FIFTH AMENDMENT
TO
SECOND RESTATED AND AMENDED
AGREEMENT OF LIMITED PARTNERSHIP
OF
LIBERTY PROPERTY LIMITED PARTNERSHIP

          This Fifth Amendment to the Second Restated and Amended Agreement of
Limited Partnership, dated as of June 16, 2005 (this “Amendment”), is entered
into by LIBERTY PROPERTY TRUST, a Maryland real estate investment trust, as
general partner (the “General Partner”) of LIBERTY PROPERTY LIMITED PARTNERSHIP,
a Pennsylvania limited partnership (the “Partnership”), for itself and on behalf
of the limited partners of the Partnership, and MONTEBELLO REALTY CORP. 2002, a
Delaware corporation (“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, that certain Second Amendment to the Second Restated
and Amended Agreement of Limited Partnership, dated as of April 18, 2000, that
certain Third Amendment to the Second Restated and Amended Agreement of Limited
Partnership, dated as of June 10, 2002, and that certain Fourth Amendment to the
Second Restated and Amended Agreement of Limited Partnership, dated as of
September 1, 2004 (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 E Preferred Units” (as hereinafter
defined), and to set forth the designations, rights, powers, preferences and
duties of such Series E Preferred Units, (ii) to issue the Series E 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 E Preferred Units with respect to distributions and rights upon voluntary
or involuntary liquidation, winding-up or dissolution of the Partnership
including, without limitation, the “7.45% Series B Cumulative Redeemable
Preferred Partnership Interests” and the “7.625% Series D Cumulative Redeemable
Preferred Partnership Interests,” The term “Priority

 

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Return” shall mean, an amount equal to 7.00% 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 (12) 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 $50 per Series E Preferred Unit,
commencing on the date of issuance of such Series E 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 Internal Revenue Code (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 “7.00% Series E Cumulative Redeemable
Preferred Partnership Interests” (the “Series E Preferred Units”) is hereby
established. The maximum number of Series E Preferred Units shall be 400,000.

          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 E Preferred Units as to payment of distributions, pursuant to
Section 6.2 of the Partnership Agreement, holders of Series E 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 7.00% of the original
Capital Contribution per Series E 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 the first such
date to occur after the original date of issuance, and, (ii), in the event of
(A) an exchange of Series E Preferred Units into Series E Preferred Shares, or
(B) a redemption of Series E 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 (12) 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 E Preferred Units is not a Business
Day (as such term is 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 E
Preferred Units will be made to the holders of record of the Series E Preferred
Units on

 

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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 E 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 distributions and whether or
not such distributions are authorized. Accrued but unpaid distributions on the
Series E 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 E 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 E 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 E 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 E
Preferred Units, any Parity Preferred Units or any Junior Units, unless, in each
case, all distributions accumulated on all Series E 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 E 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 E 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

 

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Indemnity Collateral and/or the Special Indemnity Collateral (as such term is
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 E Preferred Units, all distributions
authorized and declared on the Series E 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 E 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 E
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 E Preferred Units which may be in arrears.

        (d) No Further Rights. Holders of Series E 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 l(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;

 

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          (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 (A) 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
(B) 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).

Provided, however, that the holders of the Series E Preferred Units shall be
allocated an amount of the net “rents from real property” (within the meaning of
Sec. 856(d) of the Code) of the Partnership equal to all amounts paid or accrued
with respect to the Series E Preferred Units pursuant to Section 3.(a) of the
Fifth Amendment to the Second Restated and Amended Agreement of Limited
Partnership, dated as of June  , 2005 with respect to such fiscal year or other
period in lieu of any allocation of Net Income or Net Loss under this Section 1
and the amount of Net Income and Net Loss of the Partnership for any fiscal year
or other period shall be computed after taking into account the special
allocation of such net income to the holders of the Series E Preferred Units.

        (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),

 

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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, Series D Preferred Units
or Series E 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, Series D Preferred Units or Series E 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, Series D
Preferred Units or Series E 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, Series D Preferred Units or Series E
Preferred Units by excluding Depreciation with respect to all properties of the
Partnership. The parties intend hereunder that the aggregate Capital Account
balance of the holders of Series B Preferred Units, Series D Preferred Units or
Series E 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. Liquidation Proceeds.

          (a) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Partnership, distributions on the Series E
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 prepaid, 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 E 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 E
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

 

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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 6. Optional Redemption.

        (a) Right of Optional Redemption. The Series E 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 E 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 E Preferred Units (the “Series E
Redemption Price”); provided, however, that no redemption pursuant to this
Section 6 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 E Preferred
Units are to be redeemed, the Series E 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 E 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 E 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 E 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

 

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than sixty (60) days prior to the redemption date, addressed to the respective
holders of record of the Series E 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 E 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 E
Preferred Units to be redeemed and if fewer than all of the outstanding Series E
Preferred Units are to be redeemed, the number of Series E 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 E
Preferred Units the total number of Series E Preferred Units held by such holder
represents) of the aggregate number of Series E Preferred Units to be redeemed;
(4) the place or places where the Series E Preferred Units are to be surrendered
for payment of the Redemption Price; (5) that distributions on the Series E
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 E Preferred Units.

          (ii) If the Partnership gives a notice of redemption in respect of
Series E 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 E 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 E Preferred Units upon surrender of the Series E Preferred
Units by such holders at the place designated in the notice of redemption. If
the Series E Preferred Units are evidenced by a certificate and if fewer than
all Series E Preferred Units evidenced by any certificate are being redeemed, a
new certificate shall be issued, upon surrender of the certificate evidencing
all Series E Preferred Units, evidencing the unredeemed Series E Preferred Units
without cost to the holder thereof. On and after the date of such redemption,
distributions will cease to accumulate on the Series E Preferred Units or
portions thereof called for redemption, unless the Partnership defaults in the
payment thereof. If any date fixed for redemption of Series E 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 E 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.

 

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        Section 7. Voting Rights.

          (a) General. Holders of the Series E 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 E Preferred Units
remain outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least two-thirds of the Series E 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 E
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, however,
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 arms’ 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 or 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 E 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 E 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 E Preferred Units other interests in such entity
having substantially the same terms and rights as the Series E 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 E 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 E Preferred Units, if such Partnership Units rank
(y) junior to the Series E 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 E Preferred Units with respect to
payment of distributions or the distribution of assets upon liquidation,
dissolution or winding-up; provided, however, that any Preferred Units issued in
reliance on the preceding clause (z) shall have been issued to an Affiliate of
the Partnership on arms’ length terms, or to the General Partner in order to
allow the General Partner to

 

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issue corresponding preferred Shares to persons who are not Affiliates of the
Partnership. In the event of any conflict or inconsistency between this
Section 7 and Article XIV of the Partnership Agreement, this Section 7 shall
control.

          Section 8. Transfer Restrictions. The Series E 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) of the Partnership Agreement 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
of the Partnership Agreement and such transfers do not cause the total number of
holders of Series E 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, 2005
and (B) six (6) after December 31, 2005 and (ii) the maximum number that would
permit the Partnership to continue to satisfy such safe harbor (but in assessing
the status of such safe harbor, (i) substituting “90” for “100”; and (2) taking
into account any number of partners that the General Partner reasonably
anticipates becoming partners within the meaning of the Treasury Regulations
Section 1.7704-1(h)(3) within six months of the date of such transfer by the
Series E Preferred Unit holders) and (b) the term “transfer” when used in
Article IX shall not be deemed to include any exchange pursuant to Section 9
below.

           Section 9. Exchange Rights.

        (a) Right to Exchange.

          (i) Series E 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 7.00% Series E Cumulative Redeemable Preferred Shares of the General Partner
(the “Series E Preferred Shares”) at an exchange rate of one Series E Preferred
Share for one Series E Preferred Unit, subject to adjustment as described below
(the “Exchange Price”), provided that the Series E Preferred Units will become
exchangeable at any time, in whole or in part, at the option of the holders of
Series E Preferred Units for Series E Preferred Shares if (x) at any time full
distributions shall not have been timely made on any Series E Preferred Unit
with respect to six (6) prior quarterly distribution periods, whether or not
consecutive, provided, however, that a distribution in respect of Series E
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 (y) upon
receipt by a holder or holders of Series E 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

 

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or holders of Series E 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 E Preferred Units may be exchanged for
Series E 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 E Preferred Units shall
deliver to the General Partner either (i) a private letter ruling addressed to
such holder of Series E 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 E Preferred Units at
such earlier time would not cause the Series E 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 E 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 E 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 E
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 2005 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 E 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 2005, 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 E Preferred Units would fail to maintain qualification as a
real estate investment trust. In addition, the Series E Preferred Units may be
exchanged for Series E Preferred Shares, 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

 

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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 9(a)(i) hereof, if an Exchange Notice (as such term is 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 E Preferred Units for cash in an amount equal to the
original Capital Contribution per Series E 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 E Preferred Units for cash pursuant to
this Section 9(a)(ii) hereof by giving each holder of record of Series E
Preferred Units notice of its election to redeem for cash, within ten
(10) Business Days after receipt of the Exchange Notice, by (1) fax, and
(2) 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 E
Preferred Units are to be surrendered for payment of the redemption price,
(D) that distributions on the Series E 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 E Preferred Units and (F) the aggregate
number of Series E Preferred Units to be redeemed, and if fewer than all of the
outstanding Series E Preferred Units are to be redeemed, the number of Series E
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 E Preferred Units the total number of Series E Preferred
Units held by such holder represents) of the aggregate number of Series E
Preferred Units being redeemed.

          (iii) In the event an exchange of all or a portion of Series E
Preferred Units pursuant to Section 9(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 E Preferred Shares, the General Partner shall
give written notice thereof to each holder of record of Series E Preferred
Units, within five (5) Business Days following receipt of the Exchange Notice,
by (1) fax, and (2) 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 E Preferred Units shall be entitled to exchange, pursuant to
the provision of Section 9(b) a number of Series E 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 E 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

 

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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 Excess Units agrees
to provide representations and covenants reasonably requested by the General
Partner relating to: (x) 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 Aggregate Share Ownership Limit (all as such term is defined in the
Charter); and (y) 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 E Preferred Units described in
Sections 9(a)(ii) and (iii) hereof shall be subject to the provisions of
Section 6(b)(i) hereof; provided, however, that the term “Redemption Price” in
such Section shall be read to mean the original Capital Contribution per
Series E 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 E 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 E Preferred Units to be exchanged together with, if
applicable, written notice of exchange and a proper assignment of such Series E
Preferred Units to the office of the General Partner maintained for such
purpose. Currently, such office is:

     
 
  500 Chesterfield 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 E 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 E Preferred Shares issued
pursuant to this Section 9 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.

 

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          (ii) If the event of an exchange of Series E Preferred Units for
shares of Series E Preferred Shares, an amount equal to the accrued and unpaid
distributions, whether or not declared, to the date of exchange on any Series E
Preferred Units tendered for exchange shall (A) accrue on the Series E Preferred
Shares into which such Series E Preferred Units are exchanged, and (B) continue
to accrue on such Series E Preferred Units, which shall remain outstanding
following such exchange, with the General Partner as the holder of such Series E
Preferred Units. Notwithstanding anything to the contrary set forth herein, in
no event shall a holder of a Series E Preferred Unit that was validly exchanged
into Series E Preferred Shares pursuant to this Section 9 (other than the
General Partner now holding such Series E 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 E Preferred Shares for which such Series E Preferred Unit
was exchanged or redeemed.

          (iii) Fractional shares of Series E 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 E 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 E
Preferred Shares, and (B) distributions to all holders of Series E 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 E 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 E 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 E
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 E Preferred Shares or fraction thereof into
which one Series E 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.

 

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          (d) No Rights Under Article XI. Holders of Series E Preferred Units
shall not be entitled to any “Rights” provided to Limited Partners pursuant to
Article XI of the Partnership Agreement.

        Section 10. No Conversion Rights. The holders of the Series E 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 11. No Sinking Fund. No sinking fund shall be established for
the retirement or redemption of Series E Preferred Units.

        Section 12. Admission of Limited Partners: Exhibits to Partnership. In
accordance with Section 4.1 of the Partnership Agreement, Montebello is hereby
admitted as an Additional Limited Partner. Schedule A to the Partnership
Agreement is hereby amended to reflect the issuance of the Series E Preferred
Units provided for herein.

        Section 13. Miscellaneous.

          (a) The parties hereto agree that the holders of Series E 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.

          (b) For greater clarity, Article XIII of the Partnership Agreement
shall not apply to Montebello or to its affiliates, successors and assigns or to
their interests in the Partnership.

        Section 14. 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.

 

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          In Witness Whereof, this Amendment has been executed as of the date
first above written.

              GENERAL PARTNER
 
            LIBERTY PROPERTY TRUST
 
       
 
  By:   /s/ George J. Alburger, Jr.
 
       
 
  Name:   George J. Alburger, Jr.
 
  Title:   Chief Financial Officer
 
            ADDITIONAL LIMITED PARTNER
 
            MONTEBELLO REALTY CORP. 2002
 
       
 
  By:   /s/ Jay Willoughby
 
       
 
  Name:   Jay Willoughby
 
  Title:   Vice President and Treasurer