
<PAGE>
 
                                                                    EXHIBIT 99.7

                          THIRD AMENDED AND RESTATED
                             PARTNERSHIP AGREEMENT

                                      OF

                        ONE EMBARCADERO CENTER VENTURE
<PAGE>
 
                               TABLE OF CONTENTS

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                                                                                                              ----
<S>                                                                                                           <C> 
ARTICLE 1 - THE PARTNERSHIP...................................................................................   2

         SECTION 1.1     Continuation of the Partnership......................................................   2
         SECTION 1.2     Partnership Name.....................................................................   3
         SECTION 1.3     Place of Business....................................................................   3
         SECTION 1.4     General Partnership..................................................................   3
         SECTION 1.5     Term of Partnership..................................................................   3
         SECTION 1.6     Purposes of the Partnership..........................................................   3
         SECTION 1.7     Definitions..........................................................................   4

ARTICLE 2 - CAPITALIZATION....................................................................................   7

         SECTION 2.1     Partners' Percentage Interests.......................................................   7
         SECTION 2.2     Additional Capital Contributions; Limitations on Future
                         Capital Contributions; Obligation of Managing Partner to
                         Purchase BP Notes....................................................................   7
         SECTION 2.3     Admission of Additional Partners.....................................................   8
         SECTION 2.4     Return of Capital Accounts and Redemption of Partnership
                         Interests............................................................................   8
         SECTION 2.5     Investment Loan, Equity Redemption Loan, Prudential
                         Guarantied Loan, Existing Loans and Replacement Loans................................   8

ARTICLE 3 - ALLOCATIONS OF PROFITS AND LOSSES.................................................................   9

         SECTION 3.1     Capital Accounts and Allocations of Profit and Loss..................................   9

ARTICLE 4 - DISTRIBUTIONS.....................................................................................  11

         SECTION 4.1     Distributions........................................................................  11
         SECTION 4.2     Amounts Withheld.....................................................................  11

ARTICLE 5 - MANAGEMENT OF THE PARTNERSHIP.....................................................................  11

         SECTION 5.1     Management...........................................................................  11
         SECTION 5.2     Rights to Delegate and Employ........................................................  11
         SECTION 5.3     Enumeration of Specific Rights and Powers............................................  12
         SECTION 5.4     Limitations on Managing General Partner's Authority..................................  13
         SECTION 5.5     Filing of Returns and Other Writings.................................................  14
         SECTION 5.6     Other Permissible Activities.........................................................  15
</TABLE> 

                                      (i)
<PAGE>
 
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         SECTION 5.7     Contracts with Affiliates; Borrowing from Partners...................................  15
         SECTION 5.8     Indemnification......................................................................  15
         SECTION 5.9     Liability of the Managing General Partner............................................  17
         SECTION 5.10    Other Matters Concerning the Managing General Partner................................  18

ARTICLE 6 - ACCOUNTING........................................................................................  18

         SECTION 6.1     Fiscal Year and Tax Accounting Method................................................  18
         SECTION 6.2     Books, Records, and Tax Reports......................................................  19
         SECTION 6.3     Accounting Practice..................................................................  19
         SECTION 6.4     Accountants..........................................................................  19
         SECTION 6.5     Bank Accounts........................................................................  19

ARTICLE 7 - RIGHTS AND OBLIGATIONS OF THE NON-MANAGING........................................................  19

         SECTION 7.1     Contributions by Non-Managing General Partners.......................................  19
         SECTION 7.2     Corporate Authority..................................................................  19
         SECTION 7.3     Role of Non-Managing General Partners................................................  19
         SECTION 7.4     Rights and Obligations Under the Act.................................................  20
         SECTION 7.5     Redemption Rights....................................................................  20

ARTICLE 8 - WITHDRAWAL AND REPLACEMENT OF PARTNERS AND........................................................  20

         SECTION 8.1     Non-Managing General Partners........................................................  20
         SECTION 8.2     Managing General Partner.............................................................  20
         SECTION 8.3     Transfer of Partnership Interests....................................................  20
         SECTION 8.4     Substituted Non-Managing General Partners............................................  21
         SECTION 8.5     Assignees............................................................................  22

ARTICLE 9 - DISSOLUTION, LIQUIDATION AND TERMINATION..........................................................  22

         SECTION 9.1     Dissolution..........................................................................  22
         SECTION 9.2     Liquidation..........................................................................  22

ARTICLE 10 - MISCELLANEOUS....................................................................................  24

         SECTION 10.1    Redemption Agreement.................................................................  24
         SECTION 10.2    Notice...............................................................................  24
         SECTION 10.3    Further Assurances...................................................................  24
         SECTION 10.4    Agreement in Counterparts............................................................  24
         SECTION 10.5    Construction.........................................................................  24
</TABLE> 

                                     (ii)
<PAGE>
 
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         SECTION 10.6    Governing Law........................................................................  24
         SECTION 10.7    Amendments...........................................................................  24
         SECTION 10.8    Pronouns.............................................................................  24
         SECTION 10.9    Successors in Interest...............................................................  25
         SECTION 10.10   Headings.............................................................................  25
         SECTION 10.11   Consent to Jurisdiction and Service of Process.......................................  25
         SECTION 10.12   Waiver of Jury Trial.................................................................  25
</TABLE> 

                                     (iii)
<PAGE>
 
SCHEDULES AND EXHIBITS

Schedule A  Partners and Percentage Interests

Exhibit A   Legal Description of Property
Exhibit B   Approved Terms and Conditions of Loans from Managing General Partner
Exhibit C   Description of Equity Redemption Loan
Exhibit D   Description of Prudential Guarantied Loan
Exhibit E   Description of Business Interruption and General Liability Insurance
Exhibit F   Description of Financing Plan for the Partnership
Exhibit G   Form of Special BP Loan Note

                                     (iv)
<PAGE>
 
                          THIRD AMENDED AND RESTATED
                             PARTNERSHIP AGREEMENT

                                      OF

                        ONE EMBARCADERO CENTER VENTURE


     This THIRD AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF ONE EMBARCADERO
CENTER VENTURE (this "Agreement") is entered into and shall be effective as of
                      ---------                                               
the 12th day of November, 1998, by and between Boston Properties LLC, a Delaware
limited liability company, having a mailing address c/o Boston Properties, Inc.,
8 Arlington Street, Boston, Massachusetts 02116, as managing general partner
("BPLLC" or the "Managing General Partner"), BP EC1 Holdings LLC, a Delaware
 ------          ------------------------                                   
limited liability company, having a mailing address c/o Boston Properties, Inc.,
8 Arlington Street, Boston, Massachusetts 02116, as non-managing general partner
("Holdings LLC"), and PIC Realty Corporation, a Delaware corporation, having a
  ------------                                                                
mailing address c/o Prudential Realty Group, 8 Campus Drive, 4th Floor - Arbor
Circle South, Parsippany, New Jersey 07054 ("PIC"), as non-managing general
                                             ---                           
partner.  Holdings LLC and PIC are sometimes hereinafter referred to as the
"Non-Managing General Partners" and each as a "Non-Managing General Partner."
 -----------------------------                 ----------------------------   
The Managing General Partner and the Non-Managing General Partners are sometimes
hereinafter referred to as the "Partners."
                                --------  


                                   RECITALS:

     A.   ONE EMBARCADERO CENTER VENTURE (the "Partnership") is a California
                                               -----------                  
general partnership formed pursuant to and governed by that certain Agreement of
Partnership dated as of January 1, 1973, creating a general partnership named
Block 230 Associates, and as subsequently amended on March 1, 1973 and June 10,
1977, amended and restated on January 1, 1979, and further amended on September
1, 1979, December 29, 1986, December 31, 1986, January 1, 1992 and September 28,
1998 (as revised to such date, the "Prior Partnership Agreement").
                                    ---------------------------   

     B.   The Partnership owns and has in operation that certain parcel of real
property situated in the City and County of San Francisco, California, and more
particularly described on Exhibit A hereto, upon which is erected an office
                          ---------                                        
building, related improvements and personal property owned by the Partnership
and situated thereon or therein, known generally as One Embarcadero Center (the
"Real Property").
 -------------   

     C.   On September 30, 1998, the interest of Fedmark Corporation, a Delaware
corporation ("Fedmark"), in the Partnership was redeemed for cash.  Following
              -------                                                        
such redemption, all of the outstanding partnership interests in the Partnership
were held by PIC, with a 50.016956% partnership interest, and Embarcadero Center
Investors Partnership, a California limited partnership ("ECIP"), with a
                                                          ----          
49.983044% partnership interest.
<PAGE>
 
     D.   Pursuant to that certain Master Transaction Agreement, dated September
28, 1998 (the "Master Transaction Agreement"), by and among (i) The Prudential
               ----------------------------                                   
Insurance Company of America, a New Jersey corporation, PIC, Fedmark, ECIP,
Pacific Property Services, L.P., a California limited partnership, and the other
persons identified therein on Exhibit A-1 thereto, on the one hand, and (ii)
                              -----------                                   
Boston Properties Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), and Boston Properties, Inc., a Delaware corporation
 ---------------------                                                       
("Public Company") on the other hand, the Operating Partnership acquired the
  --------------                                                            
right, subject to the satisfaction of various conditions, to have all of the
partners of ECIP contribute to the Operating Partnership all of their interests
in ECIP.  On November 12, 1998, following the redemption of Fedmark as a partner
of the Partnership as described in the preceding paragraph, the closing of the
transactions contemplated by the Master Transaction Agreement occurred, and the
Operating Partnership directed the partners of ECIP to convey their interests in
ECIP to Holdings LLC and the partners of ECIP did so convey their interests in
ECIP to Holdings LLC (which conveyance constituted a contribution to the
Operating Partnership).  Upon such conveyance, by operation of law ECIP
dissolved and Holdings LLC succeeded to ECIP's 49.983044% partnership interest
in the Partnership.  Prior to the amendment and restatement of this Agreement,
Holdings LLC conveyed to BPLLC a 0.499830% partnership interest in the
Partnership.  As a result of the foregoing, (i) ECIP and Fedmark (the
"Withdrawing Partners") have ceased to be partners of the Partnership, (ii)
 --------------------                                                      
BPLLC and Holdings LLC have been admitted as partners of the Partnership, and
(iii) as of the date hereof BPLLC, PIC and Holdings LLC are the sole partners of
the Partnership with percentage interests of 0.499830%, 50.016956% and
49.483214%, respectively.

     E.   To reflect the transfers, successions, admissions and withdrawals
recited above, to provide for the continuation of the Partnership as a
California general partnership under the Act, and to provide for the revised
terms and conditions under which the Partnership will continue in existence and
be governed, the parties wish to amend and restate the Prior Partnership
Agreement in its entirety, as provided herein.

     NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     I.   Transfer of Partnership Interests.  Pursuant to the transactions
          ---------------------------------                               
described in the Recitals above, the Withdrawing Partners have ceased to be
partners in the Partnership, BPLLC has been admitted as the Managing General
Partner of the Partnership with a 0.499830% Percentage Interest and Holdings LLC
has been admitted as a Non-Managing General Partner of the Partnership with a
49.483214% Percentage Interest.  PIC shall continue as a Non-Managing General
Partner of the Partnership with a 50.016956% Percentage Interest.

     II.  Amendment and Restatement.  The Original Partnership Agreement is
          -------------------------                                        
hereby amended and restated in its entirety as follows:

                                       2
<PAGE>
 
                          ARTICLE 1 - THE PARTNERSHIP

     SECTION 1.1    Continuation of the Partnership.
                    ------------------------------- 

     The Partners hereby agree to continue the Partnership as a general
partnership under and pursuant to the Uniform Partnership Act of the State of
California (the "Act") as the same is now or hereafter amended.  The Partners
                 ---                                                         
shall promptly execute, and the Managing General Partner shall promptly cause to
be filed with the proper offices, any certificate or amendments thereto required
by the Act or any other applicable partnership act, fictitious name act, or
similar statute in effect, or for any reasonable purpose.

     SECTION 1.2    Partnership Name.
                    ---------------- 

     The name of the Partnership shall continue to be "ONE EMBARCADERO CENTER
VENTURE."  All business of the Partnership shall be conducted under such name or
under such variations thereof as the Managing General Partner deems necessary or
appropriate to comply with the requirements of law in any applicable
jurisdiction in which the Partnership may do business.

     SECTION 1.3    Place of Business.
                    ----------------- 

     The principal place of business of the Partnership shall be c/o Boston
Properties, Inc., Four Embarcadero Center, Suite 2600, San Francisco, California
94111, or at such other place or places as the Managing General Partner may
designate.

     SECTION 1.4    General Partnership.
                    ------------------- 

     The Partnership shall be a general partnership, governed by the Act.  The
interests of the Partners in the Partnership shall be personal property for all
purposes.  All real and other property owned by the Partnership shall be deemed
owned by the Partnership, as a partnership, and no Partner, individually, shall
have any ownership of such property.

     SECTION 1.5    Term of Partnership.
                    ------------------- 

     The term of the Partnership shall continue until 12:00 noon on December
31, 2050, unless sooner terminated in accordance with the terms and conditions
of this Agreement, or by applicable law.

                                       3
<PAGE>
 
     SECTION 1.6    Purposes of the Partnership.
                    --------------------------- 

     The purpose of the Partnership shall be:

          (a)  to own, manage, develop, improve, renovate, rehabilitate,
               operate, hold for investment, lease, encumber, mortgage, pledge,
               assign, exchange, sell and/or otherwise deal with the Property;

          (b)  to retain managing agents and consultants therefor, and to do all
               things necessary or useful in connection with any of the
               foregoing;

          (c)  in addition to, and in furtherance of these purposes and powers,
               the Partnership shall have the power (i) to borrow money and
               issue evidences of indebtedness and to secure same by mortgage,
               pledge or other lien (including, without limitation, obtaining
               the Equity Redemption Loan and Prudential Guarantied Loan), and
               (ii) to guarantee the obligations of any other Person when done
               in furtherance of the Partnership's business, including any
               indebtedness of such Person, and to secure such guarantee
               obligations by mortgage, pledge or other lien on any asset of the
               Partnership;

          (d)  to make and service the Investment Loan as contemplated herein;

          (e)  subject to the express terms, provisions and restrictions of this
               Agreement, to engage in and consummate the transactions described
               in the Master Transaction Agreement;

          (f)  to enter into the Redemption Agreement and consummate the
               transactions described therein; and

          (g)  to enter into, perform and carry out contracts of any kind
               necessary to, or in connection with, or incidental to the
               accomplishment of any of the foregoing purposes; and

          (h) to use the Excess Mortgage Loan Proceeds to make the Special BP
     Loan.

     The Partnership shall not engage in any other business.  It is further
agreed that the Partnership shall at all times adhere to at least the level of
quality in the maintenance and operation of the Property as a first class office
and retail complex as maintained by the Partnership during the twelve (12)
month period preceding the date hereof.

     SECTION 1.7    Definitions.
                    ----------- 

                                       4
<PAGE>
 
     In addition to the capitalized terms defined in the recitals and elsewhere
herein, the following terms shall have the following meanings:

     "Act" has the meaning set forth in Section 1.1 hereof.
      ---                                                  

     "Affiliate" means, with respect to any Person, any Person directly or
      ---------                                                           
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, "control," when used with respect to any
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.  No officer, director or equity owner of
the Managing General Partner shall be considered an Affiliate of the Managing
General Partner solely as a result of serving in such capacity or being an
equity owner of the Managing General Partner.

     "Approved Loan Costs" shall mean all fees, costs and expenses incurred by
      -------------------                                                     
the Partnership or any Partner in connection with the Equity Redemption Loan or
Prudential Guarantied Loan that are expressly approved by each of the Partners
(which approval shall not be unreasonably withheld, conditioned or delayed),
including, without limitation, (i) all fees and expenses of the lender(s)
thereof subject to reimbursement by the Partnership or any Partner, and (ii) all
of the reasonable legal fees and expenses incurred directly by such Persons (or
any of their constituent owners) in connection with the Equity Redemption Loan
and the Prudential Guarantied Loan.

     "Borrowing Costs" of a loan shall mean the cost of procuring and repaying
      ---------------                                                         
such loan expressed as an "all-in" effective annual interest rate per annum to
be determined taking into account all costs of procuring and repaying such loan
including, without limitation, all (i) periodic interest and other amounts due
and payable in connection with such loan, (ii) all loan points and fees paid
with respect to such loan, (iii) all fees and expenses of the lender(s) thereof
that are subject to payment or reimbursement by the borrower in connection
therewith, and (iv) all legal fees and expenses incurred by the borrower in
connection therewith; provided that, all points, fees, costs and expenses will
                      -------- ----                                           
be amortized on a straight-line basis over the term of the loan.

     "BP Note" means a note, in the form and for a purpose described in Exhibit
      -------                                                           -------
B hereto, given by the Partnership to the Managing General Partner or any of its
-                                                                               
Affiliates.

     "BP Partners" means Boston Properties LLC, the Managing General Partner,
      -----------                                                            
and BP EC1 Holdings LLC, a Non-Managing General Partner.

     "Capital Contributions" means, with respect to any Partner, the amount of
      ---------------------                                                   
money and the initial fair market value of any property (other than money)
contributed to the Partnership with respect to the interest in the Partnership
held by such Person less the amount of liabilities to which such property is
subject and which the Partnership is considered to assume pursuant to the
provisions of Section 752 of the Code (as defined below).

                                       5
<PAGE>
 
     "Code" means the Internal Revenue Code of 1986, as amended from time to
      ----                                                                  
time  (or any corresponding provisions of succeeding law).

     "Equity Redemption Loan" shall mean a loan to the Partnership governed by
      ----------------------                                                  
the term loan agreement particularly described on Exhibit C attached hereto, a
                                                  ---------                   
true, correct and complete copy of which has been delivered to each of the
Partners prior to the date hereof.  "Equity Redemption Loan" shall also include
any extension or modification of the Equity Redemption Loan and any new loan
obtained by the Partnership to replace or refinance the Equity Redemption Loan;
provided that, any such extension, modification or new loan shall be in
-------- ----                                                          
compliance with the terms and provisions of this Agreement and the Redemption
Agreement.

     "Excess Mortgage Loan Proceeds" shall mean the excess proceeds of any new
      -----------------------------                                           
mortgage loan borrowing secured by the Real Property over and above the amounts
of such proceeds used to (i) repay any existing mortgage debt secured by the
Real Property prior to the date hereof, (ii) pay any prepayment penalty, premium
or fee in connection with any such existing mortgage loan that is repaid, and
(iii) pay the transaction costs incurred by the Partnership in connection with
such borrowing or the prepayment of any existing mortgage loan.

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

     "Interest Rate Approved Loan Costs" has the meaning given thereto in
      ---------------------------------                                  
Section 2.5(e)(i).

     "Investment Loan" shall mean a loan made by the Partnership to the
      ---------------                                                  
Investment Loan Borrower in an aggregate amount equal to $88,200,000 pursuant to
(and in accordance with the terms and provisions of) that certain Note Purchase
Agreement of even date herewith, by and between the Partnership and Investment
Loan Borrower.

     "Investment Loan Borrower" shall mean Prudential Realty Securities, Inc., a
      ------------------------                                                  
Delaware corporation.

     "Investment Notes" means the promissory notes of the Investment Loan
      ----------------                                                   
Borrower acquired by the Partnership in connection with the Investment Loan.

     "Non-Managing General Partner" means BP EC1 Holdings LLC, a Delaware
      ----------------------------                                       
limited liability company, and PIC Realty Corporation, a Delaware corporation,
and any other Person who may become a Non-Managing General Partner pursuant to
the terms of this Agreement, in each such case until such Person has ceased to
be a Non-Managing General Partner pursuant to 

                                       6
<PAGE>
 
the terms of this Agreement. "Non-Managing General Partners" means all such
Persons, if there is more than one. If at any time there is more than one Non-
Managing General Partner, then all references herein to the Non-Managing General
Partner shall, unless the context requires otherwise, be deemed to refer to the
Non-Managing General Partners.

     "Managing General Partner" means Boston Properties LLC, a Delaware limited
      ------------------------                                                 
liability company, and any other Person who may become a Managing General
Partner pursuant to the terms of this Agreement, in either case until such
Person has ceased to be a Managing General Partner pursuant to the terms of this
Agreement.

     "Partnership" means the partnership governed by this Agreement and any
      -----------                                                          
partnership continuing the business of the Partnership in the event of
dissolution as herein provided.

     "Percentage Interest" means, with respect to any Partner, the Percentage
      -------------------                                                    
Interest set forth opposite such Partner's name on Schedule A.  In the event any
                                                   ----------                   
Partner's interest in the Partnership is transferred in accordance with the
provisions of this Agreement, the transferee of such interest shall succeed to
the Percentage Interest of his transferor to the extent it relates to the
transferred interest.

     "Person" means any individual, partnership, corporation, trust, or other
      ------                                                                 
entity.

     "Property" shall mean the Real Property, including all real property,
      --------                                                            
improvements, leases, licenses, fixtures and tangible and intangible personal
property (including, without limitation, cash, deposit accounts, money and other
sums and Investment Notes so long as the Partnership holds the same) owned by
the Partnership from time to time.

     "Prudential Guarantied Loan" shall mean a loan to the Partnership governed
      --------------------------                                               
by the term loan agreement particularly described on Exhibit D attached hereto,
                                                     ---------                 
a true, correct and complete copy of which has been delivered to each of the
Partners prior to the date hereof.

     "Redemption Agreement" shall mean that certain Redemption Agreement of even
      --------------------                                                      
date herewith, by and among the Partnership and each of the Partners.

     "Redemption Distribution" means the distribution to PIC, in full redemption
      -----------------------                                                   
of its interest in the Partnership, of all or a portion of the Investment Notes
and, if applicable, cash, as determined in accordance with the Redemption
Agreement.

     "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).

     "Special BP Loan" shall mean a loan in the principal amount equal to the
      ---------------                                                        
Excess Mortgage Loan Proceeds and at an interest rate per annum equal to twelve
(12) basis points above the Borrowing Costs of the Excess Mortgage Loan
Proceeds, made by the Partnership to 

                                       7
<PAGE>
 
any BP Partner, or any Affiliate of any BP Partner and evidenced by a promissory
note in the form of Exhibit G attached hereto.
                    ---------

     "Transfer" means, as a noun, any voluntary or involuntary transfer, sale,
      --------                                                                
pledge, hypothecation, or other disposition and, as a verb, voluntarily or
involuntarily to transfer, sell, pledge, hypothecate, or otherwise dispose of.


                          ARTICLE 2 - CAPITALIZATION

      SECTION 2.1   Partners' Percentage Interests.
                    ------------------------------ 

      The names and Percentage Interests of the Partners are set forth on
Schedule A hereto.
----------        

      SECTION 2.2   Additional Capital Contributions; Limitations on Future
                    -------------------------------------------------------
                    Capital Contributions; Obligation of Managing Partner to
                    --------------------------------------------------------
                    Purchase BP Notes.
                    ----------------- 

          (a) No Partner shall, except as otherwise required by the Act, other
applicable law or this Agreement, be required to make any further Capital
Contributions to the Partnership, and so long as PIC or any Affiliate of PIC is
a Partner, no Capital Contributions shall be made to the Partnership without the
prior written consent of PIC.

          (b) At no time prior to the second anniversary of the Redemption
Distribution shall the Managing General Partner call or accept Capital
Contributions from any Partner for the purpose of repaying the Equity Redemption
Loan or any debt replacing or refinancing the Equity Redemption Loan, and during
such period no Capital Contributions made after the date hereof shall be used in
such manner.

          (c) To the extent that it is necessary or desirable for the
Partnership, in the sole discretion of the Managing General Partner, to raise
cash for the purpose of funding working capital, capital expenditures, leasing
commissions, tenant improvements or other expenditures relating to the Property
at a time when the Partnership is unable to raise such cash through the receipt
of Capital Contributions because of the prohibition set forth in Section 2.2(a),
the Managing General Partner agrees that it (or an Affiliate of the Managing
General Partner) will lend funds to the Partnership for such purposes by
purchasing BP Notes from the Partnership.

      SECTION 2.3   Admission of Additional Partners.
                    -------------------------------- 

      The Managing General Partner shall have the right, from time to time,
provided it obtains the consent of the Non-Managing General Partners, to admit
additional Non-Managing General Partners to the Partnership.

                                       8
<PAGE>
 
      Upon the admission of any new Non-Managing General Partner, an amendment
of this Agreement, reflecting such change, shall be signed by the Managing
General Partner and the additional Non-Managing General Partner, and an
amendment to the Certificate, reflecting such change, to the extent required or
appropriate under applicable law, shall be signed by all Partners either
individually or by the Managing General Partner on their behalf and filed with
the Secretary of State of the State of California.

      SECTION 2.4   Return of Capital Accounts and Redemption of Partnership
                    --------------------------------------------------------
                    Interests.
                    --------- 

      Except as otherwise provided in this Agreement or as set forth in the
Redemption Agreement, (i) no Partner shall have the right to demand and withdraw
a return of its Capital Account, and (ii) no Partner shall have the right to
receive property other than cash upon a distribution to the Partners, redemption
of any Partner's interest or liquidation of the Partnership.

      No Partner shall receive any interest, salary, or drawing with respect to
its Capital Contributions or its Capital Account or for services rendered on
behalf of the Partnership or otherwise in its capacity as Partner, except (i)
interest received, if any, on BP Notes or (ii) as otherwise provided in this
Agreement.

      SECTION 2.5   Investment Loan, Equity Redemption Loan, Prudential
                    ---------------------------------------------------
                    Guarantied Loan, Existing Loans and Replacement Loans.
                    ----------------------------------------------------- 

          (a) The Partnership is hereby authorized to, and shall, make the
Investment Loan to Investment Loan Borrower and acquire the Investment Notes on
the date hereof.

          (b) The Partnership is hereby authorized to, and shall, borrow the
Equity Redemption Loan and Prudential Guarantied Loan on the date hereof and
shall thereafter perform its obligations in respect thereof subject to the terms
and limitations of this Agreement.  The proceeds of the Equity Redemption Loan
and Prudential Guarantied Loan shall be applied to make the Investment Loan and
acquire the Investment Notes on the date hereof.

          (c) In accordance with Section 2.2(b), the Partnership shall not, at
any time prior to the second anniversary of the Redemption Date, use Capital
Contributions made after the date hereof for the purpose of repaying the Equity
Redemption Loan or any debt replacing the Equity Redemption Loan.

          (d) Except as otherwise expressly provided in this Agreement, all
costs, fees, penalties and expenses incurred in connection with the satisfaction
of any debt of the Partnership on the date hereof shall be paid by PIC, on the
one hand, and the BP Partners, on the other hand, in accordance with the terms
and provisions of Exhibit V to the Master Transaction Agreement. All Borrowing
                  ---------                                                   
Costs of the Excess Mortgage Loan Proceeds ("Excess Proceeds Borrowing Costs")
                                             -------------------------------  
shall be paid by the Partnership and capitalized and amortized over the term of
the loan from which the Excess Mortgage Loan Proceeds were derived.  All other
Borrowing Costs 

                                       9
<PAGE>
 
incurred in connection with any Partnership borrowing (other than those
described hereinabove and in subsection (e) below) shall be paid by the BP
                             --------------
Partners.

          (e)  Notwithstanding anything to the contrary provided in this
Agreement, all costs, fees and expenses incurred in connection with the
consummation of the Equity Redemption Loan and Prudential Guarantied Loan shall
be paid by the Partnership and borne by the Partners (and reflected in the
Partnership's books as follows):

               (i)    Any and all Approved Loan Costs paid in order to reduce or
     lock the interest rate for the Equity Redemption Loan or Prudential
     Guarantied Loan (including, without limitation, interest rate lock fees and
     loan points charged to obtain a reduced, fixed or more favorable rate
     (collectively, "Interest Rate Approved Loan Costs")) shall be paid by the
                     ---------------------------------                        
     Partnership and capitalized and amortized over the term of the appropriate
     loan;

               (ii)   All other Approved Loan Costs shall be paid by the
     Partnership as current expenses and borne by each Partner in accordance
     with its Percentage Interest on the date hereof;

               (iii)  Any other costs and expenses incurred by the Partnership
     with respect to the Equity Redemption Loan shall be paid by the BP
     Partners; and

               (iv)   Any other costs and expenses incurred by the Partnership
     with respect to the Prudential Guarantied Loan shall be paid by PIC.


                 ARTICLE 3 - ALLOCATIONS OF PROFITS AND LOSSES
                      AND MAINTENANCE OF CAPITAL ACCOUNTS

     SECTION 3.1    Capital Accounts and Allocations of Profit and Loss.
                    --------------------------------------------------- 

          (a)  Capital Accounts.  A separate capital account (a "Capital
               ----------------                                  -------
Account") shall be maintained for each Partner in accordance with Section 1.704-
1(b)(2)(iv) of the Regulations, and this Section 3.1 shall be interpreted and
applied in a manner consistent with such section of the Regulations.  The
Partnership may, at the election of the Managing General Partner, adjust the
Capital Accounts of its Partners to reflect revaluations of the Partnership
property whenever the adjustment would be permitted under Regulations Section
1.704-1(b)(2)(iv)(f).  In the event that the Capital Accounts of the Partners
are so adjusted, (i) the Capital Accounts of the Partners shall be adjusted in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain or loss, as computed for book
purposes, with respect to such property, and (ii) the Partners' distributive
shares of depreciation, depletion, amortization and gain or loss, as computed
for tax purposes, with respect to such property shall be determined so as to
take account of the variation between the adjusted tax basis and book value of
such property in the same manner as under Section 704(c) of the Code.  In the
event that 

                                       10
<PAGE>
 
Code Section 704(c) applies to partnership property, the Capital Accounts of the
Partners shall be adjusted in accordance with Regulations Section 1.704-
1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain
and loss, as computed for book purposes, with respect to such property. The
Partners' distributive shares of depreciation, depletion, amortization and gain
or loss, as computed for tax purposes, with respect to such property shall be
determined so as to take account of the variation between the adjusted tax basis
and book value of such property in the same manner as under Code Section 704(c),
and the amount of upward and/or downward adjustments to the book value of the
Partnership property shall be treated as income, gain, deduction and/or loss for
purposes of applying the allocation provisions of this Article 3. In the event
that Code Section 704(c) applies to Partnership property, the Capital Accounts
of the Partners shall be adjusted in accordance with Regulations Section 1.704-
1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain
and loss, as computed for book purposes, with respect to such property. The
amount of all distributions to Partners shall be determined pursuant to Section
4.1 hereof. Notwithstanding any provision contained herein to the contrary, no
Partner shall be required to restore any negative balance in its Capital
Account.

          (b) Allocation of Profit and Loss.  Generally, all profits and losses
              -----------------------------                                    
will be allocated in accordance with the Percentage Interests of the Partners.
It is the intention of the Partners that all items of Partnership income, gain,
loss, and deduction, as determined for book purposes, shall be allocated among
the Partners, and shall be credited or debited to their respective Capital
Accounts in accordance with Regulations Section 1.704(b)(2)(iv), so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Regulations Section 1.704(b)(2)(ii)(i), by allocating
items that can have economic effect in such a manner that the balance of each
Partner's Capital Account at the end of any taxable year (increased by such
Partner's "share of Partnership minimum gain and Partner minimum gain", as
defined in Regulations Section 1.704-2) would be positive in the amount of cash
that such Partner would receive (or would be negative in the amount of cash that
such Partner would be required to contribute to the Partnership) if the
Partnership sold all of its property for an amount of cash equal to the book
value (as determined pursuant to Regulations Section 1.704-1(b)(2)(iv)) of such
property (reduced, but not below zero, by the amount of nonrecourse debt to
which such property is subject) and all of the cash of the Partnership remaining
after payment of all liabilities (other than nonrecourse liabilities) of the
Partnership were distributed in liquidation immediately following the end of
such taxable year pursuant to Article 9, and (ii) that all allocations of items
that cannot have economic effect (including credits and nonrecourse deductions)
are allocated to the Partners in accordance with the Partners' interests in the
Partnership, which, unless otherwise required by Code Section 704(b) and the
Regulations promulgated thereunder, shall be their Percentage Interests for the
taxable year.

          (c) Section 704(c) Items.  Except to the extent otherwise required by
              --------------------                                             
the Code, Regulations Section 1.704-3 shall apply to all tax allocations
governed by Code Section 704(c) and all "reverse section 704(c) allocations".
The Managing General Partner shall determine the method of allocation to be used
pursuant to Regulations Section 1.704-3 and shall make all elections under such
section; provided, however, that with respect to the "reverse 
         --------  -------                                                  

                                       11
<PAGE>
 
Section 704(c) allocations," caused by the transfers contemplated by the Master
Transaction Agreement, the Partnership will use the "traditional method without
curative allocations."

          (d) The tax returns for the Partnership for the 1998 calendar year
shall be prepared using the interim closing of the books method.

                           ARTICLE 4 - DISTRIBUTIONS

      SECTION 4.1   Distributions.
                    ------------- 

          (a) Except as provided in Section 4.1(b) or Section 7.5, and subject
to the needs of the Partnership to accumulate reserves, which prior to the
Redemption Distribution shall be determined in the sole discretion of the
Managing General Partner, distributions to the Partners shall be made in
proportion to the Partners' Percentage Interests.  Distributions shall be made
from time to time at the discretion of the Managing General Partner.

          (b) Notwithstanding anything to the contrary provided in this
Agreement, all payments in respect of title insurance received by the
Partnership the amount of which was affected by the non-imputation endorsement
to the Partnership's title insurance policy issued as of the date hereof with
respect to the Property will be distributed only to the BP Partners in
proportion to their respective Percentage Interests.

      SECTION 4.2   Amounts Withheld.
                    ---------------- 

      All amounts withheld pursuant to the Code or any provision of any state or
local tax law with respect to any payment or distribution to the Partnership,
the Managing General Partner or the Non-Managing General Partners shall be
treated as amounts distributed to the Managing General Partner or Non-Managing
General Partners pursuant to this Article for all purposes under this Agreement.
The Managing General Partner may allocate any such amounts among the Partners in
any manner that is in accordance with applicable law.

                   ARTICLE 5 - MANAGEMENT OF THE PARTNERSHIP

      SECTION 5.1   Management.
                    ---------- 

      The management powers over the business and affairs of the Partnership are
and shall be exclusively vested in the Managing General Partner, who shall be
subject to the provisions of this Agreement and to applicable law, and, subject
to the consent rights set forth in Section 5.4 hereof, no Non-Managing General
Partner shall have any right to participate in or exercise control or management
power over the business and affairs of the Partnership.

                                       12
<PAGE>
 
      SECTION 5.2   Rights to Delegate and Employ.
                    ----------------------------- 

      The Managing General Partner shall devote such time and effort to the
Partnership as it deems necessary and may retain agents as reasonably required
or desirable to assist it.  The Managing General Partner shall review the status
and condition of the Property and shall supervise the activities of any agents
engaged by it.  The Managing General Partner may delegate any of its powers,
rights and obligations hereunder, and, in furtherance of any such delegation,
may appoint, employ, contract or otherwise deal with any Person (including
Affiliates, but only so long as such employment, contract or other deal is not
less favorable to the Partnership than would be an arms-length transaction on
market terms) for the transaction of the business of the Partnership, which
Persons may, under the supervision of the Managing General Partner, perform any
acts or services for the Partnership as the Managing General Partner may
approve.


      SECTION 5.3   Enumeration of Specific Rights and Powers.
                    ----------------------------------------- 

      Subject to Section 5.4, the Managing General Partner shall have all the
rights and powers which may be possessed by a general partner in a partnership
formed under the Act, which are otherwise conferred by law or which are
necessary, advisable or convenient to the discharge of duties under this
Agreement and to the management, direction and control of the business and
affairs of the Partnership, exercisable without the consent of the Non-Managing
General Partners (except as herein expressly provided), including the following
rights and powers:

          (a) to conduct the tax, financial and business affairs of the
Partnership;

          (b) to take all action necessary to acquire, purchase, renovate,
rehabilitate, hold, own, improve, operate, encumber, mortgage, pledge, assign,
exchange, or to sign notes or guarantee payment of any loans relating to the
purposes of the Partnership;

          (c) to manage, repair, insure, service, promote, advertise, lease,
sublease, and create or release interests in the Partnership property;

          (d) to timely pay out of Partnership funds such expenses as are
necessary to carry out the intentions and purposes of the Partnership including
real estate taxes and debt service payments to the extent there is sufficient
gross cash proceeds.

          (e) to sell and/or otherwise dispose of all or any portion of the
Property;

          (f) to make appropriate elections permitted under any applicable tax
law, provided that such elections will not, in the opinion of counsel or the
accountants for the Partnership, be disadvantageous to a majority in interest of
the Non-Managing General Partners;

          (g) to change the principal office of the Partnership to other places
subject to the notice provision herein provided;

                                       13
<PAGE>
 
          (h) to employ agents, attorneys, public accountants (which shall be,
in all events, a "Big Five" accounting firm), and depositories and to grant
powers of attorney;

          (i) to employ persons necessary and appropriate in the operation and
management of the Partnership and the Property, including, but not limited to,
supervisory managing agents, insurance brokers,  real estate brokers, and loan
brokers, on such terms and for such compensation which does not exceed generally
prevailing market rates,  all to act under the supervision of the Managing
General Partner, and the Managing General Partner on behalf of the Partnership
is hereby authorized to enter into an agreement with any Managing General
Partner in their individual capacities or a corporation or other entity
affiliated with any Managing General Partner for the performance of such
services to the Partnership except as otherwise provided for in this Agreement;

          (j) to enter into any contract of insurance which the Managing General
Partner deems necessary and proper for the protection of the Partnership, the
conservation of the Property or any other asset of the Partnership, or for a
purpose convenient or beneficial to the Partnership, including but not limited
to, a contract naming the Managing General Partner as additional insured, and to
continue in force any policies required by any mortgage, lease or other
agreement relating to the Property or any part thereof; provided that, so long
                                                        -------- ----         
as PIC or any Affiliate of PIC is a Partner, (i) the Partnership shall maintain
reasonable and customary insurance with respect to the Property with amounts and
types of coverage that are at least comparable to that maintained by Affiliates
of the BP Partners with respect to other properties owned by such Affiliates
(after giving effect to differences in the value and nature of such properties)
and (ii) the Partnership shall maintain business interruption and commercial
general liability insurance in at least the amounts set forth on Exhibit E
                                                                 ---------
hereto;

          (k) to pay, collect, compromise, arbitrate, resort to legal action or
otherwise make or defend claims or demands of or against the Partnership;
provided that, so long as PIC, or an Affiliate of PIC, is a Partner, neither the
-------- ----                                                                   
Managing General Partner nor the Partnership shall compromise or settle any
claim or demand of, or against, the Partnership without PIC's, or its
Affiliate's, consent, which consent will not be unreasonably withheld;

          (l) to borrow money and issue evidences of indebtedness in furtherance
of any and all purposes of the Partnership, including borrowings from Partners
of the Partnership, as contemplated by Section 5.7 hereof or otherwise, and
including borrowings made in accordance with the financing plan for the
Partnership described in Exhibit F hereto; to guarantee the obligations of any
                         ---------                                            
other Person (but only when such guaranty is made in furtherance of the business
of the Partnership), including the indebtedness of such Person; and to secure
any or all of the above by mortgage, pledge, guaranty or other lien on the
Property and/or any other asset of the Partnership; and

          (m) to lend money to any BP Partner or any Affiliate of any BP Partner
pursuant to a Special BP Loan.

                                       14
<PAGE>
 
      SECTION 5.4   Limitations on Managing General Partner's Authority.
                    --------------------------------------------------- 

          (a) Notwithstanding anything in this Agreement to the contrary, for so
long as PIC is a Partner, the Managing General Partner shall not have the power
or authority to, and shall not, cause the Partnership to take any of the
following actions, without the consent of PIC, which consent shall not be
unreasonably withheld:

               (i)   other than in the ordinary course of business, cause any
     closing of a material portion of the Property for renovations (other than
     repairs necessitated as a result of a fire or other casualty);

               (ii)   cause or permit the engagement by the Partnership in any
     business other than as contemplated under Section 1.6;
                                               ----------- 

               (iii)  take any action or make any decision involving credit,
     management or servicing decisions relating to the Investment Notes other
     than making an election to accelerate the Investment Notes upon the
     occurrence of (and during the continuance of) an Event of Default or taking
     any action or decision relating to the Redemption Distribution;

               (iv)   make a loan to or guarantee the indebtedness of any Person
     other than (A) loans to tenants of the Property for tenant improvements or
     (B) a Special BP Loan;

               (v)    cause or permit the sale of (A) all or any material
     portion of the Property, except leases, concessionaire agreements and space
     licenses entered into in the ordinary course of business of the Property,
     or (B) except in connection with the Redemption Distribution, the
     Investment Notes or any portion thereof or interest therein;

               (vi)   cause the Partnership to (A) obtain any borrowing, (B)
     issue evidences of indebtedness, or (C) guaranty the obligations of any
     Person, if such borrowing, issuance or guaranty provides for recourse to
     PIC (other than the Prudential Guarantied Loan or the Equity Redemption
     Loan or any Replacement Debt (as defined in Exhibit F);

               (vii)  amend this Agreement if such amendment affects or could
     affect (A) the receipt, amount or timing of any distributions to PIC, or
     (B) PIC's rights or obligations under this Agreement or the Redemption
     Agreement;

               (viii) cause the dissolution of the Partnership, or cause the
     Partnership to file or otherwise commence a voluntary bankruptcy case, or
     consent to the commencement of an involuntary bankruptcy case, under the
     United States Code or under any other applicable bankruptcy, insolvency or
     similar law now or hereafter in effect, or consent to the entry of an order
     for relief in an involuntary case, or consent to the 

                                       15
<PAGE>
 
     appointment of or taking possession by a receiver, trustee or other
     custodian for all or a substantial part of the Property;

               (ix) borrow money from the Managing General Partner or any
     Affiliate of the Managing General Partner except as permitted or required
     under Sections 2.2(c) and 5.7 or otherwise in this Agreement;
           -----------------------                                

               (x)  assign, relinquish, settle, compromise, waive or impair any
     of the Partnership's rights under or with respect to, or amend, terminate,
     extend the term of (or time for payments due, or performance to be
     rendered, to the Partnership under) or otherwise modify any instrument or
     agreement under which the Partnership has rights and to which the Managing
     General Partner or any of its Related Parties is a party; or

               (xi) engage in any activity without a good faith business purpose
     therefor and with the intent of manipulating the "Operating Profits" or
     "Operating Losses" of the Partnership described in the Redemption Agreement
     in a manner intended to materially adversely affect, to the benefit of the
     other Partners, the amounts that PIC would be entitled to receive under
     this Agreement or the Redemption Agreement.

     SECTION 5.5    Filing of Returns and Other Writings.
                    ------------------------------------ 

     The Managing General Partner shall be the Tax Matters Partner and is also
specifically authorized to and shall cause the preparation and timely filing of
all Partnership tax returns and shall, on behalf of the Partnership, subject to
the terms and provisions of the Redemption Agreement, make such tax elections
for the Partnership as it, after consultation with the Partnership's
accountants, shall determine to be in the best interests of the Partners.  In
addition, the Managing General Partner shall timely file all other forms,
documents or other writings with respect to the business and operation of the
Partnership which shall be required by any governmental agency or authority
having jurisdiction to require such forms, documents or other writings, and
shall transmit to each Partner any form or document required to be transmitted
by any such governmental agency.

     SECTION 5.6    Other Permissible Activities.
                    ---------------------------- 

     Nothing herein contained shall be deemed to prevent any Partner or any
shareholder or affiliate thereof from engaging in other activities for profit,
whether in the real estate business or otherwise.  The Managing General Partner
(or any shareholder or affiliate thereof), or any Partner, may, in the future,
organize and manage joint ventures, additional limited partnerships or other
business entities for the acquisition, management and sale of real estate.
Neither this Agreement nor any activity undertaken pursuant hereto shall prevent
any Partner or any affiliate from engaging in such activities, or require any
Partner to permit the Partnership or any Partner to participate in any such
activities and, as a material part of the consideration for each Partner's
execution hereof, each Partner, for the benefit of the other Partners, hereby
waives, relinquishes and renounces any such right or claim of participation.

                                       16
<PAGE>
 
      SECTION 5.7   Contracts with Affiliates; Borrowing from Partners.
                    -------------------------------------------------- 

      The Managing General Partner is authorized to enter into agreements on
behalf of the Partnership with other persons or entities affiliated with the
Partnership and the Partners, including with respect to the borrowing of money
from, and issuance of evidences of indebtedness to, Partners of the Partnership
in furtherance of any and all purposes of the Partnership, including borrowing
from the Managing General Partner or any of its Affiliates for the purposes and
on the terms set forth on Exhibit B attached hereto and incorporated herein by
                          ---------                                           
reference; provided, however, that all such agreements (other than the giving of
           --------  -------                                                    
BP Notes and the making of the Special BP Loans) shall be disclosed to the other
Partners and shall not be less favorable to the Partnership than had such
agreement been negotiated at arms-length and on market terms.  Notwithstanding
any other provision of this Agreement, it is acknowledged and agreed that an
Affiliate of the Managing General Partner shall enter into a management
agreement with the Partnership for a management fee that does not exceed the
management fee that was payable to Pacific Property Services, L.P. (the previous
management company that managed the Property) as of May 1, 1998.

      SECTION 5.8   Indemnification.
                    --------------- 

          (a) To the fullest extent permitted by California 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 as set forth in this Agreement,
in which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, unless it is established that: (i) the act or omission of
the Indemnitee was material to the matter giving rise to the proceeding and
either was committed in bad faith, was the result of active and deliberate
dishonesty, or was the result of a breach of this Agreement by such Indemnitee
(or by the Partner of which such Indemnitee is a director or officer); or (ii)
the Indemnitee actually received an improper personal benefit in money, property
or services, or in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful.  Without
limitation, the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guaranty (except a guaranty by a Partner of
nonrecourse indebtedness of the Partnership or as otherwise provided in any such
loan guaranty) or otherwise for any indebtedness of the Partnership, and the
Managing 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 5.8 in favor of any Indemnitee having or potentially
having liability for any such indebtedness.  The termination of any proceeding
by conviction of an Indemnitee or upon a plea of nolo contendere or its
equivalent by an Indemnitee, or an entry of an order of probation against an
Indemnitee prior to judgment, creates a rebuttable presumption that such
Indemnitee acted in a manner contrary to that specified in this Section 5.8(a).
Any indemnification pursuant to this Section 5.8 shall be made only out of the
assets of the Partnership and shall not impose any personal liability on any
Partner, and neither the Managing General Partner nor any Non-Managing General

                                       17
<PAGE>
 
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 5.8.

          (b) If the Managing General Partner avails itself of the
indemnification provisions set forth herein, the Managing General Partner shall
promptly notify in writing the other Partners of such fact and shall provide a
brief description of the nature and magnitude of the indemnification claimed.
An Indemnitee, other than the Managing General Partner, may assert a claim for
indemnification hereunder by giving written notice thereof to the Managing
General Partner.  If indemnification is sought for a claim or liability asserted
by a third party, the Indemnitee shall also give written notice thereof to the
Managing General Partner promptly after it receives notice of the claim or
liability being asserted.  Such notice shall summarize the bases for the claim
for indemnification and any claim or liability being asserted by a third party.
The Managing General Partner, on behalf of the Partnership, shall be entitled to
direct the defense against a third party claim or liability with counsel
selected by it (subject to the consent of the Indemnitee, which consent shall
not be unreasonably withheld) as long as the Partnership is conducting a good
faith and diligent defense.  The Indemnitee shall, at all times, have the right
to fully participate in the defense of a third party claim or liability at its
own expense, directly or through counsel; provided, however, that if the named
                                          --------  -------                   
parties to the action or proceeding include both the Partnership and the
Indemnitee, and the Indemnitee is advised by counsel that representation of both
parties by the same counsel would be inappropriate under applicable standards of
professional conduct, the Indemnitee may engage separate counsel, whose
reasonable fees and expenses shall be borne by the Partnership.  If no notice of
intent to dispute and defend a third party claim or liability is given by the
Managing General Partner within 20 business days of receiving notice of such
claim or liability, the Indemnitee shall have the right, at the expense of the
Partnership, to undertake the defense of such claim or liability (with counsel
selected by the Indemnitee), and to compromise or settle it, exercising
reasonable business judgment.  If the third party claim or liability is one
that, by its nature, cannot be defended solely by the Partnership, then the
Indemnitee shall make available such information and assistance as the Managing
General Partner may reasonably request and shall cooperate with the Partnership
in such defense, at the expense of the Partnership.

          (c) Subject to the procedures set forth in Section 5.8(b), reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in a matter
for which the Indemnitee has undertaken the defense pursuant to the provisions
of this Section 5.8 (other than as a result of the rejection or dispute by the
Managing General Partner of a claim for indemnification under Section 5.8(b))
shall be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in Section 5.8(a) has been met, and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.

          (d) The indemnification provided by this Section 5.8 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under this 

                                       18
<PAGE>
 
Agreement or any agreement, pursuant to any vote of the Partners, as a matter of
law or otherwise, and shall continue as to an Indemnitee who has ceased to serve
in such capacity unless otherwise provided in a written agreement pursuant to
which such Indemnitee is indemnified.

          (e) The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
Managing General Partner shall determine in its reasonable discretion, 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.

          (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 5.8 solely 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 5.8 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 5.8 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 5.8, 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 5.9   Liability of the Managing General Partner.
                    ----------------------------------------- 

          (a) Notwithstanding anything to the contrary set forth in this
Agreement, except as otherwise expressly provided in this Agreement, the
Managing 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 reasonable errors in judgment
or of any act or omission if the Managing General Partner acted in good faith;
provided, however, that the Managing General Partner shall be liable to the
Partnership and Partners for its material breaches of this Agreement.

          (b) Subject to its obligations and duties as Managing General Partner
set forth in Section 5.3 hereof, and subject to the limitations set forth in
Section 5.4 hereof, the Managing 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 Managing General
Partner shall not be responsible for any misconduct or negligence on the part 

                                       19
<PAGE>
 
of any such agent appointed by the Managing General Partner in good faith,
except as otherwise expressly provided herein.

          (c) Any amendment, modification or repeal of this Section 5.9 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Managing General Partner's liability (and that of its
officers and directors) to the Partnership and the Non-Managing General Partners
under this Section 5.9 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 5.10  Other Matters Concerning the Managing General Partner.
                    ----------------------------------------------------- 

          (a) The Managing 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 Managing 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 Managing 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 Managing 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 Managing 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 Managing General Partner
hereunder.


                            ARTICLE 6 - ACCOUNTING

      SECTION 6.1   Fiscal Year and Tax Accounting Method.
                    ------------------------------------- 

      The Partnership shall operate on the basis of a calendar year, and shall
report its operations for tax and all other purposes in accordance with those
methods the Managing General Partner and the Partnership's accountant deem
advisable.

                                       20
<PAGE>
 
      SECTION 6.2   Books, Records, and Tax Reports.
                    ------------------------------- 

      The Partnership shall maintain full and accurate books at its principal
office which all Partners shall have the right to inspect and examine during
business hours upon reasonable written notice to the Managing General Partner.
The Managing General Partner shall keep or cause such books to be kept and shall
fully and accurately enter all transactions of the Partnership therein.  Such
books shall be closed and balanced at the end of each calendar year.  On or
before March 31 of each year, the Managing General Partner will furnish the Non-
Managing General Partners with a balance sheet and a statement of income and
expenses of the Partners for the prior calendar year and a report on Treasury
Form K-1 containing information relating to the Partnership to be used in
preparing a Non-Managing General Partner's personal federal income tax return.

      SECTION 6.3   Accounting Practice.
                    ------------------- 

      The books of account of the Partnership shall be kept in accordance with
good and accepted bookkeeping and accounting practices for similar properties,
provided that all methods of accounting and of treating particular transactions
shall be in accordance with the methods of accounting employed for Federal
income tax purposes.  The determinations of the Managing General Partner with
respect to the treatment of any items or its allocation for federal, state or
local tax purposes shall be binding upon all the Partners so long as such
determination shall not be inconsistent with any express term hereof or of the
Redemption Agreement.

      SECTION 6.4   Accountants.
                    ----------- 

      The Partnership's certified public accountant shall be designated by the
Managing General Partner, subject to the terms and provisions of Section 5.3(h).

      SECTION 6.5   Bank Accounts.
                    ------------- 

      The Managing General Partner shall, on behalf of the Partnership, open and
maintain a bank account or accounts in a bank or other financial institution of
its choosing in which shall be deposited all of the capital, cash receipts and
other funds of the Partnership.


            ARTICLE 7 - RIGHTS AND OBLIGATIONS OF THE NON-MANAGING
                               GENERAL PARTNERS

      SECTION 7.1   Contributions by Non-Managing General Partners.
                    ---------------------------------------------- 

      Except as provided herein, the Non-Managing General Partners shall not be
obligated to make a contribution of any sort whatsoever to the capital of the
Partnership, or to provide a loan.

      SECTION 7.2   Corporate Authority.
                    ------------------- 

                                       21
<PAGE>
 
      Each Partner hereby represents and covenants that its execution of this
Agreement has been duly authorized by proper corporate action or otherwise.

      SECTION 7.3   Role of Non-Managing General Partners.
                    ------------------------------------- 

      Except as otherwise provided in this Agreement, no Non-Managing General
Partner shall take part in, or interfere in any manner with, the conduct or
control of the business of the Partnership, or shall have any right or authority
to act for or bind the Partnership.

      SECTION 7.4   Rights and Obligations Under the Act.
                    ------------------------------------ 

      In addition to the foregoing rights (including any limitations thereof)
and obligations, the Non-Managing General Partners shall each have those rights
and obligations conferred or imposed upon partners of a general partnership
under applicable law, to the extent not inconsistent with the terms hereof.

      SECTION 7.5   Redemption Rights.
                    ----------------- 

      Except as specifically provided in the Redemption Agreement, no Partner
shall have the right to withdraw from the Partnership or have its interest in
the Partnership redeemed by the Partnership.


            ARTICLE 8 - WITHDRAWAL AND REPLACEMENT OF PARTNERS AND
                       TRANSFER OF PARTNERSHIP INTEREST

      SECTION 8.1   Non-Managing General Partners.
                    ----------------------------- 

      No Non-Managing General Partner's interest shall be sold, assigned,
transferred, pledged or hypothecated or encumbered (any such transaction, a
"Transfer"), in whole or in part, except in accordance with the terms and
 --------                                                                
conditions set forth in this Article 8.  Any Transfer or purported Transfer of a
Non-Managing General Partner's interest not made in accordance with this Article
8 shall be null and void.

      SECTION 8.2   Managing General Partner.
                    ------------------------ 

      The Managing General Partner may not Transfer its interest in the
Partnership or withdraw from the Partnership without the consent of the Non-
Managing General Partners.

      SECTION 8.3   Transfer of Partnership Interests.
                    --------------------------------- 

          (a) Subject to the provisions of this Article 8, a Non-Managing
General Partner may transfer its interest in the Partnership with the consent of
the Managing General Partner, which consent may be withheld by the Managing
General Partner in its sole and absolute 

                                       22
<PAGE>
 
discretion. Nothing in this Agreement shall be deemed to preclude the purchase
by the Managing General Partner of any Non-Managing General Partnership interest
and the admission of a Managing General Partner as a Non-Managing General
Partner in connection therewith.

          (b) If the interest, or any part thereof, of a Partner in the
Partnership is disposed of pursuant to this Section, such Partner shall
nevertheless be entitled to a portion of the income, gain, loss, deduction and
credit allocated to such interest or part thereof in accordance with the
provisions of this agreement for the fiscal year of the Partnership in which
such disposition occurs, based upon the number of months during such year that
such Partner owned such interest or part thereof.  Any predecessor or successor
of such Partner in respect of such interest or part thereof shall share in such
profits and losses for the fiscal year in which such disposition occurs and the
Partnership shall be bound by such allocation, provided the same shall be deemed
reasonable by the Partnership's accountants, upon being furnished with timely
written notice of same.  Distributions of cash or other property shall be made
only to such persons who are Partners on the date of distribution.

          (c) Without limiting the foregoing, the Managing General Partner may
prohibit any transfer by a Non-Managing General Partner of its interest in the
Partnership if, in the opinion of legal counsel to the Partnership, such
transfer would require filing of a registration statement under the Securities
Act of 1933 or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or interests in the Partnership, or
would cause a termination of the Partnership under Section 708 of the Code.

          (d) Without limiting the foregoing, no transfer by a Non-Managing
General Partner of its interests in the Partnership may be made to any Person if
(i) in the opinion of legal counsel for the Partnership, 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, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; or (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 would violate any
loan documents to which the Partnership is a party.

          (e) The transfer of a Partnership interest shall not constitute, or
result in, a dissolution of the Partnership.

      SECTION 8.4   Substituted Non-Managing General Partners.
                    ----------------------------------------- 

                                       23
<PAGE>
 
          (a) No Non-Managing General Partner shall have the right to substitute
a transferee as a Non-Managing General Partner in his place.  The Managing
General Partner shall, however, have the right to consent to the admission of a
transferee of the interest of a Non-Managing General Partner pursuant to this
Section 8.4 as a Substituted Non-Managing General Partner, which consent may be
given or withheld by the Managing General Partner in its sole and absolute
discretion.  The Managing General Partner's failure or refusal to permit a
transferee of any such interests to become a Substituted Non-Managing General
Partner shall not give rise to any cause of action against the Partnership or
any Partner.

          (b) A transferee who has been admitted as a Substituted Non-Managing
General Partner in accordance with this Article 8 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Non-Managing
General Partner under this Agreement.

          (c) Upon the admission of a Substituted Non-Managing General Partner,
the Managing General Partner shall amend Schedule A to reflect the name,
                                         ----------                     
address, and Percentage Interest of such Substituted Non-Managing General
Partner and to eliminate or adjust, if necessary, the name, address and interest
of the predecessor of such Substituted Non-Managing General Partner.

      SECTION 8.5   Assignees.
                    --------- 

      If the Managing General Partner, in its sole and absolute discretion, does
not consent to the admission of any permitted transferee as a Substituted Non-
Managing General Partner, as described in Section 8.4, 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, and
any other items, gain, loss deduction and credit of the Partnership attributable
to the interest in the Partnership assigned to such transferee, but except as
otherwise provided herein shall not be deemed to be a holder of an interest in
the Partnership for any other purpose under this Agreement, and shall not be
entitled to vote in any matter presented to the Non-Managing General Partners
for a vote (such interest in the Partnership being deemed to have been voted on
such matter in the same proportion as all other interests held by Non-Managing
General Partners are voted).  In the event any such transferee desires to make a
further assignment of any such interest in the Partnership, such transferee
shall be subject to all of the provisions of this Article 8 to the same extent
and in the same manner as any Non-Managing General Partner desiring to make such
an assignment.

                                       24
<PAGE>
 
             ARTICLE 9 - DISSOLUTION, LIQUIDATION AND TERMINATION

      SECTION 9.1   Dissolution.
                    ----------- 

          (a)  Except as herein otherwise expressly provided, the Partnership
shall be dissolved upon the occurrence of any of the following events:

               (1) agreement by all of the Partners to dissolve the Partnership;

               (2) expiration of the term provided in Section 1.5 hereof;

               (3) sale or taking by eminent domain or other lawful government
     action resulting in transfer of title of substantially all of the
     Partnership's assets; or

               (4) any other event which, under applicable law, results in the
     dissolution of the Partnership.

          (b)  Dissolution shall be effective on the date of the event giving
rise to the dissolution, but the Partnership shall not terminate until the
assets thereof have been distributed in accordance with the provisions of
Section 9.2 hereof.

      SECTION 9.2   Liquidation.
                    ----------- 

          (a)  If the Partnership shall be dissolved by reason of the occurrence
of any of the circumstances described in Section 9.1, no further business shall
be conducted by the Partnership except for taking of such action as shall be
necessary for the winding up of its affairs and distribution of its assets to
the Partners pursuant to the provisions of this Article 9. Upon such
dissolution, the Managing General Partner shall act as liquidator or, if it is
unable or unwilling to so act, it shall appoint one or more liquidators, who
shall have full authority to wind up the affairs of the Partnership and to make
final distribution as provided herein.

     Upon such dissolution of the Partnership, the liquidator(s) shall determine
which, if any, Partnership properties and assets should be distributed in kind,
and dispose of all other Partnership properties and assets at the best cash
price obtainable therefor and distribute the proceeds as follows:

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

               (2) Second, to the payment and discharge of all of the
          Partnership's debts and liabilities to Partners in their capacities as
          creditors of the Partnership;

               (3) The balance, if any, to the Partners in accordance with the
          provisions of Article 4.

                                       25
<PAGE>
 
          (b)  Notwithstanding the foregoing, if any Partner shall be indebted
to the Partnership, then, until payment of such indebtedness by said Partner,
the liquidator(s) shall retain such Partner's distributive share of the
Partnership properties and assets and, after applying the cost of operation of
such properties and assets during the period of such liquidation against the
income therefrom, the balance of such income shall be applied in liquidation of
such indebtedness. However, if at the expiration of six (6) months after notice
of such outstanding indebtedness has been given to such Partner and such amount
has not been paid or otherwise liquidated in full, the liquidator(s) may sell
the assets allocable to such Partner at public or private sale at the best price
immediately obtainable, such best price to be determined in the sole judgement
of the liquidator(s). So much of the proceeds of such sale as shall be necessary
to liquidate such indebtedness shall then be so applied, and the balance of such
proceeds, if any, shall be distributed to such Partner. Any gain or loss
realized for Federal income tax purposes upon the disposition of such assets
shall, to the extent permitted by law, be allocated to such Partner, and to the
extent not so permitted, to the Partners.

     Thereafter, the liquidator(s) shall comply with all requirements of the
Act, or other applicable law, pertaining to the winding up of a limited
partnership, at which time the Partnership shall stand terminated.

          (c)  In the event the Managing General Partner's interest in the
Partnership is "liquidated" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g) (including, without limitation, upon the liquidation of the
Partnership) and the Managing General Partner's Capital Account has a deficit
balance after giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such liquidation occurs,
the Managing General Partner shall contribute to the capital of the Partnership
the amount necessary to restore such deficit balance to zero in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(3).


                          ARTICLE 10 - MISCELLANEOUS

     SECTION 10.1  Redemption Agreement.
                   -------------------- 

     This Agreement and the Partners hereto are subject to the terms and
provisions of the Redemption Agreement.  If, and to the extent that, any terms
or provisions of this Agreement are inconsistent with any terms and provisions
of the Redemption Agreement, the terms and provisions of the Redemption
Agreement shall govern and control.

     SECTION 10.2  Notice.
                   ------ 

     All notices, demands, consents, options, elections, or other communications
hereunder shall be in writing and shall be deemed to have been exercised, made
or given upon delivery if delivered by hand or by courier service and three (3)
business days after being deposited in the United States mail and sent by
certified or registered mail, return receipt requested, postage prepaid.  Any
notice required to be sent to any Partner shall be sent to the addresses
specified on 

                                       26
<PAGE>
 
Schedule A attached hereto and incorporated herein. Any party may designate an
----------                                                        
alternative address on five (5) days' notice to the Partnership.

     SECTION 10.3  Further Assurances.
                   ------------------ 

     Each of the Partners will hereafter execute and deliver such further
instruments, and do such further acts as may be required to carry out the intent
and purposes of this Agreement.

     SECTION 10.4  Agreement in Counterparts.
                   ------------------------- 

     This Agreement may be executed in one or more counterparts and all such
counterparts shall constitute one agreement binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
several counterparts.

     SECTION 10.5  Construction.
                   ------------ 

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

     SECTION 10.6  Governing Law.
                   ------------- 

     This Agreement shall, except as herein otherwise expressly provided, be
governed and construed in accordance with the laws of the State of California.

     SECTION 10.7  Amendments.
                   ---------- 

     This Agreement may be amended only by a written amendment signed by all of
the Partners.

     SECTION 10.8  Pronouns.
                   -------- 

     Any pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the undersigned may require.

     SECTION 10.9  Successors in Interest.
                   ---------------------- 

     Except as otherwise provided herein, all provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against the
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns of any of the parties to this Agreement.
However, nothing in this Agreement, whether expressed or implied, is intended to
confer upon any entity, other than specifically provided, any rights or benefits
under or by reason of this Agreement.

     SECTION 10.10 Headings.
                   -------- 

                                       27
<PAGE>
 
     The headings contained at the beginning of each Article and Section are for
purposes of convenience only and are not intended to limit, expand or define the
content thereof.

     SECTION 10.11 Consent to Jurisdiction and Service of Process.
                   ---------------------------------------------- 

     ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY
OF THIS AGREEMENT EACH PARTY HERETO ACCEPTS FOR ITSELF, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.  Each party
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
any party hereto, at its address provided in this Agreement, such service being
hereby acknowledged by each party to be sufficient for personal jurisdiction in
any action against such party in any such court and to be otherwise effective
and binding service in every respect.  Nothing herein shall affect the right to
serve process in any other manner permitted by law.

     SECTION 10.12 Waiver of Jury Trial.
                   -------------------- 

     EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR THE SUBJECT MATTER OF THIS AGREEMENT.  The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this Agreement,
including, without limitation, contract claims, tort claims, beach of duty
claims and all other common law and statutory claims.  Each party hereto
acknowledges that this waiver is a material inducement to enter into a business
relationship, that each has already relied on this waiver in entering into this
Agreement, and that each shall continue to rely on this waiver in their related
future dealings.  Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with such legal
counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.

                                       28
<PAGE>
 
     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.


WITNESS:                           MANAGING GENERAL PARTNER:
                                   ------------------------ 

                                   BOSTON PROPERTIES LLC

                                   By:   Boston Properties Limited Partnership,
                                         Managing Member

                                         By:  Boston Properties, Inc.,
                                              General Partner

  /s/ Bradley A. Jacobson                     By: /s/ Thomas J. O'Connor
 ----------------------------                    ------------------------------
                                                 Name:  Thomas J. O'Connor
                                                 Title: Vice President


WITNESS:                           NON-MANAGING GENERAL PARTNERS:
                                   ----------------------------- 

                                   BP EC1 HOLDINGS LLC

                                   By:   Boston Properties Limited Partnership,
                                         Managing Member

                                         By:  Boston Properties, Inc.,
                                              General Partner

  /s/ Bradley A. Jacobson                     By: /s/ Thomas J. O'Connor
 ----------------------------                    ------------------------------
                                                 Name:  Thomas J. O'Connor
                                                 Title: Vice President


WITNESS:                           PIC REALTY CORPORATION


  /s/ Bradley A. Jacobson          By:   /s/ Gary L. Frazier
 ----------------------------            --------------------------------------
                                         Name: Gary L. Frazier
                                         Title: Vice President

                                       29
<PAGE>
 
                                                                      SCHEDULE A
                                                                      ----------

                       ATTACHED TO AMENDED AND RESTATED
                           PARTNERSHIP AGREEMENT OF
                        ONE EMBARCADERO CENTER VENTURE

                           Managing General Partner
                           ------------------------
                                        
Name and Address                                   Percentage Interest
----------------                                   -------------------

Boston Properties LLC                                   0.499830%
c/o Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts  02116

                             Non-Managing Partners
                             ---------------------

Name and Address                                   Percentage Interest
----------------                                   -------------------

BP EC1 Holdings LLC                                    49.483214%
c/o Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts  02116

PIC Realty Corporation                                 50.016956%
c/o Prudential Realty Group
8 Campus Drive
4th Floor - Arbor Circle South
Parsippany, New Jersey 07054
Attention:  John R. Triece
Facsimile: (201) 683-1797

     with copies to:

Prudential Insurance Company of America       O'Melveny & Myers
4 Embarcadero Center, Suite 2700              Embarcadero Center West
San Francisco, CA 94111                       275 Battery Street
Attention:  Harry Mixon                       San Francisco, CA 94111
Facsimile: (415) 956-2197                     Attention: Stephen A. Cowan
                                              Facsimile: (415) 984-8701
<PAGE>
 
                                                                       EXHIBIT A
                                                                       ---------

                  Legal Description of One Embarcadero Center
                  -------------------------------------------

                            [INTENTIONALLY OMITTED]
<PAGE>
 
                                                                       EXHIBIT B
                                                                       ---------


     Approved Terms and Conditions of Loans from Managing General Partner


     The Partnership shall be permitted to borrow funds from the Managing
General Partner from time to time, as determined in the sole discretion of the
Managing General Partner, for the purpose of funding working capital, leasing
commissions, tenant improvements, capital expenditures and other expenditures
relating to the Property.  Each such borrowing shall be in the form of an
unsecured loan and shall be evidenced by a note issued by the Partnership to the
Managing General Partner in the form of Exhibit A attached to this Exhibit B.
                                        ---------                  --------- 
<PAGE>
 
Exhibit A                                                      [FORM OF BP NOTE]
---------                   

                              DELAYED DEMAND NOTE
                              -------------------


$_____________________                                 San Francisco, California
                                                             _____________, 19__


     At any time after _________, 199_ [the date which is 120 days after the
date of the Closing under the Master Transaction Agreement], FOR VALUE RECEIVED,
ONE EMBARCADERO CENTER VENTURE, a California general partnership with a
principal place of business in San Francisco, California (the "Maker"), promises
                                                               -----            
to pay [BOSTON PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership]
[other BPLLC affiliate] with a principal place of business in Boston,
Massachusetts, ON DEMAND, the principal sum of _____________________
($__________), with interest thereon at the rate of ten percent (10%) per annum.
Interest shall be computed on the number of days principal is outstanding based
on a 365 day year.  All interest accruing under this Note shall be due and
payable (i) monthly in arrears on the fifth (5th) day of each succeeding
calendar month, commencing ________, 199_ [fifth day of calendar month following
month in which note is made] and continuing thereafter until all amounts due
hereunder have been paid in full, or (ii) at the option of the holder, on demand
at any time after __________, 199_ [the date which is 120 days after the date of
the Closing under the Master Transaction Agreement].

     The outstanding balance of principal due hereunder may be prepaid in full
at any time, or from time to time in part in multiples of One Thousand Dollars
($1,000.00) without any prepayment premium.

     The Maker agrees to pay all charges of the holder hereof in connection with
the collection and enforcement of this Note, including reasonable attorneys'
fees and disbursements.

     The Maker hereby waives presentment, demand, notice, protest and all other
suretyship defenses generally and agrees that any renewal, extension or
postponement of the time of payment or any other indulgence, may be effected
without notice to and without releasing the Maker from any liability hereunder.
<PAGE>
 
     This Note shall have the effect of an instrument under seal.


                              ONE EMBARCADERO CENTER VENTURE

                              By: Boston Properties LLC, its managing general
                                  partner

                                  By:  Boston Properties Limited Partnership,
                                       its managing member

                                       By:  Boston Properties, Inc., its
                                            general partner


                                          By:__________________________
                                             Name:
                                             Title:
<PAGE>
 
                                                                       EXHIBIT C
                                                                       ---------

                     DESCRIPTION OF EQUITY REDEMPTION LOAN
                     -------------------------------------

     The "Equity Redemption Loan" shall mean that certain loan to the
Partnership in the aggregate principal amount of $74,200,000, which loan is made
pursuant to a certain Term Loan Agreement dated as of November 12, 1998 by and
among BankBoston, N.A., The Chase Manhattan Bank, Fleet National Bank, PNC Bank,
National Association, Dresdner Bank AG New York Branch and Grand Cayman Branch,
The Bank of New York, Key Bank National Association, Citizens Bank and other
banks which may become parties thereto as the lenders thereunder, and One
Embarcadero Center Venture, Embarcadero Center Associates, Three Embarcadero
Center Venture and Four Embarcadero Center Venture, collectively as the
borrowers thereunder, which Term Loan Agreement provides for loans to the
borrowers in the aggregate principal amount of $328,143,000. The $74,200,000
loan to the Partnership under such Term Loan Agreement is evidenced by a
promissory note of the Partnership in the form provided in such Term Loan
Agreement.
<PAGE>
 
                                                                       EXHIBIT D
                                                                       ---------


                   DESCRIPTION OF PRUDENTIAL GUARANTIED LOAN
                   -----------------------------------------

     The "Prudential Guarantied Loan" shall mean that certain loan to the
Partnership in the aggregate principal amount of $14,000,000, which loan is made
pursuant to a certain Term Loan Agreement dated as of November 12, 1998 by and
among The Chase Manhattan Bank as lender thereunder, and One Embarcadero Center
Venture, Embarcadero Center Associates, Three Embarcadero Center Venture and
Four Embarcadero Center Venture, collectively as the borrowers thereunder, which
Term Loan Agreement provides for loans to the borrowers in the aggregate
principal amount of $92,000,000.  The $14,000,000 loan to the Partnership under
such Term Loan Agreement is evidenced by a promissory note of the Partnership in
the form provided in such Term Loan Agreement.
<PAGE>
 
                                                                       EXHIBIT E
                                                                       ---------

     Description of Business Interruption and General Liability Insurance
 
 

     Business Interruption Insurance                   $145,000,000
     Commercial General Liability                      $  2,000,000
     Umbrella Liability Program                        $200,000,000
<PAGE>
 
                                                                       EXHIBIT F
                                                                       ---------

       Description of Financing Plan for One Embarcadero Center Venture

     1.   Equity Redemption Loan.  Upon the execution of this Agreement, the
          ----------------------                                            
Partnership will enter into a  90 day Term Loan Agreement with BankBoston, N.A.,
on behalf of itself and as agent for the several banks that are parties thereto,
to borrow approximately $74,200,000 with a term of 90 days, which borrowing
shall be guaranteed by Boston Properties Limited Partnership ("BPLP").  This
                                                               ----         
loan constitutes the Equity Redemption Loan.  Interest on the outstanding
indebtedness under the Equity Redemption Loan shall accrue at a rate equal to
the 30 day Eurodollar rate plus 50 basis points.  In addition, upon the closing
of the Equity Redemption Loan, the Partnership will pay its proportionate share
of the closing fee in the approximate aggregate amount of $116,000.  The
Partnership shall pledge the Investment Notes to secure obligations of the
Partnership under the Equity Redemption Loan.

     2.   Prudential Guarantied Loan.  Upon the execution of this Agreement, the
          --------------------------                                            
Partnership will also enter into a Term Loan Agreement with The Chase Manhattan
Bank, N.A. to borrow approximately $14,000,000 with a term of 90 days, which
borrowing shall be guaranteed by The Prudential Insurance Company of America.
This loan constitutes the Prudential Guarantied Loan. Interest on the
outstanding indebtedness under the Prudential Guarantied Loan shall accrue at a
rate equal to the 30 day Eurodollar rate plus 30 basis points.  In addition,
upon the closing of the Prudential Guarantied Loan, the Partnership will pay its
proportionate share of the closing fee in the approximate aggregate amount of
$40,000.

     3.   Advance Under BPLP Line of Credit.  Upon the execution of this
          ---------------------------------                             
Agreement, BPLP will amend its existing Amended and Restated Revolving Credit
Agreement (the "Credit Agreement") with BankBoston, N.A., and certain other
                ----------------                                           
banks for which BankBoston, N.A. serves as agent, to add, inter alia, the
Partnership as a Borrower under the Credit Agreement for the purpose of the
advance described in the next paragraph.

     The Equity Redemption Loan will, upon the earlier of the redemption of PIC
Realty Corporation from the Partnership or the 90th day after the date of
execution of this Agreement, be repaid through (i) a draw on the Credit
Agreement by the Partnership of approximately $6,600,000 and (ii) cash of the
Partnership in an amount equal to approximately $67,600,500, which cash will
represent proceeds from the repayment of the Special BP Loan.  As a result of
the draw under the Credit Agreement, the Partnership will be a primary obligor
with respect to approximately $6,600,000 of indebtedness under the Credit
Agreement.

     4.   Assumption and Release with respect to Prudential Guarantied Loan.
          -----------------------------------------------------------------  
The Prudential Guarantied Loan will, upon the redemption of the interest of PIC
Realty Corporation in the Partnership, be assumed by PIC Realty Corporation and
the Partnership will be released as a borrower with respect to the Prudential
Guarantied Loan and all other obligations with respect thereto, as contemplated
by, and subject to the terms and conditions of, the Redemption Agreement.
<PAGE>
 
     In the event that the interest of PIC Realty Corporation in the Partnership
is not redeemed by February 10, 1999, or in the event that the Partnership is
not, by such date, released in full from all obligations with respect to the
Prudential Guarantied Loan and related obligations, then either (i) Prudential
shall continue to guaranty the Prudential Guarantied Loan until such redemption,
assumption and release occurs or (ii) if the Partnership repays and refinances
the Prudential Guarantied Loan by obtaining any replacement debt ("Replacement
Debt"), Prudential shall guarantee the lenders thereof of the punctual payment
in full and all other obligations of such Replacement Debt.

     5.   Secured Financing.  Upon the execution of this Agreement, the
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Partnership, as a co-borrower, will enter into a certain first deed of trust
loan in the aggregate principal amount of $320 million with New York Life
Insurance Company, The Equitable Life Assurance Society of the United States and
Teachers Assurance and Annuity Association of America.  As among the co-
borrowers, the Partnership will be the primary obligor on $160 million.
