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                                                                 Exhibit 99.16

                              AMENDED AND RESTATED
                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                         CORPORATE PROPERTY ASSOCIATES 4
                       (A California Limited Partnership)

      THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of CORPORATE
PROPERTY ASSOCIATES 4, a California limited partnership (the "Partnership"),
which amends and restates the Amended Agreement of Limited Partnership dated as
of September 30, 1982, as amended as of September 8, 1983 and _________, 1997,
is made and entered into as of the ____ day of _______, 1997 by and between
CAREY DIVERSIFIED LLC, a Delaware limited liability company as general partner
and as Limited Partner, CAREY MANAGEMENT LLC, as Corporate Special Partner,
WILLIAM POLK CAREY, as Individual Special Partner, and CAREY CORPORATE PROPERTY,
INC., as Limited Partner, those Persons set forth on Schedule A hereto, as
Limited Partners, and all persons and entities admitted as Limited Partners as
provided herein.

                                    ARTICLE I

                            FORMATION OF PARTNERSHIP

      The parties hereby continue the Partnership under the provisions of the
California Revised Limited Partnership Act (the "Act") and the rights and
liabilities of the Partners shall be as provided in such law and as herein
expressly provided. In the event that it shall be necessary for the Partnership
to exist in or qualify to do business under the laws of any state or states
other than or in addition to the State of California, the parties hereby agree
that the Partnership shall take such action as may be necessary to exist or
qualify to do business in any state in which such existence or qualification
shall be required, provided that in any such event the Partnership shall at all
times continue to be a limited partnership formed under and governed by the
provisions of the Uniform Partnership Act of the State of California.

                                   ARTICLE II

                                      NAME

      The business of the Partnership shall be conducted under the name
"Corporate Property Associates 4" or under the name "Corporate Property
Associates 4 -A California Limited Partnership" in any state or other
jurisdiction which requires that the term "limited partnership" be a part of the
Partnership's name or under such other name as the General Partner shall
hereafter designate in writing to the other Partners.
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                                   ARTICLE III

                                   DEFINITIONS

      "Acquisition Expenses" means the expenses of the Partnership related to
the selection and acquisition of properties by the Partnership, whether or not
such properties are acquired, including but not limited to legal fees and
expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, costs of title reports and title insurance, transfer and recording
taxes and miscellaneous expenses. Acquisition Expenses shall not include
Acquisition Fees.

      "Acquisition Fees" means the total of all fees and commissions paid by any
party in connection with the purchase or development of property by the
Partnership, except a development fee paid to a person not an Affiliate of the
Partnership in connection with the actual development of a project after the
Partnership's acquisition of the land. Included in the computation of such fees
or commissions shall be any real estate commission, selection fee, development
fee, nonrecurring management fee, or any fee of a similar nature, however
designated but not any loan fee ("points"). Acquisition Fees should not include
Acquisition Expenses.

      "Affiliate" means, with respect to any party hereto, (i) any person
directly or indirectly controlling, controlled by or under common control with
such party, (ii) any person owning or controlling 10% or more of the outstanding
voting securities of such party. (iii) any officer, director or partner of such
party or of any person specified in (i) or (ii) above and (iv) any company in
which any officer, director or partner of any person specified in (iii) above is
an officer, director or partner; provided, however, that for purposes of this
definition the term "Affiliate" shall not be deemed to include any person
providing legal, underwriting or financial or investment advisory services to
the Partnership, the General Partner, or any Affiliate of any of them from time
to time.

      "Agreement" means this Amended and Restated Agreement of Limited
Partnership as hereafter amended from time to time.

      "Appraisal Date" means December 31, 1998.

      "Capital Account" means, in respect of any Partner, the account maintained
for such Partner in accordance with Article XII.
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      "Cash From Financings" means the net cash proceeds realized by the
Partnership from the financing of Partnership property or the refinancing of any
Partnership indebtedness.

      "Cash From Sales" means the net cash proceeds realized by the Partnership
from the sale, exchange or other disposition of any of its assets. Cash From
Sales shall not include net cash proceeds realized from the financing of
Partnership property or the refinancing of any Partnership indebtedness.

      "Code" means the Internal Revenue Code of 1986.

      "Consolidation and Offering Expenses" means all expenses incurred in
connection with the formation and qualification of the Subsidiary Partnership,
the Merger and in offering the Shares to the former limited partners of the
Partnership in exchange for their Partnership Interests under applicable Federal
and state law, and any other expenses actually incurred and directly related to
the offering of the Shares, including such expenses as: (i) the preparing,
printing, filing and delivering of the Registration Statement and the Prospectus
(including any amendments thereof or supplements thereto), (ii) the preparing
and printing of this Agreement, other solicitation material and related
documents and the filing and/or recording of such certificates or other
documents necessary to comply with the laws of the State of California for the
formation of a limited partnership, the merger of a limited partnership into
another limited partnership and for the continued good standing of a limited
partnership, (iii) the qualification or registration of the limited liability
company interests under state securities or "Blue Sky" laws, (iv) any escrow
arrangements, including any compensation to an escrow agent, (v) the filing fees
payable to the United States Securities and Exchange Commission and to the
National Association of Securities Dealers, Inc. and any costs payable to the
New York Stock Exchange for the listing of the Listed Shares, (vi) the fees of
the Partnership's counsel, (vii) all advertising expenses incurred in connection
therewith, including the cost of all sales literature and the costs related to
investor and broker/dealer sales and information meetings and marketing
incentive programs and (viii) selling commissions and wholesaling expenses
incurred in connection with the sale of the Shares.

      "Contribution" means any money, property or services rendered, or a
promissory note or other binding obligations to contribute money or property, or
to render services as permitted by Section 15651 of the Act, which a Partner
contributes to the Partnership as capital in that Partner's capacity as Partner
pursuant to this Partnership Agreement or any other agreement among the
Partners, including any agreement as to value.
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      "Corporate Special Partner" means Carey Management LLC, a Delaware limited
liability company.

      "CPA Partnership" means Corporate Property Associates, a California
limited partnership, Corporate Property Associates 2, a California limited
partnership, Corporate Property Associates 3, a California limited partnership,
Corporate Property Associates 5, a California limited partnership, Corporate
Property Associates 6, a California limited partnership, Corporate Property
Associates 7, a California limited partnership, Corporate Property Associates 8,
L.P., a Delaware limited partnership, Corporate Property Associates 9, L.P., a
Delaware limited partnership, the Partnership and any other real estate limited
partnerships sponsored by W.P. Carey & Co., Inc. or its Affiliates with
investment objectives substantially similar to the Partnership's.

      "Distributable Cash From Operations" means cash receipts from the ordinary
day-to-day operations of the Partnership (including all interest on Partnership
investments and mortgages held by the Partnership) without deduction for the
management fee authorized by Paragraph G(3) of Article X payable to an Affiliate
of the General Partner or for depreciation and amortization of intangibles such
as organization, underwriting and debt placement costs but after deducting all
other expenses, debt amortization and provisions for reserves established by the
General Partner which it deems to be reasonably required for the proper
operation of the business of the Partnership. "Distributable Cash from
Operations" shall not include cash proceeds realized from the sale, exchange or
other disposition of assets of the Partnership or from financing of Partnership
property or the refinancing of any Partnership indebtedness.

      "Distribution" means any transfer of money or property by the Partnership
to a Partner without consideration.

      "Fiscal Quarter" means the three-month period ending on the last day of
the third. sixth. ninth and twelfth calendar months of each Fiscal Year of the
Partnership.

      "Fiscal Year' means the Fiscal Year specified in Article XIII.

      "Front-End Fees" means all fees and expenses paid by any party for any
services rendered in connection with the organizational or acquisition phase of
the Partnership, including Consolidation and Offering Expenses, Acquisition
Fees, Acquisition Expenses and any other similar fees, however designated.
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      "General Partner" means any person or entity in his, her or its capacity
as general partner of the Partnership and whose name and address are set fourth
in Article V, or any successor thereto appointed or elected hereunder.

      "Individual Special Partner" means William Polk Carey.

      "Investment in Properties" means the amount of gross proceeds of the
Offering actually paid or allocated to the purchase, development, construction
or improvement of properties acquired by the Partnership, including the purchase
of properties, working capital reserves (except that working capital reserves in
excess of 5% of the gross proceeds of the Offering shall not be included) and
other such payments such as interest, closing costs, financing fees, taxes and
other similar items, but excluding Front-End Fees.

      "Limited Partner" means any person or entity in his, her or its capacity
as a limited partner of the Partnership and whose name and address are set forth
on the books and records of the Partnership.

      "Mandatory Distribution Event" means (a) the sale or disposition of a
Partnership property to a third party unaffiliated with the Partnership or the
General Partner, not including the pledge, mortgage or encumbrance of a
property, or of any interest therein, in connection with the financing,
refinancing or other leveraging of such property or otherwise or any assignment
of any leases or rents related to such property, or (b) the mandatory
distribution to holders of Partnership Interests following the Appraisal Date.

      "Merger" means the merger of the Subsidiary Partnership into the
Partnership.

      "Merger Agreement" means the Agreement of Merger pursuant to which the
Subsidiary Partnership is merged with and into the Partnership.

      "Minimum Gain" shall mean and refer to, at any time, the excess, if any,
of the outstanding principal balance of all nonrecourse debt of the Partnership
that is secured by an interest in Partnership assets, over the adjusted basis of
such assets to the Partnership for Federal income tax purposes. For purposes of
the preceding sentence, the term "nonrecourse debt" shall mean a liability of
the Partnership with respect to which no Partner has any personal liability.

      "Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
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      "Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.

      "Net Lease" means a lease in which the tenant undertakes to pay all or
substantially all the cash expenses, excluding debt service, related to the
leased property.

      "Offering" means the offering of the Shares made pursuant to the
Prospectus.

      "Partner" means the General Partner, the Corporate Special Partner, the
Individual Special Partner and any Limited Partner where no distinction is
required by the context in which the term is used.

      "Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).

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

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

      "Partnership" means Corporate Property Associates 4 - a California limited
partnership.

      "Partnership Interest" means the interest of each Partner in the profits,
losses, distributions, capital and assets of the Partnership.

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

      "Prospectus" means the final prospectus of the General Partner pursuant to
which the Partnership will offer up to 23,654,898 Shares as the same may at any
time and from time to time be amended or supplemented after the effective date
of the Registration Statement.
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      "Proxy" means a written authorization signed by a Partner or the Partner's
attorney-in-fact giving another person the power to vote with respect to the
Partnership Interest of that Partner. "Signed," for the purpose of this
paragraph, means the placing of the Partner's name on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by the
Partner or the Partner's attorney-in-fact.

      "Registration Statement" means the General Partner's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in the
form in which it becomes effective, as the same may at any time and from time to
time thereafter be amended or supplemented.

      "Shares" means the Shares of the General Partner.

      "Special Partners" means the Corporate Special Partner and the Individual
Special Partner.

      "Subsidiary Partnership" means Fourth Subsidiary, L.P., a California
limited partnership, which is a subsidiary of the General Partner.

                                   ARTICLE IV

                                     PURPOSE

      The business and purpose of the Partnership is to invest in and own real
property or interests therein (including leasehold estates) or appurtenances
thereto as well as personal or mixed property connected therewith which is
income-producing within a reasonable time after acquisition. The Partnership may
enter into ventures, partnerships and other business arrangements with respect
to real property as deemed prudent by the General Partner in order to achieve
successful operations for the Partnership. Operations of the Partnership may be
conducted wherever, in the opinion of the General Partner and not in violation
of the general restrictions described in Paragraph H of Article X the factors
involved appear to be favorable for the Partnership and the Partners.

                                    ARTICLE V

                         NAMES AND ADDRESSES OF PARTNERS

      The General Partner of the Partnership shall be Carey Diversified LLC, a
Delaware limited liability company having an office at 50 Rockefeller Plaza, New
York, New York 10020.
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      The names and addresses of the Limited Partners of the Partnership shall
be as set forth on the books and records of the Partnership and shall be kept at
the principal place of business of the Partnership and a copy of which shall be
kept at the Partnership's California office.

                                   ARTICLE VI

                 PRINCIPAL PLACE OF BUSINESS; CALIFORNIA OFFICE

      The principal place of business of the Partnership shall be 50 Rockefeller
Plaza, New York, New York 10020. The Partnership shall also maintain an office
in California at Transamerica Pyramid, 600 Montgomery Street, San Francisco,
California 94111. The General Partner may from time to time change the principal
place of business of the Partnership or its California office and, in either
such event, the General Partner shall notify the Partners in writing within ten
days after the effective date of such change; provided, however, that no such
change shall be effected unless the General Partner determines that such change
is in the best interests of the Partnership after giving consideration to any
material adverse state or local income, estate or inheritance tax consequences
to the Partners, or any adverse effect on the limited liability of the Limited
Partners, as a result of such change. The General Partner may establish
additional places of business of the Partnership when and where required by the
business of the Partnership. The Partnership shall at all times maintain in
California an agent for service of process upon the Partnership.

                                   ARTICLE VII

                              CAPITAL CONTRIBUTIONS

      The Partnership is authorized to issue and sell up to $140,000 of limited
partner interests.

      No interest shall be paid on any contribution to the capital of the
Partnership.

      Loans by a Partner to the Partnership shall not be considered
contributions to the capital of the Partnership. Any Partner, including any
additional or substituted Partner, who shall acquire a Partnership Interest or
whose Partnership Interest is increased by means of a transfer to him of all or
a part of the Partnership Interest of another Partner, shall succeed to the
Capital Account, or portion thereof, in respect of the Partnership Interest
received.
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                                  ARTICLE VIII

                               PROFITS AND LOSSES

      A. Determination of Profits and Losses. The profits and losses of the
Partnership shall be determined for each Fiscal Year of the Partnership in
accordance with generally accepted accounting principles and procedures applied
in a consistent manner and for federal income tax purposes, by additionally
making such adjustments as are necessary to include other items of income,
expense, deduction and allowance as are permitted and required under the Code
and the regulations promulgated thereunder. Except as otherwise provided herein,
whenever a proportionate part of the Partnership profit or loss is credited or
charged to a Partner's Capital Account every item of income, gain, loss or
deduction entering into the computation of such profit or loss shall be
considered either credited or charged, as the case may be, to such Partner's
Capital Account and every item of credit or tax preference related to such
profit or loss and applicable to the period during which such profit or loss was
realized shall be allocated to such Partner in the same proportion. Every
recapture of deduction or credit shall be allocated among the Partners in the
same proportion as the items of deduction or credit subject to recapture were
allocated among the Partners. Any increase or decrease in the amount of any item
of income, gain,. loss or deduction attributable to an adjustment to the basis
of Partnership assets made pursuant to a valid election under Sections 734, 743
and 754 of the Code, and pursuant to corresponding provisions of applicable
state and local income tax laws shall be charged or credited, as the case may
be, and any increase or decrease in the amount of any item of credit or tax
preference attributable to any such adjustment shall be allocated, to the
Partners entitled thereto under such laws. Profits and losses allocated, to a
particular class of Partnership Interests shall be allocated among the holders
of record of such class of Partnership Interests at the end of each Fiscal Year
(or such shorter period as may be provided herein) of the Partnership in
proportion to their respective Partnership Interests; provided however, that any
such profits and losses attributable to a limited partner interest assigned
during such Fiscal Year of the Partnership shall be allocated among the holders
of such limited partner interests during such Fiscal Year in proportion to the
number of months (for purposes of such allocation ownership of limited partner
interests for each month will be determined on the fifteenth day of each month)
that each such holder was recognized as the owner of such limited partner
interest during such Fiscal Year, without regard to the results of Partnership
operations during the period in which each such holder was recognized as the
owner thereof and without regard to
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the date, amount or recipient of any distributions which may have been made with
respect to such limited partner interest.

      B.  Allocation of Profits and Losses.

            1. Except as provided in subparagraph 4 of this paragraph B, the
profits and losses of the Partnership (other than gains or losses from the sale,
exchange or other disposition of Partnership assets) shall be allocated to the
Partners as follows and in the following order to priority:

            a. An amount of net income equal to the excess, if any, of the
      aggregate negative balance of the Capital Accounts of the Partners over
      the Minimum Gain (determined as of the end of such year or fraction
      thereof), shall first be allocated among the Partners whose Capital
      Accounts are negative as a result of nonrecourse debt in proportion to the
      negative amounts attributable to such nonrecourse debt.

            b. Any remaining balance of net income shall be allocated 1% of the
      General Partner, 5% to the Corporate Special Partner, 1% to the Individual
      Special Partner and 93% to the Limited Partners.

            c. Net losses of the Partnership shall be allocated 1% to the
      General Partner, 5% to the Corporate Special Partner, 1% to the Individual
      Special Partner and 93% to the Limited Partners.

      2. Except as provided in subparagraph 4 of this Paragraph B, net losses
arising from sales, exchanges or other dispositions of Partnership assets shall
be allocated 1% to the General Partner, 1% to the Individual Special Partner and
98% to the Limited Partners. For purposes of this subparagraph 2, Capital
Accounts shall be determined after applying the allocations provided in
subparagraphs 1 and 5 of this Paragraph B, and after applying subparagraphs 6
and 7 of this Paragraph B.

      3. Net gains arising from sales, exchanges or other dispositions of
Partnership assets shall be allocated to the Partners as follows and in the
following order to priority:

            a. An amount of such gains equal to the excess, if any, of the
      aggregate negative balance of the Capital Account of the General Partner
      over the Minimum Gain;

            b. If each Partner's Capital Account is negative and the gains are
      less than the aggregate negative amounts in the Capital Accounts, in the
      ratio that the Capital Accounts bear to each other;
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            c. If each Partner's Capital Account is negative and the gains are
      greater than the aggregate negative amounts in the Capital Accounts (i)
      first in an amount to bring each Partner's Capital Account to zero, and
      (ii) then to the Partners in the percentage by which Cash From Sales and
      Cash From Financings is then being distributed pursuant to the provisions
      of Paragraph E of Article IX hereof;

            d. If certain Partner's Capital Accounts are positive and other
      Partner's Capital Accounts are negative (i) first in an amount to bring
      the Capital Account of each Partner whose Capital Accounts which are
      negative to zero (or if gains are less than the aggregate negative amounts
      of the Capital Accounts which are negative, to such Partners in the ratio
      that such negative Capital Accounts bear to each other), and (ii) then to
      the Partners in the percentage by which Cash From Sales and Cash From
      Financings is then being distributed pursuant to the provisions of
      Paragraph E of Article IX hereof;

            e. If each Partner's Capital Account is positive, in the percentages
      by which Cash From Sales and Cash From Financings is then being
      distributed pursuant to the provisions of Paragraph E of Article IX
      hereof;

      For purposes of this subparagraph 3, Capital Accounts shall be determined
after applying the allocations provided in subparagraphs 1 and 2 of this
Paragraph B and after applying subparagraphs 6 and 7 of Paragraph B.

      4. No loss or deduction or item thereof under subparagraph 1 or 2 of this
Paragraph B shall be allocated to the General Partner if, or to the extent, such
allocation would create or increase a deficit in the General Partner's Capital
Account, unless:

            a. Such allocation of loss or deduction is attributable to
      nonrecourse debt of the Partnership; and

            b. Such allocation does not cause the deficit capital account of the
      General Partner to exceed the amount of Minimum Gain attributable to such
      nonrecourse debt, determined as of the last day of the taxable year to
      which such allocation is attributable.

      5. To the extent that any amount paid to a Limited Partner or its
Affiliates pursuant to the provisions of Paragraphs G(2), (4),(5),(6), or (7) of
Article X hereof, or as Front-End Fees, is treated as a distributive share of
Partnership income to the Limited Partner for Federal income tax purposes, the
Limited Partner affected shall be allocated gross income of the
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Partnership at a time and in an amount equal to the amount of such payment, and
the Capital Account of the Limited Partner so affected shall be adjusted to
reflect such allocation and payment. If the Partnership's gross income for a
Fiscal Year is less than the amount of such payment, the Limited Partner so
affected shall be allocated gross income in each succeeding Fiscal Year until
the total amount so allocated equals the total amount of such payment.

      6. For purposes of subparagraphs 1(a), 2 and 3 of this Paragraph B,
distributions to the Partners pursuant to Paragraphs A and E of Article IX
hereof shall be treated as having been made and charged to the Capital Accounts
of the Partners prior to the allocations of income, gains and losses provided
therein.

      7. Solely for purposes of this Paragraph B, the Capital Accounts of each
Partner shall be reduced by such Partner's share of any Partnership expenditure
which would be treated as it were an expenditure described under Section
705(a)(2)(B) of the Code, and shall be reduced or increased by any other amount
required by the then applicable regulations under Section 704 of the Code.

      8. Notwithstanding anything to the contrary in this Article VIII, if any
Partner receives an adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be
specially allocated a pro rata portion of each item of Partnership income,
including gross income, and gain in an amount and manner sufficient to
eliminate, as quickly as possible, any deficit balance in such Partner's Capital
Account created by such adjustment, allocation or distribution in excess of the
sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Limited Partner is deemed
to be obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) (as amended in 1986). This subparagraph
8 of Paragraph B is intended to constitute a "qualified income offset" within
the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(3).

      9. Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, if there is a net decrease in Partnership Minimum Gain for any
Partnership fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary subsequent years)
in an amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain to the extent required by Treasury Regulations Section 1.704-2(f).
The items to be so allocated shall be determined in accordance with Section
1.704-2(f) and (i) of the Treasury Regulations. This subparagraph is intended to
comply with the minimum gain chargeback requirement in said
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section of the Treasury Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this subparagraph shall be made in proportion
to the respective amounts required to be allocated to each Partner pursuant
hereto.

      10. Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, if there is a net decrease in Partner Minimum Gain attributable to
a Partner Nonrecourse Debt during any fiscal year, each Partner who has a share
of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations,
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt to the extent and in the manner required by Section 1.704-2(i)
of the Treasury Regulations. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i) of the Treasury Regulations. The items to be
so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
(j)(2) of the Treasury Regulations. This subparagraph is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Treasury Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph shall be made
in proportion to the respective amounts to be allocated to each Partner pursuant
hereto.

      11. To the extent any Partner has an Adjusted Capital Account Deficit at
the end of any Partnership Fiscal Year, each such Partner shall be specially
allocated items of Partnership income (including gross income) and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Paragraph 8(B)(11) shall be made if and only to the extent that
such Partners would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section have been tentatively made as if this
Paragraph 8(B)(11) were not in the Agreement.

      12. Partner Nonrecourse Deductions for any fiscal year or other applicable
period with respect to a Partner Nonrecourse Debt shall be specially allocated
to the Partners that bear the economic risk of loss for such Partner Nonrecourse
Debt (as determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the
Treasury Regulations).

      C.  Power of the Partner to Vary Allocations of Profits and Losses.  It is
the intent of the Partners that each Partner's distributive share of income,
gains, losses, deductions and credits shall be determined and allocated in
accordance with this Article VII to the fullest extent permitted by Section
704(b) of
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the Code. If the Partnership is advised that the allocations provided in this
Article VIII are unlikely to be respected for Federal income tax purposes, the
General Partner has been granted power in Paragraph B(2) of Article XVI of this
Agreement to amend the allocation provisions of this Agreement, on advice of
accountants and legal counsel, to the minimum extent necessary to effect the
plan of allocations and distributions provided in this Agreement.

      D.  Allocations of Profits and Losses Among Limited Partners.  Except as
otherwise provided in this Article VIII, profits and losses shall be allocated
among the Limited Partners in the same manner as distributions are allocated in
Paragraph D of Article IX hereof.

      E.    Consent of Partners to Allocation of Profits and Losses.  The
methods hereinabove set forth by which profits and losses of the Partnership are
determined and allocated are hereby consented to by each Partner as a condition
to becoming a Partner.

                                   ARTICLE IX

                                  DISTRIBUTIONS

      A. Distributable Cash From Operations.  The General Partner shall
distribute as soon after the close of each Fiscal Quarter as is reasonably
feasible all of the Distributable Cash From Operations for such Fiscal Quarter
in the following manner: 1% to the General Partner, 5% to the Corporate Special
Partner, 1% to the Individual Special Partner and 93% to the Limited Partners.

      B. Cash From Sales. The General Partner shall distribute, as soon after
the close of each Fiscal Quarter as is reasonably feasible, all Cash From Sales
realized by the Partnership during such Fiscal Quarter in accordance with the
provisions of Paragraph E of this Article IX.

      C. Cash From Financings. The General Partner shall distribute, as soon
after the close of each Fiscal Quarter as is reasonably feasible, all of the
Cash From Financings realized by the Partnership during such Fiscal Quarter in
accordance with the provisions of Paragraph E of this Article IX.

      D. Allocation of Distributions Among Limited Partners.  Distributions of
cash to the Limited Partners shall be apportioned among the holders of record of
limited partner interests in the ratio in which the number of limited partner
interests held of record by each of them bears to the number of limited partner
interests held of record by all the Limited
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Partners as of the first day of the Fiscal Quarter with respect to which such
distribution is made

      E. Distributions of Cash From Sales and Cash From Financings. The General
Partner shall distribute Cash From Sales and Cash From Financings in the
following manner: 1% to the General Partner, 1% to the Individual Special
Partner and 98% to the Limited Partners, until such time as $335,185 has been
distributed to the Individual Special Partner pursuant to this Paragraph E of
Article IX. Thereafter, Cash From Sales and Cash From Financings shall be
distributed 1% to the General Partner and 99% to the Limited Partners.

      F. Return of Capital Contributions. To the extent that, at the end of any
Fiscal Quarter, the total cash distributions to the Limited Partners made
pursuant to this Article IX exceed the profits of the Partnership for such
Fiscal Quarter, such excess shall be charged to each Limited Partners' Capital
Account and shall be regarded as a rightful return of capital contributions.

      G. Consent of Partners to Allocation of Distributions. The methods
hereinabove set forth by which Cash From Operations, Cash From Sales and Cash
From Financings are allocated and distributed are hereby consented to by each
Partner as a condition to becoming a Partner.

                                    ARTICLE X

                      MANAGEMENT AND OPERATION OF BUSINESS

      A. Management of Business. The Partnership shall be managed by the General
Partner and the conduct of the Partnership's business shall be controlled and
conducted by the General Partner in accordance with this Agreement.

      B. Authority of General Partner. In addition to and not in limitation of
any rights and powers conferred by law or other provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and
carry out the purposes, business and objectives of the Partnership. Such powers
shall include, without limitation, the following powers:

            1. To acquire, hold and dispose of any real property, (or any
      interests therein, including leasehold estates) and appurtenances thereto
      as well as personal or mixed property connected therewith, including the
      purchase, lease, development, improvement, maintenance, exchange, trade or
      sale of such property at such price, rental or amount, for cash,
      securities or other property and upon such terms, as
   16

      the General Partner deem to be in the best interests of the Partnership;

            2. Subject to the provisions of Paragraph H(10) of this Article X to
      borrow money and, if security is required therefor, to mortgage or subject
      to any other security device any portion of the assets of the Partnership,
      to obtain replacements of any mortgage or other security device, and to
      prepay, in whole or in part, refinance, increase, modify, consolidate or
      extend any mortgage or other security device;

            3. To invest the Partnership's funds in United States Government
      securities, certificates of deposit of United States commercial banks with
      a net worth of at least $20,000,000, savings accounts with United States
      commercial banks, savings banks, savings and loan associations or similar
      institutions where such accounts are fully insured by any federal or state
      government agency, Eurodollar deposits in branches of United States banks,
      which banks have a net worth of at least $50,000,000, bank repurchase
      agreements covering securities of the United States Government or
      governmental agencies, bankers' acceptances, public no-load money market
      funds or other similar short-term highly liquid investments; to invest any
      working capital or other reserves retained by the General Partner for the
      operation of the Partnership in like manner; and to deposit, withdraw,
      invest, pay, retain and distribute the Partnership's funds in any manner
      consistent with the provisions of this Agreement.

            4. To bring and defend actions at law or in equity.

            5. To employ persons in the operation and management of the
      Partnership's business, including but not limited to supervisory managing
      agents, building management agents. real property developers and real
      estate brokers;

            6. To place record title to, or the right to use, Partnership assets
      in the name or names of a non-operating nominee or nominees, including an
      Affiliate of the General Partner, for any purpose convenient or beneficial
      to the Partnership;

            7. To perform all acts and file all documents, including tax returns
      and registration statements, necessary to comply with federal, state and
      local laws, rules and regulations applicable to the Partnership or the
      conduct of the Partnership's business;

            8. To enter into and carry out contracts and agreements and any or
      all documents and instruments and to do and perform all such other things
      as may be in furtherance of
   17

      Partnership purposes or necessary or appropriate to the conduct of
      Partnership activities;

            9.    To execute, acknowledge, deliver, seal, file, record and vote
      any and all instruments which may be deemed necessary or convenient to
      effect the foregoing; and

            10. To designate Carey Diversified LLC, the General Partner, as the
      "Tax Matters Partner" in accordance with Section 6231(a)(7) of the Code
      and, as such, the General Partner shall have all powers necessary to so
      perform including, without limitation, the power to retain attorneys and
      accountants of its choice and the right to settle any audits without the
      consent of the Limited Partners, except as otherwise required by the Code.
      the designation provided for herein is expressly consented to by each
      Partner as an express condition to becoming a Partner; and

      C.     Restrictions on Authority of General Partner.  In addition to other
acts expressly prohibited or restricted by this Agreement or by law, the General
Partner shall have no authority to act on behalf of the Partnership with respect
to, and are expressly prohibited from undertaking, the following:

            1.  Doing any act in contravention of this Agreement;

            2. Except as provided in this Agreement and except in connection
      with the liquidation and winding up of the business of the Partnership
      upon its termination and dissolution, doing any act which would make it
      impossible to carry on the ordinary business of the Partnership;

            3. Confessing a judgment against the Partnership in connection with
      any threatened or pending legal action,

            4. Possessing Partnership property or assigning the rights of the
      Partnership in specific Partnership property for other than a Partnership
      purpose;

            5.  Admitting a person as a Limited Partner except as provided in
      this Agreement;

            6. Except as provided in this Agreement and except in connection
      with the liquidation and winding up of business of the Partnership upon
      its termination and dissolution or a Mandatory Distribution Event, selling
      substantially all the assets of the Partnership at a single sale or in
      multiple sales in the same 12-month period without the prior written
      consent of Limited Partners holding more than fifty percent (50%) of the
      then outstanding Limited Partner Interests, with
   18

      the same proportionate vote as provided in paragraph (d) of Article XI;

            7. Pledging or encumbering substantially all the properties of the
      Partnership at one time or from time to time in a series of related
      transactions, unless the lien of such pledge or encumbrance arises in
      connection with the acquisition or improvement of properties or the
      initial financing of properties acquired free and clear of encumbrances or
      the refinancing of previous obligations and such lien is limited to the
      properties so acquired, improved, financed or refinanced;

            8. Obtaining any loan or any mortgage loan on any residential
      property made or guaranteed by any Federal, state or local government or
      municipality or any agency of any federal, state or local government or
      municipality;

            9. Performing any act (other than an act required by this Agreement
      or any act taken in good faith in reliance upon counsel's opinion) which
      would, at the time such act occurred, subject any Limited Partner to
      liability as a general partner in any jurisdiction;

            10. Prepaying any interest on any Partnership indebtedness; provided
      that the payment of any amount commonly referred to as "points" shall not
      be deemed a prepayment of interest; or

            11. Assessing any Partner for an additional capital contribution.

      D. Fiduciary Obligations of General Partner.  The General Partner shall
act at all times as a fiduciary with respect to the Partnership, the Limited
Partners and the Partnership property and assets.

      E. Obligations of General Partner.  The General Partner shall:

            1. Devote such of their time to the business of the Partnership as
      they shall, in its discretion, exercised in good faith, determine to be
      necessary to conduct the business of the Partnership for the benefit of
      the Partnership and the Limited Partners;

            2. File and publish all certificates, statements or other
      instruments required by law for formation, qualification and operation of
      the Partnership and for the conduct of its business in all appropriate
      jurisdictions;
   19

            3. Use its best efforts to cause the Partnership and the Partners to
      be protected by adequate public liability, property damage and other
      insurance;

            4. Employ attorneys to represent the Partnership, which attorneys
      may also serve as counsel to the General Partner and any of its
      Affiliates; and

            5. Use its best efforts to maintain the status of the Partnership as
      a "partnership" for federal income tax purposes.

      F. Limitation on Liability of General Partner Indemnification.

            1. The General Partner shall have no liability, responsibility or
accountability in damages or otherwise to any other Partner or the Partnership
for, and the Partnership agrees to indemnify, pay, protect and hold harmless the
General Partner (on the demand of and to the satisfaction of the General
Partner) from and against, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including without limitation all
costs and expenses of defense, appeal and settlement of any and all suits,
actions or proceedings instituted against the General Partner or the Partnership
and all costs of investigation in connection therewith) which may be imposed on,
incurred by or asserted against the General Partner or the Partnership in any
way relating to or arising out of, or alleged to relate to or arise out of, any
action or inaction on the part of the Partnership or on the part of the General
Partner as a General Partner of the Partnership; provided, that the General
Partner shall be liable, responsible and accountable, and the Partnership shall
not be liable to the General Partner, for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, proceedings,
costs, expenses and disbursements resulting from the General Partner's own
fraud, bad faith, negligence, misconduct or other breach of fiduciary duty to
the Partnership or any Partner. If any action, suit or proceeding shall be
pending or threatened against the Partnership or the General Partner relating to
or arising, or alleged to relate to or arise, out of any such action or inaction
the General Partner shall have the right to employ, at the expense of the
Partnership, separate counsel of the General Partner's choice in such action,
suit or proceeding. The satisfaction of the obligations of the Partnership under
this Section 1 shall be from and limited to the assets of the Partnership and no
Partner shall have any personal liability on account thereof. The General
Partner shall have the right to bill the
   20

Partnership for, or otherwise request the Partnership to pay, at any time and
from time to time after the General Partner has become obligated to make payment
therefor, any and all amounts for which the General Partner believes in good
faith that the General Partner is entitled to indemnification for under this
Section.

            2. The Partnership shall pay any and all such bills and honor any
and all such requests for payment within 60 days after such bill or request is
received by the General Partner. In the event that a final determination is made
that the Partnership is not so obligated in respect of any amount paid by it to
the General Partner, the General Partner will refund such amount within 180 days
of such determination.

            3. The Partnership shall indemnify to the extent of the Partnership
assets each Limited Partner against any claims of liability asserted against a
Limited Partner solely because he is a Limited Partner in the Partnership.

            4. Notwithstanding the foregoing, neither the General Partner nor
any officer, director, employee, agent, subsidiary or assignee of the General
Partner or of the Partnership shall be indemnified from any liability, loss or
damage incurred by them in connection with (i) any claim or settlement involving
allegations that the Securities Act of 1933 was violated by the General Partner
or by any such other person or entity unless: (a) the General Partner or other
persons or entities seeking indemnification are successful in defending such
action; and (b) such indemnification is specifically approved by a court of law
which shall be advised as to the current position of the Securities and Exchange
Commission and the California Commissioner of Corporations regarding
indemnification for violations of securities laws; or (ii) any liability imposed
by law, including liability for fraud, bad faith or negligence.

      G. Specific Transactions Authorized.  The General Partner is hereby
authorized to enter into, on behalf of the Partnership, the following specific
transactions:

            1. The Partnership may purchase property from any Affiliate of the
General Partner provided (i) the property was acquired by such Affiliate for the
purpose of facilitating its purchase by the Partnership, facilitating the
borrowing of money or the obtaining of financing for the Partnership or any
other purpose related to the business of the Partnership, (ii) the property is
purchased by the Partnership for a price no greater than the acquisition and
out-of-pocket carrying cost of the property to such Affiliate, (iii) there is no
adverse difference in the interest rates of the loans secured by the property at
the time acquired by such Affiliate and at the time
   21

purchased by the Partnership nor any other benefit arising out of such
transaction to the General Partner and (iv) no compensation is paid by the
Partnership or by any non-affiliated person to any Affiliate of the General
Partner in connection with the purchase of the property by the Partnership.

            2. The Partnership may contract (i) with Affiliates of the General
Partner to serve as real estate brokers and mortgage placement brokers in
connection with the investment of the Partnership assets and (ii) with
Affiliates of the General Partner to serve as real estate brokers in connection
with the sale of property by the Partnership. The amount of real estate
commissions payable to Affiliates of the General Partner upon a sale of property
by the Partnership where such Affiliates have provided a substantial amount of
services in the sales effort may not exceed the lesser of (i) 3% of the sales
contract price of the property or (ii) 50% of the reasonable, customary and
competitive rate for similar services in light of the size, type and location of
the property and the total real estate commissions payable to such Affiliates
and to other persons may not exceed the lesser of (a) 6% of the contract price
for the sale of the property or (b) the reasonable, customary and competitive
rate for similar services in light of the size, type and location of the
property. No Affiliate of the General Partner may receive payment of a real
estate commission with respect to the sale of any property by the Partnership
unless total consideration received by the Partnership upon such sale exceeds
the amounts actually paid by the Partnership for the purchase, development,
construction or improvement, of the property and any fees and commissions paid
by the Partnership in connection therewith. For purposes of this Paragraph G(2)
only, the term "Affiliate" shall not be deemed to exclude any person solely by
reason of his or its providing underwriting or financial or investment advisory
services to the Partnership, the Partners or any Affiliate of any of them from
time to time.

            3. Affiliates of the General Partner may receive insurance premiums
and brokerage commissions with respect to insurance on property owned by the
Partnership only when the cost of such insurance is paid by tenants who net
lease such properties from the Partnership. No such Net Lease shall provide that
the lessee is required to purchase insurance through an Affiliate of the General
Partner.

            4. At any time, the Partnership may borrow money on a short-term
basis from an Affiliate of the General Partner in connection therewith pay
interest to such Affiliate at a rate equal to the lesser of (i) one percent
above the prime interest rate at the Bank of New York or (ii) the rate that
would be
   22

charged to the Partnership by unrelated lending institutions on comparable loans
for the same purpose in the locality of the property. Such borrowings shall be
non-recourse to the Partnership, unless the General Partner shall otherwise
consent in writing.

            5. All of the Partnership's expenses shall be billed directly to and
paid by the Partnership. The Partnership shall reimburse the General Partner or
its Affiliates for: (a) the actual cost to the General Partner or its Affiliates
of goods and materials used for and by the Partnership and obtained from
unaffiliated parties and (b) the costs incurred by the General Partner or its
Affiliates in performing administrative services necessary to the prudent
operation of the Partnership; provided, however, that the amounts charged to the
Partnership for services performed pursuant to this clause (c) shall not exceed
the lesser of (1) the actual cost of such services, or (2) the amount which the
Partnership would be required to pay to independent parties for comparable
services in the same geographic location. No reimbursement shall be made to the
General Partner or its Affiliates for: (x) services for which the General
Partner or its Affiliates are entitled to compensation by way of a separate fee,
or (y) any of the salaries, fringe benefits, travel expenses, and other
administrative items incurred by or allocated to any controlling person (as
defined herein) of the General Partner or its Affiliates. The Partnership's
annual report to the Limited Partners shall contain a breakdown of the costs
reimbursed to the General Partner or its Affiliates. Within the scope of the
annual audit of the General Partner's (or such Affiliates) financial statement,
the independent certified public accountant shall verify the allocation of such
costs to the Partnership. The method of review shall at minimum provide (1) a
review of time records of individual employees, the costs of whose services were
reimbursed; and (2) a review of the specific nature of the work performed by
each such employee. The methods of review shall be in accordance with generally
accepted auditing standards and shall accordingly include such tests of the
accounting records and such other auditing procedures which the General
Partner's (or such Affiliate's) independent certified public accountants
consider appropriate in the circumstance. The additional costs of such review
shall be itemized by such accountants on a partnership by partnership basis and
may be reimbursed to the General Partner (or such Affiliate) in accordance with
this Paragraph G(9) only to the extent that such reimbursement, when added to
the cost for administrative services rendered, does not exceed the competitive
rate for such services as determined in this Paragraph G(9).

      As used herein, the term "controlling person" shall mean any person,
whatever his title, who performs executive or senior management functions for
the General Partner or Affiliate similar
   23

to those of executive or senior management officers, directors or partners, or
those holding 5% or more equity interest in the General Partner or Affiliate or
a person having the power to direct or cause the direction of the management
level employees and policies of the General Partner or Affiliate, whether
through the ownership of voting securities, by contract, or otherwise. For the
purposes of this Paragraph G(5), not every person who carries a title such as
vice president or senior vice president, corporate secretary or treasurer, shall
be considered a controlling person, unless such person performs the functions or
has the powers described above, and even in the absence of a specific title, an
executive in a truly senior management position shall be considered a
controlling person.

      H. General Restrictions.

            1. The Partnership shall obtain a written evaluation report signed
by an independent appraiser prior to the purchase of any real property by the
Partnership and shall not purchase any such real property if the purchase price
and all Acquisition Fees paid by the Partnership in connection with the
acquisition exceed the appraised value set forth in such report. All such
appraisals whether or not the real property which is the subject of such
appraisal is purchased by the Partnership, shall be at the Partnership's expense
or at the expense of the seller, shall be retained for five years and shall be
available for inspection and duplication by the Limited Partners.

            2. The Partnership may not sell any property in a transaction in
which an Affiliate of the General Partner acts as a real estate broker unless
the provisions of Paragraph G(2) of this Article X are complied with.

            3. The Partnership shall not own any land where the buildings and
improvements thereon are owned by an Affiliate of a General Partner.

            4. The Partnership may not acquire property in exchange for
interests in the Partnership.

            5. The Partnership shall not give an Affiliate of a General Partner
the exclusive right to sell property for the Partnership.

            6. The Partnership shall not pay, directly or indirectly, any
Acquisition Fee to an Affiliate of a General Partner in connection with the
purchase of property acquired with proceeds obtained from Cash From Sales or
Cash From Financings.

            7. The aggregate borrowings of the Partnership shall not exceed
66-2/3,% of the purchase price of all properties
   24

purchased by the Partnership on a combined basis. The foregoing restriction may
be waived or lessened by the General Partner without the approval of the Limited
Partners, but only with the prior written consent of the Commissioner of
Corporations of the Sate of California or pursuant to a change in the published
Rules of the Commissioner. In no event, however, shall the aggregate borrowings
of the Partnership exceed the sum of 85% of the purchase price of all properties
which have not been refinanced and 85% of the aggregate fair market value of all
refinanced properties.

            8. Except as set forth in Paragraph G(5) of this Article X, all
expenses of the Partnership shall be billed directly to and paid by the
Partnership.

            9. The Partnership funds shall not be commingled with the funds of
any other natural person. partnership, corporation, association or other legal
entity.

            10. The Partnership shall not finance the purchase of real property
by use of a wrap around note and mortgage "all-inclusive" note and deed of
trust) unless (a) neither the General Partner nor any Affiliate of the General
Partner receives interest on the amount of the underlying encumbrance in excess
of that payable to the lender on such underlying encumbrance, (b) the
Partnership receives credit on its obligation under the all-inclusive note for
payments made directly on the underlying encumbrance and (c) all payments on the
underlying encumbrance shall be made by the Partnership or, in the alternative,
payments by the Partnership on the wrap around note are made to a third party
collecting agent which in turn disburses such payment, first to the holder of
such underlying encumbrance, and thereafter to the holder of the wrap around
note.

            11. The Partnership shall not create or assume any indebtedness for
borrowed money unless the documents pursuant to which such indebtedness is
created or assumed provide, and the General Partner shall cause any and all such
documents assumed or entered into by or on behalf of the Partnership to provide,
that the parties thereto other than the Partnership (including any Affiliates of
the General Partner) shall look only to the assets of the Partnership for
satisfaction of the liabilities and obligations of the Partnership under such
documents (including without limitation those arising from representations,
warranties, covenants and agreements made in or in connection with such
documents) and that such other parties shall have no recourse to the Partners or
the separate assets of the Partners for the satisfaction of such liabilities and
obligations. The Partnership shall not incur any indebtedness including
indebtedness under a shared appreciation or similar mortgage wherein the lender
will have or acquire, at any time as a result
   25

of making the loan, any direct or indirect interest in the profit, capital or
property of the Partnership other than as a creditor.

            12. The Partnership shall not enter into any contracts with the
General Partner or with any Affiliates of the General Partner to construct or
develop Partnership properties or to render any services in connection with such
construction or development.

            13. The Partnership shall not acquire any property which is under
construction unless completion of the improvements on the property is guaranteed
at the contracted price by (a) an adequate completion bond; (b) a letter of
credit issued by a bank organized and doing business under the laws of the
United States or any State or of the District of Columbia which is subject to
supervision by Federal, State or District of Columbia authority and which has a
combined capital and surplus of not less than $5,000,000; or (c) a completion
guarantee by a third person, provided that such person has a net worth of at
least $10,000,000 and had in the most recent fiscal year or twelve-month period
prior to the giving of such guarantee net income of at least $2,000,000.

            14. Unimproved or non-income producing property shall not be
acquired except in amounts and upon terms which can be financed by the net
proceeds derived from the sale of limited partner interests. No more than 10% of
the net proceeds derived from Distributable Cash from Operations.

            15. No portion of the net proceeds derived from the sale of limited
partner interests may be invested in junior mortgages or deeds of trust;
provided, however, that the acquisition or granting of a junior mortgage or deed
of trust in connection with the sale, purchase, financing or refinancing of real
property of the Partnership shall not be deemed to be investing in junior
mortgages or deeds of trust.

            16. Any agreement entered into between the Partnership and the
General Partner or its Affiliates must be terminable by the Partnership, without
penalty, upon 60 days' notice.

      I. Compensation of General Partner. The General Partner shall not, in its
capacity as General Partner, receive any salary, fees, profits or distributions
from the Partnership except profits, distributions, fees and allocations to
which they may be entitled under Articles VIII and IX.

      J. Other Business of Partners. Except as otherwise specifically provided
herein, any of the Partners and any shareholder, officer, director, employee or
other person holding
   26

a legal or beneficial interest in an entity which is a Partner may engage in or
possess an interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the ownership,
financing, leasing, operation, management, syndication, brokerage and
development of real property and neither the Partnership nor the Partners shall
have any right by virtue of this Agreement in and to such independent ventures
or to the income or profits derived therefrom.

                                   ARTICLE XI

                 STATUS OF LIMITED PARTNERS AND SPECIAL PARTNERS

      The Limited Partners and Special Partners shall not participate in the
management or control of the Partnership's business nor shall they transact any
business for the Partnership nor shall they have the power to sign for or bind
the Partnership, said powers being vested solely and exclusively in the General
Partner. The Limited Partners and Special Partners shall not be bound by, or be
personally liable for, the expenses, liabilities or obligations of the
Partnership, except to the extent of their Capital Accounts. The Partnership
Interest owned by a Limited Partner or Special Partner shall be fully paid and
nonassessable.

      In addition to those described elsewhere in the Partnership Agreement, the
Limited Partners and Special Partners shall have the following rights, powers,
privileges, duties and liabilities:

            (a) The Limited Partners and Special Partners shall have the right
      to have full and true information of all things affecting the Partnership
      and shall be entitled to such reports as are set forth in Article XII
      hereof.

            (b) The Limited Partners and Special Partners shall receive from the
      Partnership the share of the distributions provided for in this Agreement
      in the manner and at the times provided for in this Agreement.

            (c) A Limited Partner or a Special Partner shall have the right to
      demand the return of his Capital Account only on the dissolution and
      winding up of the Partnership in accordance with Article XVIII hereof. No
      Limited Partner shall have priority over any other Limited Partner either
      as to the return of capital or as to profits, losses or distributions. No
      Limited Partner shall have right to bring an action for partition against
      the Partnership.
   27

            (d) Limited Partners holding more than fifty percent (50%) of the
      outstanding Limited Partner Interests may (1) remove the General Partner
      and (2) in the event that a vacancy shall occur in the office of General
      Partner, subject to the provisions B(5) of Article XV, elect a successor
      General Partner upon retirement, removal, death, adjudication of
      incompetence to manage his person or estate, adjudication of bankruptcy
      under Chapter 7 of the Bankruptcy Code (or any similar law or provision
      enacted in lieu thereof), dissolution or other cessation to exist as a
      legal entity of the General Partner.

            (e) Each Limited Partner and Special Partner shall have the right to
      a complete list of names and addresses and interests of all Limited
      Partners as set forth in the records of the Partnership, upon written
      request to the Partnership, provided such request is for a purpose
      reasonably related to such Partner's interest in the Partnership. A
      reasonable charge for copy work may be charged by the Partnership.

                                   ARTICLE XII

                          BOOKS OF ACCOUNT AND REPORTS

      Proper books of account shall be kept by the General Partner wherein shall
be entered all transactions, matters and things relating to the Partnership's
business as are usually entered into books of account kept by persons engaged in
a business of a like character. The books of account shall be kept at the
principal place of business of the Partnership and each Partner (or any duly
constituted designee of a Partner) shall at all times during reasonable business
hours have free access to and the right to inspect and copy the same.

      There shall be established for each Partner on the books of the
Partnership a Capital Account which shall show the amount of each capital
contribution made by such Partner (or his, her or its predecessor in the case of
an assignment of a Partnership Interest),. adjusted to reflect such Partner's
proportion of profits and losses (determined according to Paragraph B of Article
VIII) and of withdrawals and distributions and other items to the extent
properly creditable to or chargeable against such Capital Account.

      Within 75 days after the end of each Fiscal Year, the General Partner
shall deliver to each Limited Partner adequate information to enable each
Limited Partner to complete and file his Federal tax return.
   28

      Copies of each such report shall be distributed to each Limited Partner
within 60 days after the end of any such quarter. If deemed appropriate by the
General Partner such notice may be prepared and distributed to Limited Partners
more frequently than quarterly. The General Partner shall send such other
reports and information, if any, to the Limited Partners as the General Partner
may deem necessary or appropriate, including but not limited to reports
containing the name and address of each person who has had an unconditional
written offer to purchase Partnership property rejected by the Partnership (such
report shall also contain the price and terms offered). Copies of each report
distributed to the Limited Partners shall, to the extent required by applicable
law, be filed concurrently with relevant state "Blue Sky" authorities

                                  ARTICLE XIII

                                   FISCAL YEAR

      The Fiscal Year of the Partnership shall begin on the first day of January
and end on the thirty-first day of December in each year.

                                   ARTICLE XIV

                                PARTNERSHIP FUNDS

      The funds of the Partnership shall be deposited in such account or
accounts as shall be designated by the General Partner and all withdrawals
against such accounts shall be made only by one of the General Partner or by its
properly delegated agents.

                                   ARTICLE XV

                        TRANSFER OF PARTNERSHIP INTEREST

      A. In General. A Limited Partner or Special Partner may not sell, assign,
transfer or otherwise dispose of, or pledge, hypothecate or in any manner
encumber, his interest in the Partnership or any part thereof except as
permitted in this Article, and any act in violation of this Paragraph A shall
not be binding upon or recognized by the Partnership regardless of whether the
General Partner shall have knowledge thereof.

      B.  General Partner.

            1.  Limited Partners holding more than fifty percent (50%) of the
then outstanding Limited Partner Interests, pursuant to
   29

Paragraph (d) of Article XI and with the same proportionate vote as provided
therein, may remove a General Partner from the Partnership. Written notice of
the removal of the General Partner shall be served upon the General Partner
either by certified or by registered mail, return receipt requested. or by
personal service. Said notice shall set forth the day upon which the removal is
to become effective. Upon receipt of notice, the General Partner shall cause an
accounting to be prepared covering the transactions of the Partnership since the
end of the previous Fiscal Year, and it shall not thereafter sell or dispose of
or allow the sale or disposition of any Partnership asset unless such sale or
disposition was the subject of a contract entered into by and binding upon the
Partnership prior to the date upon which the notice was received by the General
Partner.

            2. Until the dissolution of the Partnership otherwise occurs, the
General Partner shall not voluntarily take any steps to dissolve itself nor
shall the General Partner voluntarily retire; provided, however, that nothing in
this Partnership Agreement shall be deemed to prevent the merger or
reorganization of Carey Diversified LLC into or with any other entity organized
under the laws of the United States or any state thereof or the transfer of all
the limited liability company interests of Carey Diversified LLC and the
assumption of the rights and duties of the General Partner by, in the case of a
merger, reorganization or consolidation, the surviving entity by operation of
law.

            3. Upon the removal, adjudication of bankruptcy or insolvency,
dissolution or other cessation to exist as a legal entity of the General
Partner, the General Partner's Partnership Interest and interest in
Distributable Cash From Operations and its subordinated interest in Cash From
Sales and Cash From Financings shall be purchased by the Partnership for a
purchase price equal to the fair market value thereof determined pursuant to the
provisions of Section 4 of this Paragraph B. The purchase price of such interest
shall be paid by the Partnership to the General Partner by the promissory note
of the Partnership, payable to the General Partner or its order, having a face
amount equal to such purchase price, containing provisions as would be usual and
customary in a commercial promissory note, bearing interest at a rate per annum
equal to one percent above the prime interest rate at The Bank of New York,
payable annually, with principal and all unpaid accrued interest subject to
mandatory prepayment from all Cash From Sales and Cash From Financings, and the
remaining unpaid principal balance and unpaid accrued interest on such
promissory note due and payable five years from the date of the General
Partner's retirement, expulsion, adjudication of bankruptcy or insolvency,
dissolution or other cessation to exist as a legal entity.
   30

            4. The fair market value of the General Partner's interest purchased
by the Partnership pursuant to Section 3 of this Paragraph B shall be determined
by agreement between the General Partner and the Partnership (which agreement
shall require the approval of the Limited Partners holding more than fifty
percent (50%) of the outstanding Limited Partner Interests, with the same
proportionate vote as provided in paragraph (d) of Article XI). If the General
Partner and the Partnership cannot agree upon the fair market value of such
Partnership Interest within 30 days after the occurrence of the event upon which
such interest of the General Partner is to be purchased by the Partnership, the
fair market value thereof shall be determined in the manner provided by the laws
of the State of California for the determination of controversies by
arbitration, the General Partner to choose one arbitrator, the Partnership to
choose one arbitrator and the two arbitrators so chosen to choose a third
arbitrator. The decision of a majority of said arbitrators as to the fair market
value of such Partnership interest shall be final and binding and may be
enforced by legal proceedings. The General Partner and the Partnership shall
each compensate the arbitrator appointed by it and the compensation of the third
arbitrator shall be borne equally by such parties.

      C.  Limited Partners and Special Partners.

            1. The General Partner may, pursuant to this Article XV, (a) admit
as a substituted Limited Partner or Special Partner any successor in interest to
a Limited Partner or Special Partner either deceased or under legal disability,
and (b) admit as substituted Limited Partners or Special Partners assignees of
Limited Partners or Special Partners.

            2. A substituted Limited Partner or Special Partner is a person
admitted to all the rights of a Limited Partner or Special Partner. An assignee
is a person to whom a Limited Partner or Special Partner has assigned his
interest in the Partnership but who has not become a substituted Limited Partner
or Special Partner. An assignee shall have no right to require any information
or account of the Partnership's transactions or to inspect the Partnership's
books but shall only be entitled to receive the share of the profits, or the
return of the capital contribution, to which his assignor would otherwise be
entitled as set forth in Section 5 of this Paragraph C.

            3. No assignee of the whole or any portion of a Limited Partner's or
Special Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner or Special Partner in place of his assignor unless
all of the following conditions are satisfied:
   31

            (a) The written consent of the General Partner to such substitution
      shall be obtained, the granting or denial of which shall be within the
      absolute discretion of the General Partner;

            (b) The duly executed written instrument of assignment setting forth
      the intention of the assignor that the assignee become a substituted
      Limited Partner or Special Partner in his place shall have been filed with
      the Partnership;

            (c) The interests in the Partnership being acquired by the assignee
      shall consist of at least five (5) percent of the limited partner or
      special partner interest and, if the assignor shall retain any partner
      interest, such retention shall consist of at least five (5) percent of the
      limited partner or special partner interest;

            (d) The assignor and assignee shall execute and acknowledge such
      other instruments as the General Partner may deem necessary or desirable
      to effect such assignment and admission, including the written acceptance
      and adoption by the assignee of the provisions of this Agreement and his
      execution, acknowledgment and delivery to the General Partner of a Power
      of Attorney, the form and content of which are more fully described in
      Article XIX hereof; and

            (e)  The assignee shall pay a transfer fee not to exceed $50.00 per
      transaction to the Partnership.

            4.  Any person admitted to the Partnership as a Partner shall be
subject to all of the provisions; of this Agreement as if originally a party to
it.

            5. Subject to the provisions of Section 11 of this Paragraph C.
compliance with the suitability standards imposed by the Partnership, applicable
"Blue Sky" laws and the applicable rules of any other governmental authority, a
Limited Partner or Special Partner shall have the right to assign the whole or
any portion (not less than five (5) percent of the limited partner or special
partner interest and, if he shall retain any limited partner or special partner
interest, subject to his retaining not less than five (5) percent of the limited
partner or special partner interest) of his Partnership Interest by a written
assignment the terms of which are not in contravention of any of the provisions
of this Agreement, which assignment has been executed by the assignor and
received by the Partnership and recorded on the books thereof. Any assignment in
contravention of any of the provisions of this Section 5 shall be of no force
and effect and shall not be binding upon or recognized by the Partnership.
   32

            (a) Except as provided in Subsection (c) below, Paragraph A of
      Article VIII hereof and Paragraph D or Article IX hereof, an assignee of a
      Partner's Partnership Interest shall be entitled to receive distributions
      of cash or other property from the Partnership attributable to the
      interest acquired by reason of such assignment from and after the
      effective date of the assignment of such interest to him. The "effective
      date" of an assignment of an interest in the Partnership as used in this
      Subsection shall be the last day of the month in which the written
      instrument of assignment, in form and substance satisfactory to the
      General Partner, is received by the General Partner.

            (b) The net profits and net losses attributable to an interest in
      the Partnership assigned during any year shall be divided among and
      allocated in accordance with the provisions of Paragraph A of Article VIII
      hereof.

            (c) Anything herein to the contrary notwithstanding. both the
      Partnership and the General Partner shall be entitled to treat the
      assignor of such interest as the absolute owner thereof in all respects,
      and shall incur no liability for distributions of cash or other property
      made in good faith to him, until such time as the written assignment has
      been received by, and recorded in books of, the Partnership.

            6. The General Partner may elect to treat an assignee who has not
become a substituted Limited Partner or Special Partner as a substituted Limited
Partner or Special Partner in the place of his assignor should they deem, in its
absolute discretion, that such treatment is in the best interests of the
Partnership for any of its purposes or for any of the purposes of this
Agreement.

            7. No consent of any of the Limited Partners or Special Partners is
required to effect the substitution of a Limited Partner or Special Partner,
except that a Limited Partner or Special Partner who assigns his interest in the
Partnership must evidence his intention that his assignee be admitted as a
substituted Limited Partner or Special Partner in his place and must execute
such instruments as the General Partner may in its absolute discretion determine
to be necessary or desirable in connection therewith.

            8. Upon the admission of a Limited Partner or Special Partner
(whether as a result of his purchase of partner interests from the Partnership
or his admission as a substituted Limited Partner or Special Partner), the
General Partner shall make an appropriate amendment to the list of the Partner's
names,
   33

addresses, Contributions and Capital Accounts referred to in Article XII hereof.

            9. Upon the death or legal incompetency of an individual Limited
Partner or Special Partner. his personal representative shall have all of the
rights of a Limited Partner or Special Partner for the purpose of settling or
managing his estate, and such power as the decedent or incompetent possessed to
constitute a successor as an assignee of its interest in the Partnership and to
join with such assignee in making application to substitute such assignee as a
Limited Partner or Special Partner. However, such personal representative shall
not have the right to become a substituted Limited Partner or Special Partner in
the place of his predecessor in interest unless the conditions of Section 2 of
this Paragraph C (other than the requirement that the assignor execute and
acknowledge instruments) are first satisfied.

            10. Upon the adjudication of bankruptcy or insolvency, dissolution
or other cessation to exist as a legal entity of a Limited Partner or Special
Partner not an individual, the authorized representative of such entity shall
have all of the rights of a Limited Partner or Special Partner for the purpose
of effecting the orderly winding up and disposition of the business of such
entity and such power as such entity possessed to constitute a successor as an
assignee of its interest in the Partnership and to join with such assignee in
making application to substitute such assignee as a Limited Partner or Special
Partner. However, such authorized representative shall not have the right to
become a substituted Limited Partner or Special Partner in the place of his
predecessor in interest unless the conditions of Section 2 of this Paragraph C
(other than the requirement that the assignor execute and acknowledge
instruments) are first satisfied.

            11. (a) No assignment or transfer of an interest in the Partnership
may be made which would result in Limited Partners or Special Partners and
assignees of Limited Partners or Special Partners owning, directly or
indirectly, individually or in the aggregate, more than twenty percent (20%) of
the equity interests of a General Partner or any Affiliate of a General Partner
as defined in Section 1504(a)) of the Code. If any such assignment or transfer
would otherwise be made by bequest, inheritance or operation of law, the
transferee shall not become a Partner and the interest in the Partnership
transferred shall be automatically redeemed by the Partnership immediately prior
to such transfer in the same manner as provided in Subsection (b)(4) of this
Section 11.

            (b)  Anything to the contrary contained herein notwithstanding:
   34

                  (1) Except in the case of the Merger, in any twelve (12)
            consecutive month period no assignment or transfer of a limited
            partner interest may be made if as a result thereof the aggregate
            total of limited partner interests assigned and/or transferred in
            such period would exceed forty percent (40%) of the outstanding
            limited partner interests. This limitation is hereinafter referred
            to as the "forty percent (40%) limitation".

                  (2) A Limited Partner may assign or transfer his Partnership
            Interest to: (i) his spouse (unless legally separated), child or
            ancestor, or (ii) a corporation, partnership, trust or other entity,
            fifty-one percent (51%) of the equity interest of which is owned by
            such Limited Partner and/or any of the persons specified in clause
            (i) so related to such Limited Partner, provided, however, that such
            transfers are subject to the forty percent (40%) limitation.

                  (3) Subsection (b)(1) of this Section 11 shall not apply to a
            transfer by gift, bequest or inheritance or a transfer to the
            Partnership and, for purposes of the forty percent (40%) limitation,
            any such transfer shall not be treated as such.

                  (4) If, after the forty percent (40%) limitation is reached in
            any consecutive twelve (12) month period, a transfer of a
            Partnership Interest would otherwise take place by operation of law
            (but not including any transfer referred to in Subsection (b)(3) of
            this Section 11), then the transferee shall not become a Limited
            Partner and such Partnership Interest shall be automatically
            redeemed by the Partnership immediately prior to such transfer for a
            price equal to the fair market value of said interest on such date
            of transfer. The price shall be paid within ninety (90) days after
            the date of the transfer and redemption. If the Partnership and the
            transferor do not agree upon the fair market value of the
            Partnership Interest, the purchase price shall be determined by
            arbitration. The purchase price shall be paid in cash within ten
            (10) days after such determination.

            (c) No transfer or assignment of any limited partner interest shall
      be made if it would result in the Partnership's being treated as an
      association taxable as a corporation for tax purposes. The General
      Partner, in its sole discretion, may, on behalf of the Partnership, impose
      any restrictions or transfers or assignments of limited partner interests
      it may deem appropriated to give effect to the preceding sentence. The
      General Partner shall incur no liability to any Limited Partner,
      prospective investor or assignee for any action or inaction in
   35

connection with the foregoing, provided that the General Partner acted in good
faith and such course of conduct did not constitute negligence or misconduct of
the General Partner.

            12. The General Partner, in its absolute discretion, may cause the
Partnership to make, refrain from making, or once having made, to revoke, the
election referred to in Section 754 of the Code, and any similar election
provided by state or local law, or any similar provision enacted in lieu
thereof.

            13. Until the dissolution of the Partnership, the General Partner
shall not take any voluntary steps to dissolve itself nor shall the General
Partner voluntarily withdraw or resign.

                                   ARTICLE XVI

                  MEETINGS AND AMENDMENT OF LIMITED PARTNERSHIP
                            CERTIFICATE AND AGREEMENT

      A. Amendment of Limited Partnership Certificate The General Partner shall
amend and record the Certificate of Limited Partnership of the Partnership
without additional consent of Limited Partners when, pursuant to the terms of
this Partnership Agreement:

            1. There is a change in the name of the Partnership;

            2. The General Partner withdraws, is removed, is adjudicated
bankrupt under Chapter 7 of the Bankruptcy Code (or any similar law or provision
enacted in lieu thereof), is adjudicated incompetent to manage his person or
estate or dies, or a person is admitted as the General Partner;

            3. There is a false or erroneous statement in the Certificate;

            4. A time is fixed for dissolution of the Partnership or the return
of contributions and such time has not been specified in the Certificate;

            5. The Partners desire to make a change in any other statement in
the Certificate in order that it shall accurately represent the agreement among
them;

            6. There is a change in the character of the business of the
Partnership;

            7. There is a change in the address of the Partnership's principal
place of business or its California office;
   36

            8. There is a change in the time as stated in the Certificate for
the dissolution of the Partnership or for the return of a contribution; and

            There is a change in the address of the California agent for service
of process designated in the Certificate of Limited Partnership (unless such
agent is a corporation) or a new agent for service of process is appointed.

      B.  Amendments to the Agreement.

            1. Amendments to this Partnership Agreement may be proposed by the
      General Partner or by Limited Partners holding ten percent (10%) or more
      of the then outstanding Limited Partner Interests, with the same
      proportionate vote as provided in paragraph (d) of Article XI. Following
      such proposal, the General Partner shall submit to the Partners a verbatim
      statement of any proposed amendment and an opinion of counsel, who may be
      counsel to the Partnership, as to the legality of such amendment and the
      effect of such amendment on the liability of Limited Partners for the
      debts of the Partnership. The General Partner shall include in any such
      submission the General Partner's recommendations as to the proposed
      amendment. The amendment shall become effective only upon the written
      consent or affirmative vote of holders holding more than fifty percent
      (50%) of the then outstanding Limited Partner Interests, with the same
      proportionate vote as provided in paragraph (d) of Article XI.

            2. Any provision to the contrary herein notwithstanding, the General
      Partner may, without the consent of the Limited Partners, make the
      following amendments to this Agreement:

            a. Any amendments to Article VIII and/or Article IX of this
      Agreement if the Partnership is advised by its accountants or legal
      counsel at any time that the allocations provided in those Articles are
      not likely to be respected for Federal income tax purposes, either because
      of the promulgation of Treasury Regulations under Section 704 of the Code
      or other developments in the law. The General Partner is empowered to
      amend such provisions to the minimum extent necessary in accordance with
      the advice of the accountants and counsel to effect the allocations
      provided in this Agreement . New allocations made by the General Partner
      in reliance upon the advice of the accountants or counsel described above
      shall be deemed to be made pursuant to the fiduciary obligation of the
      General Partner to the Partnership and the Limited Partners, and no such
      new allocation shall give rise to any claim or cause of action by

   37

      any Limited Partner, provided that the General Partner acted in good
      faith; and

               b. In the event that the State of California amends the
      California Revised Limited Partnership Act in any manner and, as a result
      of such amendment, counsel to the Partnership is unable to give the
      Partnership an opinion to the effect that the Partnership will be treated
      as a partnership for Federal income tax purposes and not as an association
      taxable as a corporation, then the General Partner may decide in its sole
      discretion to reconstitute the Partnership under the laws of another
      state.

            3. Any provision to the contrary contained herein notwithstanding,
      the General Partner may, without the consent of the Limited Partners,
      amend this Agreement (a) to add to the representations, duties or
      obligations of a General Partner or to surrender any right or power
      granted to a General Partner herein, for the benefit of the Limited
      Partners, (b) to cure any ambiguity, to correct or supplement any
      provision herein which may be inconsistent with any other provision herein
      or to make any other provision with respect to matters or questions
      arising under this Agreement which will not be inconsistent with the
      provisions of this Agreement, (c) to delete any provision from this
      Agreement or to add any provision to this Agreement required to be so
      deleted or added by the Staff of the Securities and Exchange Commission or
      by a State "Blue Sky" Commissioner or similar such official, which
      addition or deletion is deemed by such Commission or official to be for
      the benefit or protection of the Limited Partners, and (d) to change
      administrative or other provisions of this Agreement in a manner which, in
      the opinion of the General Partner, will permit the most profitable and/or
      efficient operation of the Partnership; provided, however, that no
      amendment shall be adopted pursuant to this Section 3 unless the adoption
      thereof (i) is for the benefit of, or not adverse to, the interests of the
      Limited Partners, (ii) is consistent with Article IV and Paragraph A of
      Article X hereof, (iii) does not affect the distribution of Distributable
      Cash From Operations, Cash From Sales and Cash From Financings or the
      allocation of profits and losses among the Limited Partners or between the
      Limited Partners and the General Partner and (iv) does not affect the
      limited liability of the Limited Partners or the status of the Partnership
      as a partnership for Federal income tax purposes.

            4. Upon amendment of this Agreement, the Certificate of Limited
      Partnership shall also be amended if necessary to reflect such change.
   38

            5. Any amendment to the Partnership Agreement which modifies the
      compensation or distributions to which a General Partner is entitled or
      which affects the duties of a General Partner must be consented to by the
      General Partner before becoming effective.

            6. In the event there is a change in the Federal income tax laws or
      regulations which result in the Partnership being taxed as an association
      taxable as a corporation, the General Partner may cause the Partnership to
      conduct its business so as to be treated as a real estate investment trust
      for Federal income tax purposes.

      C. Meetings of the Partnership. Meetings of the Partnership may be called
by the General Partner and shall be called by them upon the written request of
Limited Partners holding ten percent (10%) or more of the outstanding Limited
Partner Interests, with the same proportionate vote as provided in paragraph (d)
of Article XI. Upon receipt of such a written request, stating the purpose of
the proposed meeting, the General Partner shall provide each Partner, within 10
days of such request, written notice (either by personal service or certified
mail or by express or other overnight delivery service) of a meeting and the
purpose of such meeting. Such meeting shall be held not less than 10 days nor
more than 60 days after the receipt of such request. Included with the notice
shall be a detailed statement of the action proposed, including a verbatim
statement of the wording of any resolution proposed for adoption by the Limited
Partners and of any proposed amendment to the Partnership Agreement. The
Partnership will provide for Proxies or written consents which specify a choice
between approval or disapproval of each matter to be acted upon at the meeting.
Holders of a majority of the limited partner interests entitled to vote,
represented in person or by Proxy, shall constitute a quorum at a meeting of the
Limited Partners. To the extent not consistent with this Paragraph C, all
meetings shall be governed by the provisions of Section 15637 of the Act. The
General Partner may establish a record date for any meeting, subject to the
limitations of Section 15637(j) of the Act.

                                  ARTICLE XVII

                                      TERM

      The Partnership shall terminate on December 31, 2020, unless sooner
dissolved pursuant to the provisions of Article XVIII hereof as otherwise
provided by law.

                                  ARTICLE XVIII
   39

                                   DISSOLUTION

      A.  Events Requiring Dissolution.  The Partnership shall be dissolved upon
the happening of any of the following events:

            1. The retirement, removal, adjudication of bankruptcy under Chapter
7 of the Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), of the General Partner, the dissolution or other cessation to exist as
a legal entity of the General Partner, unless the Limited Partners agree in
writing to continue the business of the Partnership and to admit one or more
General Partners.

            2. The Partnership is adjudicated bankrupt under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof).

            3. The vote of Limited Partners holding more than fifty percent
(50%) of the then outstanding Limited Partner Interests held by all Limited
Partners, with the same proportionate vote as provided in paragraph (d) of
Article XI.

            4. The disposition of all interests in the real, personal and mixed
property and other assets of the Partnership.

            5. December 31, 2020.

      B. Distributions on Dissolution. Upon the dissolution of the Partnership
the General Partner who has not wrongfully dissolved the Partnership shall wind
up the affairs of the Partnership. If there is no such General Partner, the
Limited Partners shall wind up the affairs of the Partnership. The Partners
winding up the affairs of the Partnership shall take full account of the
Partnership assets and liabilities and all assets shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom shall be applied and distributed in the following order: (1)
to creditors (including Partners who are creditors to the extent permitted by
law), in the order of priority as provided by law, (2) to the Partners in
accordance with their respective Capital Accounts, determined after the
application of Articles VIII and IX hereof and (3) to the Partners in accordance
with the provisions of Paragraph E of Article IX hereof. Notwithstanding
anything to the contrary, in the event the Partnership is "liquidated" within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), liquidating
distributions shall be made pursuant to the previous sentence by the end of the
taxable year in which the Partnership is liquidated, or, if later, within 90
days after the date of such liquidation. Distributions pursuant to the
   40

preceding sentence may be made to a trust for the purposes of an orderly
liquidation of the Partnership by the trust in accordance with the Act.

      C. Contributions by the General Partner. In the event that, upon the
liquidation of the Partnership, a General Partner shall have a negative balance
in the General Partner's Capital Account then the General Partner shall
contribute to the capital of the Partnership an amount equal to such negative
balance in the General Partner's Capital Account.

                                   ARTICLE XIX

                                POWER OF ATTORNEY

      Concurrently with the written acceptance and adoption of the provisions of
this Agreement, each Limited Partner and Special Partner shall execute and
deliver to the General Partner a Power of Attorney in form acceptable to the
General Partner in which the General Partner is constituted and appointed as the
attorney-in-fact for such Limited Partner or Special Partner with power and
authority to act in his name and on his behalf in the execution, acknowledgment
and filing of documents, which will include but not be limited to a Certificate
of Limited Partnership, as well as amendments thereto, under the laws of the
State of California and under the laws of any other state in which the General
Partner deems it advisable to file such a certificate; any other instrument
which may be required to be filed by the Partnership under the laws of any state
or by any governmental agency, or which the General Partner deems it advisable
to file; and any documents which may be required to effect the continuation of
the Partnership, the admission of an additional or substituted Limited Partner
or the dissolution and termination of the Partnership, provided such
continuation, admission or dissolution and termination are in accordance with
the terms of this Agreement.

      The Power of Attorney so granted by each Limited Partner and Special
Partner to the General Partner is a Special Power of Attorney coupled with an
interest, is irrevocable and shall survive the death or legal incapacity of the
Limited Partner or Special Partner; may be exercised by the General Partner for
each Limited Partner or Special Partner by a facsimile signature of one of its
officers or by listing all the Limited Partners and Special Partners executing
any instrument with a single signature of one of its officers acting as
attorney-in-fact for all of them; and shall survive the delivery of any
assignment by a Limited Partner or Special Partner of the whole or any portion
of his interest in the Partnership; except that where the assignee thereof has
been approved by the General Partner for admission to
   41

the Partnership as a substituted Limited Partner or Special Partner, the Power
of Attorney shall survive the delivery of such assignment for the sole purpose
of enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.

      The Power of Attorney so granted by each Limited Partner to the General
Partner shall not authorize the General Partner to act on behalf of Limited
Partners in any situation in which this Agreement requires the consent of
Limited Partners.

                                   ARTICLE XX

                      LIMITATIONS ON LIABILITY; LITIGATION

      Except as provided in his Subscription Agreement, no Limited Partner or
Special Partner shall be liable (i) as a General Partner unless, in addition to
the exercise of his rights and powers as a Limited Partner or Special Partner,
he takes part in the management or control of the Partnership's business or (ii)
to the Partnership or to a General Partner unless a liability of the Partnership
or of the General Partner, as the case may be, is founded upon the unauthorized
activity of such Limited Partner or Special Partner in attempting to take part
in the control of the Partnership's business or misstatements contained in such
Partner's Subscription Agreement delivered in connection with his purchase of
limited partner interests.

      The General Partner is hereby authorized to prosecute, defend, settle or
compromise actions or claims at law or in equity at the Partnership's expense as
may be necessary or proper to enforce or protect the Partnership's interests.
The General Partner shall satisfy any judgment, decree or decision of any court,
board or authority having jurisdiction or any settlement of any suit or claim
prior to judgment or final decision thereon first, out of any insurance proceeds
available therefor, next out of the Partnership's assets and income and finally
out of the assets and income of the General Partner.
   42

                                   ARTICLE XXI

                                  MISCELLANEOUS

      All notices under this Agreement shall be in writing and shall, except as
otherwise expressly provided herein, be given to the Partner entitled thereto by
personal service or by certified or registered mail, return receipt requested,
to the address set forth in this Agreement for such Partner or at such other
address as he may specify in writing.

      Article titles or captions contained in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.

      Whenever the singular number is used in this Agreement and when required
by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders and the word "persons" shall
include individuals, corporations, firms, partnerships, trusts or other forms of
associations.

      This Agreement may be executed in several counterparts, and all so
executed shall constitute one agreement, binding on all of the parties hereto,
notwithstanding that all the parties are not signatory to the original or the
same counterpart.

      Subject to the provisions of Article XV, the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of the respective Partners.

      Whenever the vote of the Limited Partners is referred to in this
Agreement, the General Partner may vote on behalf of such Limited Partners who
have by written proxy authorized the General Partner so to do.

      This Agreement and amendments hereof shall be governed by the laws of the
State of California.
   43

      IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands as of the day and year first above written.

                              GENERAL PARTNER:
                              CAREY DIVERSIFIED LLC


                              ________________________________________


                              CORPORATE SPECIAL PARTNER:

                              CAREY MANAGEMENT LLC


                              By:_____________________________________


                              INDIVIDUAL SPECIAL PARTNER


                              ________________________________________
                              William Polk Carey


                              LIMITED PARTNERS:
                              CAREY CORPORATE PROPERTY, INC.


                              By:_____________________________________

                              CAREY DIVERSIFIED LLC


                              By:_____________________________________
   44

                              All Limited Partners now and hereafter admitted as
                              limited partners of the Partnership pursuant to
                              powers of attorney and authorizations now and
                              hereafter executed in favor of and granted and
                              delivered to the General Partner

                              By:  CAREY DIVERSIFIED LLC,
                                    General Partner


                              By:_____________________________________