EXHIBIT 3.1.2 SECOND AMENDMENT
TO
SECOND RESTATED AND AMENDED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LIBERTY PROPERTY LIMITED PARTNERSHIP
This Second Amendment to the Second Restated and Amended Agreement of
Limited Partnership (this "Amendment") dated as of April 18, 2000, is
entered into by LIBERTY PROPERTY TRUST, a Maryland real estate
investment trust, as general partner (the "General Partner") of LIBERTY
PROPERTY LIMITED PARTNERSHIP (the "Partnership"), for itself and on
behalf of the limited partners of the Partnership, and MONTEBELLO
REALTY CORP. ("Montebello").
Whereas, Section 4.2(a) of the Second Restated and Amended Agreement of
Limited Partnership of the Partnership, as amended by that certain
First Amendment to the Second Restated and Amended Agreement of Limited
Partnership, dated as of July 28, 1999 (collectively, as amended, the
"Partnership Agreement") authorizes the General Partner to cause the
Partnership to issue additional Partnership Units in one or more
classes or series, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties as
shall be determined by the General Partner, subject to the provisions
of such section; and
Whereas, pursuant to the authority granted to the General Partner
pursuant to Sections 4.2(a) and 14.1(b) of the Partnership Agreement,
the General Partner desires to amend the Partnership Agreement (i) to
establish a new class of Partnership Units, the Series C Preferred
Units (as hereinafter defined), and to set forth the designations,
rights, powers, preferences and duties of such Series C Preferred
Units, (ii) to issue the Series C Preferred Units to Montebello and
admit Montebello as an Additional Limited Partner and (iii) to make
certain other changes to the Partnership Agreement.
Now, therefore, in consideration of good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the
General Partner hereby amends the Partnership Agreement as follows:
Section 1. DEFINITIONS. For purposes of this Amendment, the term
"Parity Preferred Units" shall be used to refer to any class or series
of Partnership Interests of the Partnership now or hereafter
authorized, issued or outstanding expressly designated by the
Partnership to rank on a parity with Series C Preferred Units with
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Partnership including,
without limitation, the "8.80% Series A Cumulative Redeemable Preferred
Partnership Interests" and the "9.25% Series B Cumulative Redeemable
Preferred Partnership Interests". The term "Priority Return" shall
mean, an amount equal to 9.125% per annum, as the same may be adjusted
pursuant to Section 3(a) below, determined on the basis of a 360 day
year of twelve 30 day months (and for any period shorter than a full
quarterly period for which distributions are computed, the amount of
the distribution payable will be computed based on the ratio of the
actual number of days elapsed in such period to ninety (90) days),
cumulative to the extent not distributed for any given distribution
period pursuant to Section 6.2 of the Partnership Agreement, of the
stated value of $ 25 per Series C Preferred Unit, commencing on the
date of issuance of such Series C Preferred Unit. The term
"Subsidiary" shall mean with respect to any person, any corporation,
partnership, limited liability company, joint venture or other entity
of which a majority of (i) voting power of the voting equity securities
or (ii) the outstanding equity interests, is owned, directly or
indirectly, by such person. The term "PTP" shall mean a "publicly
traded partnership" within the meaning of Section 7704 of the Code.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Partnership Agreement.
Section 2. DESIGNATION AND NUMBER. A series of Partnership
Interests in the Partnership designated as the "9.125% Series C
Cumulative Redeemable Preferred Partnership Interests" (the "Series C
Preferred Units") is hereby established. The maximum number of Series
C Preferred Units shall be 800,000.
Section 3.
(a) PAYMENT OF DISTRIBUTIONS. Subject to the rights of holders
of Parity Preferred Units and holders of Partnership Interests ranking
senior to the Series C Preferred Units as to payment of distributions,
pursuant to Section 6.2 of the Partnership Agreement, holders of Series
C Preferred Units will be entitled to receive, when, as and if declared
by the Partnership acting through the General Partner, out of Net
Operating Cash Flow, cumulative preferential cash distributions at the
rate per annum of 9.125% of the original Capital Contribution per
Series C Preferred Unit (the "Issuance Rate"). All distributions shall
be cumulative, shall accrue from the original date of issuance and will
be payable (i) quarterly in arrears, on or before March 31, June 30,
September 30 and December 31 of each year commencing on June 30, 2000
for the quarterly period then ended, and, (ii), in the event of (A) an
exchange of Series C Preferred Units into Series C Preferred Shares, or
(B) a redemption of Series C Preferred Units, on the exchange date or
redemption date, as applicable (each a "Preferred Unit Distribution
Payment Date"). The amount of the distribution payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months
and for any period shorter than a full quarterly period for which
distributions are computed, the amount of the distribution payable will
be computed based on the ratio of the actual number of days elapsed in
such period to ninety (90) days. If any date on which distributions
are to be made on the Series C Preferred Units is not a Business Day
(as defined herein), then payment of the distribution to be made on
such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date. Distributions on the Series C Preferred Units will be made
to the holders of record of the Series C Preferred Units on the
relevant record dates to be fixed by the Partnership acting through the
General Partner, which record dates shall in no event exceed fifteen
(15) Business Days prior to the relevant Preferred Unit Distribution
Payment Date (the "Preferred Unit Partnership Record Date").
(b) DISTRIBUTIONS CUMULATIVE. Distributions on the Series C
Preferred Units will accrue whether or not the terms and provisions of
any agreement of the Partnership, including any agreement relating to
its indebtedness at any time prohibit the declaration, setting aside
for payment or current payment of distributions, whether or not the
Partnership has earnings, whether or not there are funds legally
available for the payment of such of such distributions and whether or
not such distributions are authorized. Accrued but unpaid
distributions on the Series C Preferred Units will accumulate as of the
Preferred Unit Distribution Payment Date on which they first become
payable. Distributions on account of arrears for any past distribution
periods may be declared and paid at any time, without reference to a
regular Preferred Unit Distribution Payment Date to holders of record
of the Series C Preferred Units on the record date fixed by the
Partnership acting through the General Partner, which date shall not
exceed fifteen (15) Business Days prior to the payment date.
Accumulated and unpaid distributions will not bear interest.
(c) PRIORITY AS TO DISTRIBUTIONS.
(i) So long as any Series C Preferred Units are outstanding,
no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to any class
or series of Partnership Interest of the Partnership ranking junior as
to the payment of distributions or rights upon a voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership
to the Series C Preferred Units (collectively, "Junior Units"), nor
shall any cash or other property be set aside for or applied to the
purchase, redemption or other acquisition for consideration of any
Series C Preferred Units, any Parity Preferred Units or any Junior
Units, unless, in each case, all distributions accumulated on all
Series C Preferred Units and all classes and series of outstanding
Parity Preferred Units have been paid in full or a sum sufficient for
such full payment has been irrevocably deposited in trust for immediate
payment. The foregoing sentence will not prohibit (a) distributions
payable solely in Junior Units, (b) the conversion of Junior Units or
Parity Preferred Units into Partnership Interests of the Partnership
ranking junior to the Series C Preferred Units as to distributions and
rights upon the voluntary or involuntary liquidation, dissolution or
winding up of the Partnership, (c) the redemption of Partnership
Interests corresponding to any Series C Preferred Shares, Parity
Preferred Shares with respect to distributions or Junior Shares to be
purchased by the General Partner pursuant to Article VII of the Amended
and Restated Declaration of Trust of the General Partner (as amended
and modified through the date hereof, the "Charter") to preserve the
General Partner's status as a real estate investment trust, provided
that such redemption shall be upon the same terms as the corresponding
purchase pursuant to Article VII of the Charter or (d) the foreclosure
by the Partnership on the Partnership Interests constituting the
Indemnity Collateral and/or the Special Indemnity Collateral (as
defined in Section 13.3 of the Partnership Agreement).
(ii) So long as distributions have not been paid in full (or
a sum sufficient for such full payment is not irrevocably deposited in
trust for immediate payment) upon the Series C Preferred Units, all
distributions authorized and declared on the Series C Preferred Units
and all classes or series of outstanding Parity Preferred Units shall
be authorized and declared so that the amount of distributions
authorized and declared per Series C Preferred Unit and such other
classes or series of Parity Preferred Units shall in all cases bear to
each other the same ratio that accrued distributions per Series C
Preferred Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of
Parity Preferred Units do not have cumulative distribution rights) bear
to each other. No interest or any sum of money in lieu of interest
shall be payable in respect of any distribution, payment or payments on
Series C Preferred Units which may be in arrears.
(d) NO FURTHER RIGHTS. Holders of Series C Preferred Units shall
not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions
described herein.
Section 4. ALLOCATIONS. Section 1 of Exhibit C to the
Partnership Agreement is hereby deleted and replaced by the following:
(a) NET INCOME. Except as otherwise provided herein, Net Income
for any fiscal year or other applicable period shall be allocated in
the following order and priority:
(i) first, to the General Partner to the extent of Net Loss
previously allocated to the General Partner pursuant to Section
1(b)(iii) below for all prior fiscal years or other applicable periods
exceed Net Income previously allocated to the General Partner pursuant
to this Section 1(a)(i) for all prior fiscal years or other applicable
periods,
(ii) second, to Partners holding any Partnership Interests
that are entitled to any preference in distribution to the extent that
Net Loss previously allocated to such holders pursuant to Section
1(b)(ii) below for all prior fiscal years or other applicable periods
exceeds Net Income previously allocated to such Partners pursuant to
this Section 1(a)(ii) for all prior fiscal years or other applicable
periods,
(iii) third, to Partners holding Partnership Interests of a
class not entitled to preference in distribution to the extent that Net
Loss previously allocated to such holders pursuant to Section 1(b)(i)
below for all prior fiscal years or other applicable periods exceeds
Net Income previously allocated to such holders pursuant to this
Section 1(a)(iii) for all prior fiscal years or other applicable
periods,
(iv) fourth, to Partners holding any Partnership Interests
that are entitled to any preference in distribution in accordance with
the rights of any such class of Partnership Interests until each such
Partnership Interest has been allocated, Net Income equal to the excess
of (x) the cumulative amount of preferred distributions such Partners
are entitled to receive to the last day of the current fiscal year or
other applicable period or to the date of redemption, to the extent
such Partnership Interests are redeemed during such period, over (y)
the cumulative Net Income allocated to such Partners, pursuant to this
Section 1(a)(iv) for all prior fiscal years or other applicable periods
(and, within each such class, pro rata in proportion to the respective
share of such Partnership Interests each Partner holds as of the last
day of the period for which such allocation is being made), and
(v) fifth, with respect to Partnership Interests that are
not entitled to any preference in the allocation of Net Income, pro
rata to each such class in accordance with the terms of such class
(and, within each such class, pro rata in proportion to each Partner's
respective share of such Partnership Interests as of the last day of
the period for which such allocation is being made).
B. NET LOSS. Except as otherwise provided herein, Net Loss for
any fiscal year or other applicable period shall be allocated in the
following order and priority:
(i) first, with respect to classes of Partnership Interests
that are not entitled to any preference in distribution (including the
General Partner Interest), pro rata to each such class in accordance
with the terms of such class (and, within such class, pro rata in
proportion to each Partner's respective share of such Partnership
Interests as of the last day of the period for which such allocation is
being made) until the Adjusted Capital Account (ignoring for this
purpose any amounts a Partner is obligated to contribute to the capital
of the Partnership or is deemed obligated to contribute pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of each Partner with
respect to such Partnership Interests is reduced to zero,
(ii) second, to the Partners holding any Partnership
Interests that are entitled to any preference in distribution in
accordance with the rights of any such class of Partnership Interests
(and, if there is more than one class of such Partnership Interests,
then in the reverse order of their preference in distribution), until
the Adjusted Capital Account (modified in the same manner as in clause
(i)) of each such Partner with respect to such Partnership Interests is
reduced to zero, and
(iii) third, to the General Partner.
To the extent permitted under Section 704 of the Code, solely for
purposes of allocating Net Income or Net Loss in any taxable year (or a
portion thereof) to Partners holding Series B Preferred Units or Series
C Preferred Units pursuant to Section 1 hereof, items of Net Income or
Net Loss, as the case may be, shall not include Depreciation with
respect to properties that are "ceiling limited" in respect of holders
of Series B Preferred Units or Series C Preferred Units. For purposes
of the preceding sentence, Partnership property shall be considered
"ceiling limited" in respect of a holder of Series B Preferred Units or
Series C Preferred Units if Depreciation attributable to such
Partnership property which would otherwise be allocable to such
Partner, without regard to this paragraph, exceeds depreciation
determined for federal income tax purposes attributable to such
Partnership property which would otherwise be allocable to such holder
by more than 5%. Notwithstanding the foregoing sentences in this
paragraph, in applying this paragraph, the General Partner may, in its
discretion for administrative ease and convenience, calculate Net
Income or Net Loss in any taxable year (or a portion thereof) allocable
to the Partners holding Series B Preferred Units or Series C Preferred
Units by excluding Depreciation with respect to all properties of the
Partnership.
It is the intention of the parties hereunder that the aggregate
Capital Account balance of the holders of Series B Preferred Units or
Series C Preferred Units at any date shall not exceed the amount of the
original Capital Contribution of such holder plus the cumulative
Priority Return, whether or not declared, to the extent not previously
distributed.
Section 5. CEILING ON PARTICIPATION.
(a) Notwithstanding any other provision of the Partnership
Agreement, if the holder of the Series C Preferred Units is an entity
other than a corporation, such holder shall not be allocated or
otherwise entitled to more than 19.9% of the total Net Income allocated
to the Capital Accounts of the Partners in accordance with Section
704(b) of the Internal Revenue Code for any taxable year (or any
portion thereof in which the relative interests of the Partners have
varied from their relative interests for an immediately preceding
and/or immediately succeeding portion thereof). If, by application of
this paragraph, such holder is allocated less Net Income for any period
than the amount to which it would otherwise be entitled, then (1) Net
Income equal to such shortfall shall instead be allocated to the
General Partner and (2) Net Income equal to such shortfall shall be
allocated to such holder, as applicable, in lieu of the General Partner
as soon as possible in subsequent periods to the extent that doing so
would not violate the limitations provided for in this paragraph. If
the General Partner reasonably anticipates or realizes that a
distribution to such holder on any Preferred Unit Distribution Payment
Date might cause such partner to be distributed cash in respect of more
than 19.9% of the total Net Income allocated to the Capital Accounts of
the partners in accordance with Section 704(b) of the Internal Revenue
Code for any taxable year (or any portion thereof in which the relative
interests of the partners have varied from their relative interests for
an immediately preceding and/or immediately succeeding portion
thereof), the General Partner may withhold all or a portion of such
distribution to the extent appropriate to satisfy the provisions of
this paragraph 5(a).
(b) Notwithstanding any other provision of the Partnership
Agreement (as amended), if the ceiling provision set forth in paragraph
5(a) hereof causes income which would otherwise be allocated to any
holder to be allocated to the General Partner, the cash otherwise
distributable to such holder in respect of such reallocated income
shall be reduced by an amount equal to such reallocated income. If, by
application of this paragraph 5, such holder is distributed less cash
for any period than the amount to which it would otherwise be entitled,
an amount equal to such shortfall shall be made up by distributing cash
to such Partner, on the first Preferred Unit Distribution Payment Date
following each period for which income is allocated to such Partner
pursuant to the penultimate sentence of the immediately preceding
paragraph, in an amount equal to the income so allocated. Solely for
purposes of this paragraph 5(b), income shall be deemed to be allocated
immediately prior to each Preferred Unit Distribution Payment Date.
Section 6. LIQUIDATION PROCEEDS.
(a) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Partnership, distributions on the
Series C Preferred Units shall be made in accordance with Section 8.2
of the Partnership Agreement.
(b) NOTICE. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the
payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by
(i) fax and (ii) by first class mail, postage pre-paid, not less than
twenty 20 and not more than sixty (60) days prior to the payment date
stated therein, to each record holder of the Series C Preferred Units
at the respective addresses of such holders as the same shall appear on
the transfer records of the Partnership.
(c) NO FURTHER RIGHTS. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of
Series C Preferred Units will have no right or claim to any of the
remaining assets of the Partnership.
(d) CONSOLIDATION, MERGER OR CERTAIN OTHER TRANSACTIONS. The
consolidation or merger of the Partnership with or into any other
corporation, trust, partnership, limited liability company or other
entity (or of any other corporation, trust, partnership, limited
liability company or other entity with or into the Partnership), or the
sale, lease, exchange, transfer or conveyance of all or substantially
all of the property or business of the Partnership shall not be deemed
to constitute a liquidation, dissolution or winding-up of the
Partnership.
Section 7. OPTIONAL REDEMPTION.
(a) RIGHT OF OPTIONAL REDEMPTION. The Series C Preferred Units
may not be redeemed prior to the fifth (5th) anniversary of the issuance
date. On or after such date, the Partnership at its sole option shall
have the right to redeem the Series C Preferred Units, in whole or in
part, at any time or from time to time, upon not less than thirty (30)
nor more than sixty (60) days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of the holders of
Series C Preferred Units (the "Series C Redemption Price"); provided,
however, that no redemption pursuant to this Section 7 will be
permitted if the Redemption Price does not equal or exceed the original
Capital Contribution of such holder plus the cumulative Priority
Return, whether or not declared, to the redemption date to the extent
not previously distributed. If fewer than all of the outstanding
Series C Preferred Units are to be redeemed, the Series C Preferred
Units to be redeemed shall be selected pro rata (as nearly as
practicable without creating fractional units).
(b) LIMITATION ON REDEMPTION.
(i) The Redemption Price of the Series C Preferred Units
(other than the portion thereof consisting of accumulated but unpaid
distributions) will be payable solely out of the sale proceeds of
capital stock of the General Partner, which will be contributed by the
General Partner to the Partnership as additional capital contribution,
or out of the sale of limited partner interests in the Partnership and
from no other source. For purposes of the preceding sentence, "capital
stock" means any equity securities (including Common Shares and
Preferred Shares (as such terms are defined in the Charter)), shares,
participation or other ownership interests (however designated) and any
rights (other than debt securities convertible into or exchangeable for
equity securities) or options to purchase any of the foregoing.
(ii) The Partnership may not redeem fewer than all of the
outstanding Series C Preferred Units unless all accumulated and unpaid
distributions have been paid or contemporaneously are authorized and
paid (or authorized and a sum sufficient for the full payment thereof
is irrevocably deposited in trust for immediate payment) on all Series
C Preferred Units for all quarterly distribution periods terminating on
or prior to the date of redemption.
(c) PROCEDURES FOR REDEMPTION.
(i) Notice of redemption will be (A) faxed, and (B) mailed by
the Partnership, by certified mail, postage prepaid, not less than
thirty (30) nor more than sixty (60) days prior to the redemption date,
addressed to the respective holders of record of the Series C Preferred
Units at their respective addresses as they appear on the records of
the Partnership. No failure to give or defect in such notice or in the
transmission thereof shall affect the validity of the proceedings for
the redemption of any Series C Preferred Units except as to the holder
to whom such notice was defective or not given or received. In
addition to any information required by law, each such notice shall
state: (1) the redemption date, (2) the Redemption Price, (3) the
aggregate number of Series C Preferred Units to be redeemed and if
fewer than all of the outstanding Series C Preferred Units are to be
redeemed, the number of Series C Preferred Units to be redeemed held by
such holder, which number shall equal such holder's pro rata share
(based on the percentage of the aggregate number of outstanding Series
C Preferred Units the total number of Series C Preferred Units held by
such holder represents) of the aggregate number of Series C Preferred
Units to be redeemed, (4) the place or places where the Series C
Preferred Units are to be surrendered for payment of the Redemption
Price, (5) that distributions on the Series C Preferred Units to be
redeemed will cease to accumulate on such redemption date and (6) that
payment of the Redemption Price will be made upon presentation and
surrender of such Series C Preferred Units.
(ii) If the Partnership gives a notice of redemption in
respect of Series C Preferred Units (which notice will be irrevocable)
then, by 12:00 noon, New York City time, on the redemption date, the
Partnership will deposit irrevocably in trust for the benefit of the
Series C Preferred Units being redeemed funds sufficient to pay the
applicable Redemption Price and will give irrevocable instructions and
authority to pay such Redemption Price to the holders of the Series C
Preferred Units upon surrender of the Series C Preferred Units by such
holders at the place designated in the notice of redemption. If the
Series C Preferred Units are evidenced by a certificate and if fewer
than all Series C Preferred Units evidenced by any certificate are
being redeemed, a new certificate shall be issued upon surrender of the
certificate evidencing all Series C Preferred Units, evidencing the
unredeemed Series C Preferred Units without cost to the holder thereof.
On and after the date of redemption, distributions will cease to
accumulate on the Series C Preferred Units or portions thereof called
for redemption, unless the Partnership defaults in the payment thereof.
If any date fixed for redemption of Series C Preferred Units is not a
Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price is improperly withheld
or refused and not paid by the Partnership, distributions on such
Series C Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for
purposes of calculating the applicable Redemption Price.
Section 8. VOTING RIGHTS.
(a) GENERAL. Holders of the Series C Preferred Units will not
have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below.
(b) CERTAIN VOTING RIGHTS. So long as any Series C Preferred
Units remain outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series C
Preferred Units outstanding at the time (i) (A) authorize or create, or
increase the authorized or issued amount of, any class or series of
Partnership Interests senior to the Series C Preferred Units with
respect to payment of distributions or rights upon liquidation,
dissolution or winding-up, (B) reclassify any Partnership Interests of
the Partnership into any such senior Partnership Interest, or (C)
create, authorize or issue any obligations or security convertible into
or evidencing the right to purchase any such senior Partnership
Interests, (ii) (A) authorize or create, or increase the authorized or
issued amount of any Parity Preferred Units, (B) reclassify any
Partnership Interest into a Parity Preferred Unit, or (C) create,
authorize or issue any obligations or security convertible into or
evidencing the right to purchase any Parity Preferred Unit; provided,
that restrictions contained in this clause (ii) of this Paragraph (b)
shall apply only to Parity Preferred Units that are issued to an
Affiliate of the Partnership other than on arm's length terms; and to
no other issuance, including, without limitation, an issuance to the
General Partner, the purpose of which is to allow the General Partner
to issue corresponding preferred Shares to persons who are not
Affiliates of the Partnership or (iii) either (A) consolidate or merge
into or with any corporation or other entity or (B) amend, alter or
repeal the provisions of the Partnership Agreement, whether by merger
or consolidation or otherwise, in such a way that would materially and
adversely affect the powers, special rights, preferences, privileges or
voting power of the Series C Preferred Units or the holders thereof;
provided, however, that with respect to the occurrence of a merger or
consolidation, so long as (1) the Partnership is the surviving entity
and the Series C Preferred Units remain outstanding with the terms
thereof unchanged, or (2) the resulting, surviving or transferee entity
is a partnership, limited liability company or other pass-through
entity organized under the laws of any state, and such entity
substitutes for the Series C Preferred Units other interests in such
entity having substantially the same terms and rights as the Series C
Preferred Units, including with respect to distributions, voting rights
and rights upon liquidation, dissolution or winding-up, then the
occurrence of any such event shall not be deemed to materially and
adversely affect the rights, privileges or voting powers of the holders
of the Series C Preferred Units; provided, further, that any increase
in the amount of Partnership Interests or the creation or issuance of
any other class or series of Partnership Interests, shall not be deemed
to materially and adversely affect the rights, preferences, privileges
or voting powers of the Series C Preferred Units, if such Partnership
Units rank (y) junior to the Series C Preferred Units with respect to
payment of distributions or the distribution of assets upon
liquidation, dissolution or winding up, or (z) on a parity with the
Series C Preferred Units with respect to payment of distributions or
the distribution of assets upon liquidation, dissolution or winding-up;
provided, that any Preferred Units issued in reliance on the preceding
clause (z) shall have been issued to an Affiliate of the Partnership on
arm's length terms, or to the General Partner in order to allow the
General Partner to issue corresponding preferred Shares to persons who
are not Affiliates of the Partnership. In the event of any conflict or
inconsistency between this Section 8 and Article XIV of the Partnership
Agreement, this Section 8 shall control.
Section 9. TRANSFER RESTRICTIONS. The Series C Preferred Units
shall be subject to the provisions of Article IX of the Partnership
Agreement, provided, however that (a) the General Partner shall act
reasonably in exercising its discretion pursuant to the provisions of
Sections 9.2(a) and 9.2(c) and shall not withhold its consent to any
transfer to any Person, and the admission of such Person as a
Substituted Limited Partner, which Person does not violate the
requirements of Section 9.3 and such transfers do not cause the total
number of holders of Series C Preferred Units which would be considered
partners under Treasury Regulation Section 1.7704-1(h)(3), at any time
the Partnership is satisfying the private placement safe harbor of
Treasury Regulation Section 1.7704-1(h) to exceed the lesser of (i)
(A) four (4) through December 31, 2000 and (B) six (6) after December
31, 2000 and (ii) the maximum number that would permit the Partnership
to continue to satisfy such safe harbor (but substituting "90" for
"100" in assessing the status of such safe harbor) and (b) the term
"transfer" when used in Article IX shall not be deemed to include any
exchange pursuant to Section 10 below.
Section 10. EXCHANGE RIGHTS.
(a) RIGHT TO EXCHANGE.
(i) Series C Preferred Units will be exchangeable in whole
or in part at anytime on or after the tenth (10th) anniversary of the
date of issuance, at the option of the holders thereof, for authorized
but previously unissued shares of 9.125% Series C Cumulative Redeemable
Preferred Shares of the General Partner (the "Series C Preferred
Shares") at an exchange rate of one Series C Preferred Share for one
Series C Preferred Unit, subject to adjustment as described below (the
"Exchange Price"), provided that the Series C Preferred Units will
become exchangeable at any time, in whole or in part, at the option of
the holders of Series C Preferred Units for Series C Preferred Shares
if at any time full distributions shall not have been timely made on
any Series C Preferred Unit with respect to six (6) prior quarterly
distribution periods, whether or not consecutive, provided, however,
that a distribution in respect of Series C Preferred Units shall be
considered timely made if made within two (2) Business Days after the
applicable Preferred Unit Distribution Payment Date if at the time of
such late payment there shall not be any prior quarterly distribution
periods in respect of which full distributions were not timely made or
upon receipt by a holder or holders of Series C Preferred Units of (1)
notice from the General Partner that the General Partner or a
Subsidiary of the General Partner has taken the position that the
Partnership is, or upon the occurrence of a defined event in the
immediate future will be, a PTP and (2) an opinion rendered by an
outside nationally recognized independent counsel familiar with such
matters addressed to a holder or holders of Series C Preferred Units,
that the Partnership is or likely is, or upon the occurrence of a
defined event in the immediate future will be or likely will be, a PTP.
In addition, the Series C Preferred Units may be exchanged for Series C
Preferred Shares, in whole or in part, at the option of any holder
prior to the tenth (10th) anniversary of the issuance date and after the
third (3rd) anniversary thereof if such holder of a Series C Preferred
Units shall deliver to the General Partner either (i) a private letter
ruling addressed to such holder of Series C Preferred Units or (ii) an
opinion of independent counsel reasonably acceptable to the General
Partner based on the enactment of temporary or final Treasury
Regulations or the publication of a Revenue Ruling, in either case to
the effect that an exchange of the Series C Preferred Units at such
earlier time would not cause the Series C Preferred Units to be
considered "stock and securities" within the meaning of section 351(e)
of the Code for purposes of determining whether the holder of such
Series C Preferred Units is an "investment company" under
section 721(b) of the Code if an exchange were to occur at such time.
Furthermore, the Series C Preferred Units may be exchanged in whole but
not in part by any holder thereof which is a real estate investment
trust within the meaning of Sections 856 through 859 of the Code for
Series C Preferred Shares (but only if the exchange in whole may be
accomplished consistently with the ownership limitations set forth
under Article VII of the Charter (taking into account exceptions
thereto and exemptions therefrom)) if at any time, (i) the Partnership
reasonably determines that the assets and income of the Partnership for
a taxable year after 2000 would not satisfy the income and assets tests
of Section 856 of the Code for such taxable year if the Partnership
were a real estate investment trust within the meaning of the Code or
(ii) any such holder of Series C Preferred Units shall deliver to the
Partnership and the General Partner an opinion of independent counsel
reasonably acceptable to the General Partner to the effect that, based
on the assets and income of the Partnership for a taxable year after
2000, the Partnership would not satisfy the income and assets tests of
Section 856 of the Code for such taxable year if the Partnership were a
real estate investment trust within the meaning of the Code and that
such failure would create a meaningful risk that a holder of the Series
C Preferred Units would fail to maintain qualification as a real estate
investment trust. In addition, the Series C Preferred Units may be
exchanged for Series C Preferred Share, in whole or in part, at the
option of any holder that is not a corporation (a "non-corporate
holder") if both (a) such non-corporate holder concludes based on
results or projected results that there exists (in the reasonable
judgment of the holder) an imminent and substantial risk that the
holder's interest in the Partnership will represent more than 19.9% of
the total profits or capital interests in the Partnership (determined
in accordance with Treasury regulations Section 1.731-2(e)(4)) for a
taxable year (or portion thereof), and (b) the non-corporate holder
delivers to the General Partner an opinion of nationally recognized
independent counsel to the effect that there is an imminent and
substantial risk that the holder's interest in the Partnership will
represent more than 19.9% of the total profits or capital interests in
the Partnership (determined in accordance with Treasury regulations
Section 1.731-2(e)(4)) for a taxable year (or portion thereof in which
the relative interests of the Partners may vary from their relative
interests for an immediately preceding and/or immediately succeeding
portion thereof).
(ii) Notwithstanding anything to the contrary set forth in
Section 10(a)(i) hereof, if an Exchange Notice (as defined herein) has
been delivered to the General Partner, then the General Partner may, at
its option, elect to redeem or cause the Partnership to redeem all or a
portion of the outstanding Series C Preferred Units for cash in an
amount equal to the original Capital Contribution per Series C
Preferred Unit plus all accrued and unpaid distributions thereon to the
date of redemption. The General Partner may exercise its option to
redeem the Series C Preferred Units for cash pursuant to this Section
10(a)(ii) hereof by giving each holder of record of Series C Preferred
Units notice of its election to redeem for cash, within ten (10)
Business Days after receipt of the Exchange Notice, by (m) fax, and (n)
registered mail, postage paid, at the address of each holder as it may
appear on the records of the Partnership stating (A) the redemption
date, which shall be no later than sixty (60) days following the
receipt of the Exchange Notice, (B) the redemption price, (C) the place
or places where the Series C Preferred Units are to be surrendered for
payment of the redemption price, (D) that distributions on the Series C
Preferred Units will cease to accrue on such redemption date; (E) that
payment of the redemption price will be made upon presentation and
surrender of the Series C Preferred Units and (F) the aggregate number
of Series C Preferred Units to be redeemed, and if fewer than all of
the outstanding Series C Preferred Units are to be redeemed, the number
of Series C Preferred Units to be redeemed held by such holder, which
number shall equal such holder's pro-rata share (based on the
percentage of the aggregate number of outstanding Series C Preferred
Units the total number of Series C Preferred Units held by such holder
represents) of the aggregate number of Series C Preferred Units being
redeemed.
(iii) In the event an exchange of all or a portion of Series
C Preferred Units pursuant to Section 10(a)(i) hereof would violate the
provisions on ownership limitation of the General Partner set forth in
Article VII of the Charter with respect to the Series C Preferred
Shares, the General Partner shall give written notice thereof to each
holder of record of Series C Preferred Units, within five (5) Business
Days following receipt of the Exchange Notice, by (m) fax, and (n)
registered mail, postage prepaid, at the address of each such holder
set forth in the records of the Partnership. In such event, each
holder of Series C Preferred Units shall be entitled to exchange,
pursuant to the provision of Section 10(b) a number of Series C
Preferred Units which would comply with the provisions on the ownership
limitation of the General Partner set forth in Article VII of the
Charter and any Series C Preferred Units not so exchanged (the "Excess
Units") shall be redeemed by the Partnership for cash in an amount
equal to the original Capital Contribution per Excess Unit, plus any
accrued and unpaid distributions thereon, whether or not declared, to
the date of redemption. The written notice of the General Partner
shall state (A) the number of Excess Units held by such holder, (B) the
redemption price of the Excess Units, (C) the date on which such Excess
Units shall be redeemed, which date shall be no later than sixty (60)
days following the receipt of the Exchange Notice, (D) the place or
places where such Excess Units are to be surrendered for payment of the
Redemption Price, (E) that distributions on the Excess Units will cease
to accrue on such redemption date, and (F) that payment of the
redemption price will be made upon presentation and surrender of such
Excess Units. In the event an exchange would result in Excess Units,
as a condition to such exchange, each holder of such units agrees to
provide representations and covenants reasonably requested by the
General Partner relating to (1) the widely held nature of the interests
in such holder, sufficient to assure the General Partner that the
holder's ownership of shares of beneficial interest of the General
Partner (without regard to the limits described above) will not cause
any individual to Beneficially Own in excess of the Ownership Limit
(all as defined in the Charter); and (2) to the extent such holder can
so represent and covenant without obtaining information from its
owners, the holder's ownership of tenants of the Partnership and its
affiliates.
(iv) The redemption of Series C Preferred Units described in
Sections 10(a)(ii) and (iii) hereof shall be subject to the provisions
of Sections 7(b)(i) and 7(c)(ii) hereof; provided, however, that the
term "Redemption Price" in such Section shall be read to mean the
original Capital Contribution per Series C Preferred Unit being
redeemed plus all accrued and unpaid distributions to the redemption
date.
(b) PROCEDURE FOR EXCHANGE.
(i) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General Partner by
the holder who is exercising such exchange right, by (A) fax and (B) by
certified mail postage prepaid. The exchange of Series C Preferred
Units, or a specified portion thereof, may be effected after the fifth
(5th) Business Day following receipt by the General Partner of the
Exchange Notice by delivering certificates, if any, representing such
Series C Preferred Units to be exchanged together with, if applicable,
written notice of exchange and a proper assignment of such Series C
Preferred Units to the office of the General Partner maintained for
such purpose. Currently, such office is:
65 Valley Stream Parkway
Malvern, Pennsylvania 19355.
Each exchange will be deemed to have been effected
immediately prior to the close of business on the date on which such
Series C Preferred Units to be exchanged (together with all required
documentation) shall have been surrendered and notice shall have been
received by the General Partner as aforesaid and the Exchange Price
shall have been paid. Any Series C Preferred Shares issued pursuant to
this Section 10 shall be delivered as shares which are duly authorized,
validly issued, fully paid and nonassessable, free of pledge, lien,
encumbrance or restriction other than those provided in the Charter,
the Bylaws of the General Partner, the Securities Act and relevant
state securities or blue sky laws.
(ii) In the event of an exchange of Series C Preferred Units
for shares of Series C Preferred Shares, an amount equal to the accrued
and unpaid distributions, whether or not declared, to the date of
exchange on any Series C Preferred Units tendered for exchange shall
(A) accrue on the Series C Preferred Shares into which such Series C
Preferred Units are exchanged, and (B) continue to accrue on such
Series C Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such Series C
Preferred Units. Notwithstanding anything to the contrary set forth
herein, in no event shall a holder of a Series C Preferred Unit that
was validly exchanged into Series C Preferred Shares pursuant to this
Section 10 (other than the General Partner now holding such Series C
Preferred Unit), receive a cash distribution out of Available Cash of
the Partnership, if such holder, after exchange, is entitled to receive
a distribution out of Available Cash with respect to the Series C
Preferred Shares for which such Series C Preferred Unit was exchanged
or redeemed.
(iii) Fractional shares of Series C Preferred Shares are not
to be issued upon exchange but, in lieu thereof, the General Partner
will pay a cash adjustment based upon the fair market value of the
Series C Preferred Shares on the day prior to the exchange date as
determined in good faith by the Board of Directors of the General
Partner.
(c) ADJUSTMENT OF EXCHANGE PRICE.
(i) The Exchange Price is subject to adjustment upon certain
events, including, (A) subdivisions, combinations and reclassification
of the Series C Preferred Shares, and (B) distributions to all holders
of Series C Preferred Shares of evidence of indebtedness of the General
Partner or assets (including securities, but excluding dividends and
distributions paid in cash out of equity applicable to Series C
Preferred Shares).
(ii) In case the General Partner shall be a party to any
transaction (including, without limitation, a merger, consolidation,
statutory share exchange, tender offer for all or substantially all of
the General Partner's capital stock or sale of all or substantially all
of the General Partner's assets), in each case as a result of which the
Series C Preferred Shares will be converted into the right to receive
shares of capital stock, other securities or other property (including
cash or any combination thereof), each Series C Preferred Unit will
thereafter be exchangeable into the kind and amount of shares of
capital stock and other securities and property receivable (including
cash or any combination thereof) upon the consummation of such
transaction by a holder of that number of Series C Preferred Shares or
fraction thereof into which one Series C Preferred Unit was
exchangeable immediately prior to such transaction. The General
Partner may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
(d) NO RIGHTS UNDER ARTICLE XI. Holders of Series C Preferred
Units shall not be entitled to any "Rights" provided to Limited
Partners pursuant to Article XI of the Partnership Agreement.
Section 11. NO CONVERSION RIGHTS. The holders of the Series C
Preferred Units shall not have any rights to convert such shares into
shares of any other class or series of shares or into any other
securities of, or interest in, the Partnership.
Section 12. NO SINKING FUND. No sinking fund shall be
established for the retirement or redemption of Series C Preferred
Units.
Section 13. ADMISSION OF LIMITED PARTNERS; EXHIBITS TO
PARTNERSHIP. In accordance with Section 4.1 of the Partnership
Agreement, Montebello is hereby admitted as an Additional Partner.
Exhibit A to the Partnership Agreement is hereby amended to reflect the
issuance of the Series C Preferred Units provided for herein.
Section 14. MISCELLANEOUS. The parties hereto agree that the
holders of Series C Preferred Units shall not be deemed "Limited
Partners" for the purpose of calculating the ownership level of limited
partners as contemplated by Section 7.2 of the Partnership Agreement.
Section 15. REAFFIRMATION. Except as modified herein, all terms
and conditions of the Partnership Agreement shall remain in full force
and effect, which terms and conditions the General Partner hereby
ratifies and affirms.
In witness whereof, this Amendment has been executed as of the
date first above written.
GENERAL PARTNER
LIBERTY PROPERTY TRUST
By:
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Name:
Title:
ADDITIONAL LIMITED PARTNER
MONTEBELLO REALTY CORP.
By:
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Name:
Title: