       -3-
<PAGE>   84
      5.    BOOKS, RECORDS AND STATEMENTS.

            5.1 Maintenance and Access of Records. Manager agrees to maintain
adequate accounting records (which records shall be and remain the property of
Owner) in connection with all matters contemplated by this Agreement in
accordance with the provisions of this Agreement.

            5.2 Operating Budget. Within thirty (30) calendar days after the
execution of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed operating budget setting forth in reasonable detail the
estimated income and operating expenses of the Project, by month, for the
remainder of the then calendar year for which this Agreement is in effect. On or
before thirty (30) calendar days before each subsequent calendar year during the
term of this Agreement, Manager shall prepare and submit to Owner for its
approval a proposed operating budget setting forth in reasonable detail the
estimated income and operating expenses of the Project, by month, for the
succeeding calendar year.

      Owner will consider the proposed budgets and then will consult with the
Manager in the ensuing period prior to the commencement of the forthcoming
calendar year in order to agree on an "APPROVED OPERATING BUDGET." The parties
will use reasonable efforts to agree upon an Approved Operating Budget for the
forthcoming calendar year on or before December 15th of the then current
calendar year. If the parties are unable to reach such agreement, the Approved
Operating Budget for the forthcoming calendar year will be established by Owner.

      Manager agrees to employ reasonable efforts to ensure that the actual
costs of maintaining and operating the Project shall not exceed the Approved
Operating Budget, either in total or in any one accounting category. In the
event it appears to Manager that the actual costs of maintaining and operating
the Project shall exceed the Approved Operating Budget, Manager shall submit a
revised budget proposal for Owner's approval as provided above. Upon approval,
such revised budget shall become the Approved Operating Budget. In all events,
Owner shall pay all actual costs of maintaining and operating the Project.

            5.3 Capital Expenditure Budget. Within thirty (30) calendar days
after the execution of this Agreement, Manager shall prepare and submit to Owner
for its approval a proposed capital expenditure budget setting forth in
reasonable detail the estimated capital expenditures of the Project, by month,
for the remainder of the then calendar year for which this Agreement is in
effect. On or before thirty (30) calendar days before each subsequent calendar
year during the term of this Agreement, Manager shall prepare and submit to
Owner for its approval a proposed capital expenditure budget setting forth in
reasonable detail the estimated capital expenditures of the Project, by month,
for the succeeding calendar year.

                                       -4-
<PAGE>   85
      Owner will consider the proposed budgets and then will consult with
Manager in the ensuing period prior to the commencement of the forthcoming
calendar year in order to agree on an "APPROVED CAPITAL BUDGET." The parties
will use reasonable efforts to agree upon an Approved Capital Budget for the
succeeding calendar year on or before December 15th of the then current calendar
year. If the parties are unable to reach such agreement, the Approved Capital
Budget for the forthcoming calendar year will be established by Owner.

      6.    TERM.

            6.1 Initial Term. The term of this Agreement shall commence as of
the date first set forth above and shall continue for an initial term ending on
__________. Unless written notice to terminate is given by either party to the
other at least thirty (30) days prior to the end of the initial term, this
Agreement shall be automatically renewed for another _________ year term, upon
and subject to the terms and conditions set forth in this Agreement.

            6.2 Termination. This Agreement may be terminated for "cause" at any
time by Owner upon thirty (30) days prior written notice to Manager setting
forth in detail the "cause" for such termination. The term "cause" shall mean
(i) any material breach of this Agreement by Manager, (ii) any willful
misconduct, intentional misrepresentation or gross negligence of Manager related
to, or in connection with, the management and operation of the Project, (iii)
the commencement of a case under Title 11 U.S.C., or under any similar
insolvency proceeding under applicable state or federal law, involving Manager
as debtor, (iv) Owner's transfer or sale of the Property to an independent third
party, (v) the occurrence of a total destruction of the Project, and (vi) the
taking of the Project by condemnation, eminent domain, or by agreement in lieu
thereof.

      7. INDEMNIFICATION AND HOLD HARMLESS. Neither Manager nor any employee of
Manager shall be liable, responsible or accountable in damages or otherwise to
Owner for any acts performed by it in good faith and within the scope of this
Agreement if any such act or failure to act is not attributable to Manager's or
such employee's gross negligence or willful misconduct. Owner shall indemnify,
defend and hold Manager (and each employee thereof) harmless for any loss,
damage, liability, cost or expense (including reasonable attorneys' fees)
arising out of any act or failure to act by Manager (or any employee thereof) if
such act or failure to act is in good faith, is within the scope of this
Agreement, and is not attributable to Manager's or such employee's gross
negligence or willful misconduct.

                                       -5-
<PAGE>   86
      8.    MISCELLANEOUS.

            8.1   Applicable Law.  This Agreement shall be construed
in accordance with the laws of the State of California.

            8.2 Severability. Each provision of this Agreement is intended to be
severable. If any term or provision of this Agreement shall be determined by a
court of competent jurisdiction to be illegal or invalid for any reason
whatsoever, that provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.

            8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument.

      IN WITNESS OF THE FOREGOING, Owner and Manager have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.

                                    OWNER:

                                    PGP NORTHERN INDUSTRIAL, L.P.,
                                    a Delaware limited partnership

                                    By:   Pacific Gulf Properties Inc.,
                                          a Maryland corporation,
                                          its General Partner

                                          By:   _________________________
                                          Name: _________________________
                                          Title: ________________________


                                          By:   _________________________
                                          Name: _________________________
                                          Title: ________________________

                                    MANAGER:

                                    PACIFIC GULF PROPERTIES INC.,
                                    a Maryland corporation

                                    By:   ______________________________
                                    Name: ______________________________
                                    Title:______________________________

                                    By:   ______________________________
                                    Name:_______________________________
                                    Title: _____________________________

                                       -6-
<PAGE>   87
                                    EXHIBIT A

                                LEGAL DESCRIPTION

THE LAND REFERRED TO IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF ALAMEDA,
CITY OF HAYWARD, DESCRIBED AS FOLLOWS:

PARCEL 1:

PARCEL 1, PARCEL MAP 1288, FILED SEPTEMBER 25, 1973, BOOK 80 OF PARCEL MAPS,
PAGE 27, ALAMEDA COUNTY RECORDS.

ASSESSOR'S PARCEL NO. 461-0015-028

PARCEL 2:

PARCEL 1, PARCEL MAP 939, FILED JULY 13, 1972, BOOK 76 OF PARCEL MAPS, PAGE 10,
ALAMEDA COUNTY RECORDS.

EXCEPTING THEREFROM THAT PORTION DESCRIBED IN THE DEED TO EDEN ROCK CO. NO. 3,
A JOINT VENTURE, RECORDED JULY 31, 1978, REEL 5508, IMAGE 378, SERIES NO.
78-145175, OFFICIAL RECORDS.

ASSESSOR'S PARCEL NO. 461-0015-020-2

PARCEL 3:

PARCEL 2, PARCEL MAP NO. 939, FILED JULY 13, 1972, IN BOOK 76 OF PARCEL MAPS,
PAGE 10, ALAMEDA COUNTY RECORDS.

TOGETHER WITH:

ALL THAT CERTAIN REAL PROPERTY BEING A PORTION OF PARCEL 1 AS SHOWN ON "PARCEL
MAP NO. 939" WHICH MAP IS FILED IN BOOK 76 OF PARCEL MAPS AT PAGE 10, ALAMEDA
COUNTY RECORDS, SAID REAL PROPERTY BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE CORNER COMMON TO PARCELS 1 AND 2 ON THE NORTHWESTERLY LINE OF
CORPORATE PLACE, AS SHOWN ON THE ABOVE MENTIONED PARCEL MAP, THENCE FROM SAID
POINT OF BEGINNING ALONG SAID NORTHERLY LINE SOUTH 76 DEGREES 38'05" WEST 8.22
FEET; THENCE LEAVING THE LAST SAID LINE AND RUNNING ALONG A LINE PARALLEL TO AND
7.806 FEET SOUTHWESTERLY AT RIGHT ANGLES, FROM THE DIVIDING LINE BETWEEN SAID
PARCELS 1 AND 2 NORTH 31 DEGREES 37'51" WEST 205.78 FEET; THENCE LEAVING SAID
PARALLEL LINE NORTH 58 DEGREES 22'09" EAST 7.806 FEET TO SAID DIVIDING LINE;
THENCE ALONG THE LAST SAID LINE SOUTH 31 DEGREES 37'51" EAST 208.356 FEET TO THE
POINT OF BEGINNING.

SAID REAL PROPERTY IS THE SAME AS "LOT LINE ADJUSTMENT NO. 77-4" APPROVED BY THE
CITY OF HAYWARD PLANNING COMMISSION ON SEPTEMBER 22, 1977.

ASSESSOR'S PARCEL NO. 461-0015-021-01

                                       -7-
<PAGE>   88
PARCEL 4:

PARCEL ONE OF AMENDED PARCEL MAP 1035 FILED SEPTEMBER 5, 1975 IN BOOK 80 OF
PARCEL MAPS ON PAGE 15, ALAMEDA COUNTY RECORDS.

ASSESSOR'S PARCEL NO. 461-0085-018-03 (PORTION).

PARCEL 5:

PORTION OF INVESTMENT BOULEVARD, AS SAID BOULEVARD WAS ESTABLISHED BY THE GRANT
OF EASEMENT FROM EDEN LANDING CORPORATION, A CALIFORNIA CORPORATION, TO THE CITY
OF HAYWARD, A MUNICIPAL CORPORATION, DATED JUNE 20, 1967, AND RECORDED JULY 24,
1967 IN REEL 2005 OF OFFICIAL RECORDS OF ALAMEDA COUNTY AT IMAGE 500 (AZ-71982),
DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE NORTHERLY RIGHT OF WAY LINE OF INVESTMENT
BOULEVARD WITH THE EASTERLY RIGHT OF WAY LINE OF EDEN LANDING ROAD AS SHOWN ON
PARCEL MAP NO. 1035 FILED IN BOOK 79 OF PARCEL MAPS, PAGE 28, IN THE OFFICE OF
THE ALAMEDA COUNTY RECORDER; THENCE ALONG SAID NORTHERLY RIGHT OF WAY LINE OF
INVESTMENT BOULEVARD THE FOLLOWING THREE COURSES: 1) SOUTH 81 DEGREES 53'26"
EAST 40.130 FEET; 2) SOUTH 48 DEGREES 12'02" EAST 61.294 FEET; 3) SOUTH
08 DEGREES 06'34" WEST 40.000 FEET; THENCE LEAVING SAID NORTHERLY RIGHT OF WAY
LINE NORTH 81 DEGREES 53'26" WEST 67.124 FEET TO A TANGENT CURVE TO THE RIGHT;
THENCE ALONG SAID TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 24.000 FEET
THROUGH A CENTRAL ANGLE OF 89 DEGREES 59'35" AN ARC DISTANCE OF 37.696 FEET;
THENCE NORTH 08 DEGREES 06'09" EAST 50.003 FEET TO THE POINT OF BEGINNING.

ASSESSOR'S PARCEL NO. 416-0085-018-03

                                       -8-