AGREEMENT AND PLAN OF MERGER
among
EQUITY OFFICE PROPERTIES TRUST,
EOP OPERATING LIMITED PARTNERSHIP,
CORNERSTONE PROPERTIES INC.
and
CORNERSTONE PROPERTIES LIMITED PARTNERSHIP
Dated as of February 11, 2000
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGERS...............................................................................3
1.1 Election by Limited Partners in Cornerstone Partnership to Exercise the
Redemption Right; The Partnership Merger..............................................3
1.2 The Merger............................................................................5
1.3 Closing...............................................................................5
1.4 Effective Time........................................................................5
1.5 Effect of Partnership Mergers on Agreement of Limited Partnership.....................6
1.6 Effect of Merger on Declaration of Trust and Bylaws...................................6
1.7 Trustees of EOP.......................................................................6
1.8 Effect on Shares......................................................................7
1.9 Effect on Partnership Interests.......................................................7
1.10 Exchange Ratios and Other Merger Consideration........................................7
1.11 Election by Holders of Cornerstone Common Stock to Receive EOP Common Shares or Cash..9
1.12 Proration.............................................................................11
1.13 Partner Approval......................................................................13
1.14 No Appraisal Rights...................................................................13
1.15 Exchange of Certificates; Pre-Closing Dividends; Fractional Shares....................13
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF CORNERSTONE AND CORNERSTONE PARTNERSHIP.................18
2.1 Organization, Standing and Power......................................................18
2.2 Cornerstone Subsidiaries..............................................................18
2.3 Capital Structure.....................................................................20
2.4 Other Interests.......................................................................22
2.5 Authority; Noncontravention; Consents.................................................22
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities..........................24
2.7 Absence of Certain Changes or Events..................................................25
2.8 Litigation............................................................................26
2.9 Properties............................................................................27
2.10 Environmental Matters.................................................................29
2.11 Related Party Transactions............................................................31
2.12 Employee Benefits.....................................................................31
2.13 Employee Policies.....................................................................33
2.14 Taxes.................................................................................33
2.15 No Payments to Employees, Officers or Directors.......................................35
2.16 Broker; Schedule of Fees and Expenses.................................................36
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2.17 Compliance with Laws..................................................................36
2.18 Contracts; Debt Instruments...........................................................36
2.19 Opinion of Financial Advisor..........................................................39
2.20 State Takeover Statutes...............................................................39
2.21 Investment Company Act of 1940........................................................39
2.22 Definition of Knowledge of Cornerstone................................................39
2.23 Required Stockholder Approvals and Partner Approvals..................................39
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EOP AND EOP PARTNERSHIP.................................40
3.1 Organization, Standing and Power of EOP...............................................40
3.2 EOP Subsidiaries......................................................................40
3.3 Capital Structure.....................................................................41
3.4 Other Interests.......................................................................43
3.5 Authority; Noncontravention; Consents.................................................43
3.6 SEC Documents; Financial Statements; Undisclosed Liabilities..........................45
3.7 Absence of Certain Changes or Events..................................................46
3.8 Litigation............................................................................46
3.9 Properties............................................................................47
3.10 Environmental Matters.................................................................48
3.11 Taxes.................................................................................49
3.12 Brokers; Schedule of Fees and Expenses................................................51
3.13 Compliance with Laws..................................................................51
3.14 Contracts; Debt Instruments...........................................................51
3.15 Opinion of Financial Advisor..........................................................51
3.16 State Takeover Statutes...............................................................52
3.17 Investment Company Act of 1940........................................................52
3.18 Definition of Knowledge of EOP........................................................52
3.19 Required Shareholder Approvals and Partner Approvals..................................52
ARTICLE 4 COVENANTS.................................................................................52
4.1 Conduct of Cornerstone's and Cornerstone Partnership's Business Pending Merger........52
4.2 Conduct of EOP's and EOP Partnership's Business Pending Merger........................56
4.3 No Solicitation.......................................................................58
4.4 Affiliates............................................................................61
4.5 Other Actions.........................................................................62
ARTICLE 5 ADDITIONAL COVENANTS......................................................................62
5.1 Preparation of the Form S-4 and the Proxy Statement; Cornerstone Stockholders
Meeting, Cornerstone Unitholders Consent Solicitation and EOP Shareholders Meeting....62
5.2 Access to Information; Confidentiality................................................65
5.3 Commercially Reasonable Efforts; Notification.........................................66
5.4 Tax Matters...........................................................................67
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5.5 Public Announcements..................................................................69
5.6 Listing...............................................................................69
5.7 Transfer and Gains Taxes..............................................................69
5.8 Benefit Plans and Other Employee Arrangements.........................................70
5.9 Indemnification.......................................................................72
5.10 Declaration of Dividends and Distributions............................................75
5.11 Transfer of Non-Controlled Subsidiary Voting Shares...................................76
5.12 Notices...............................................................................76
5.13 Resignations..........................................................................76
5.14 Assumption of Existing Tax Protection Agreements......................................76
5.15 EOP Partnership Agreement.............................................................76
5.16 Registration Rights Agreements........................................................77
5.17 Cornerstone Convertible Promissory Note...............................................77
ARTICLE 6 CONDITIONS................................................................................77
6.1 Conditions to Each Party's Obligation to Effect the Mergers...........................77
6.2 Conditions to Obligations of EOP and EOP Partnership..................................78
6.3 Conditions to Obligations of Cornerstone and Cornerstone Partnership..................79
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.........................................................82
7.1 Termination...........................................................................82
7.2 Certain Fees and Expenses.............................................................83
7.3 Effect of Termination.................................................................86
7.4 Amendment.............................................................................86
7.5 Extension; Waiver.....................................................................86
ARTICLE 8 GENERAL PROVISIONS........................................................................87
8.1 Nonsurvival of Representations and Warranties.........................................87
8.2 Notices...............................................................................87
8.3 Interpretation........................................................................88
8.4 Counterparts..........................................................................88
8.5 Entire Agreement; No Third-Party Beneficiaries........................................88
8.6 Governing Law.........................................................................88
8.7 Assignment............................................................................89
8.8 Enforcement...........................................................................89
8.9 Severability..........................................................................89
8.10 Exculpation...........................................................................89
8.11 Joint and Several Obligations.........................................................89
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EXHIBITS
Exhibit "A" - Form of Certificate of Merger
Exhibit "B" - Form of Maryland Articles of Merger
Exhibit "C" - Form of Nevada Articles of Merger
Exhibit "D" - Form of Proposed EOP Charter Amendment Relating to
Certain Voting Requirements
Exhibit "E" - Form of Proposed EOP Charter Amendment Relating to
Domestically Controlled REIT Status
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Index of Defined Terms
AICPA Statement......................................5.1(b)
Acquisition Proposal.................................4.3(a)(i)
Affiliate............................................2.11
Agreement............................................Preamble
Base Amount..........................................7.2
BeaMet...............................................3.11(b)
Break-Up Fee.........................................7.2
Break-Up Fee Tax Opinion.............................7.2
Break-Up Expenses....................................7.2
Cash Election........................................1.11(a)
Cash Election Shares.................................1.12(a)
Cash Fraction........................................1.12(b)
CERCLA...............................................2.10(a)
Certificate of Merger ...............................C
Certificate..........................................1.10(b)(iv)
Closing..............................................1.3
Closing Date.........................................1.3
Cornerstone.......................................... Preamble
Cornerstone Acquisition Agreement....................7.2
Cornerstone Articles.................................2.1
Cornerstone Bylaws...................................2.1
Cornerstone Common Stock.............................1.10(b)(i)
Cornerstone Convertible Promissory Note..............2.3(c)
Cornerstone Disclosure Letter........................Art. 2
Cornerstone Financial Statement Date.................2.7
Cornerstone Material Adverse Change..................2.7
Cornerstone Material Adverse Effect..................2.1
Cornerstone Non-controlled Subsidiary................J
Cornerstone OP Unit..................................1.1(a)
Cornerstone Other Interests..........................2.4
Cornerstone Partner Approvals........................1.13
Cornerstone Partnership..............................Preamble
Cornerstone Partnership Agreement....................1.5
Cornerstone Preferred OP Unit........................1.10(a)(ii)
Cornerstone Properties...............................2.9(a)
Cornerstone Rent Roll................................2.9(e)
Cornerstone SEC Documents............................2.6
Cornerstone 7% Preferred Stock.......................1.10(b)(iii)
Cornerstone Stockholder Approvals....................2.5(a)
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Cornerstone Stockholders Meeting.....................5.1(d)
Cornerstone Space Lease..............................2.9(e)
Cornerstone Stock Options............................2.3(b)
Cornerstone Stock Rights.............................2.3(b)
Cornerstone Subsidiaries.............................2.2(a)
Cornerstone Voting Agreement ........................K
Code.................................................F
Commitment...........................................4.1(i)
Common Stock Exchange Ratio..........................1.10(b)(ii)
Confidentiality Agreement............................2.18(k)
Controlled Group Member..............................2.12
Department...........................................1.4
DRULPA...............................................1.1(b)
Effective Time.......................................1.4
Electing Cornerstone OP Units........................1.11
Election.............................................1.11(a)
Election Date........................................1.11(d)
Employee Plan........................................2.12
Encumbrances.........................................2.9(a)
Environmental Law....................................2.10(a)
Environmental Permits................................2.10(b)(iv)
EOP.................................................. Preamble
EOP Bylaws...........................................1.6
EOP Common Share.....................................1.10(b)(ii)
EOP Counter Proposal.................................4.3(c)
EOP Declaration of Trust.............................1.6
EOP Disclosure Letter................................Art. 3
EOP Financial Statement Date.........................3.7
EOP Material Adverse Change..........................3.7
EOP Material Adverse Effect..........................3.1
EOP NCS Sub..........................................J
EOP Options..........................................3.3(b)
EOP OP Unit..........................................1.10(a)(i)
EOP Other Interests..................................3.4
EOP Partner Approvals................................1.13
EOP Partnership......................................Preamble
EOP Partnership Agreement............................1.5
EOP Preferred OP Unit................................1.10(a)(ii)
EOP Preferred Units..................................3.3(e)
EOP Preferred Shares.................................3.3(a)
EOP Properties.......................................3.9(a)
EOP Rent Roll........................................3.9(g)
EOP SEC Documents....................................3.6
EOP Shareholder Approvals............................3.5(a)
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EOP Shareholders Meeting.............................5.1(c)
EOP Space Lease......................................3.9(g)
EOP Subsidiaries.....................................3.1
ERISA................................................2.12
Exchange Act.........................................2.6
Exchange Agent.......................................1.15(a)
Exchange Fund........................................1.15(b)
Exercise.............................................1.1(a)(i)
Final Company Dividend...............................1.15(d)(i)
Form of Election.....................................1.11(b)
Form S-4.............................................5.1(a)
Former Cornerstone Properties........................2.10(b)(ii)
GAAP.................................................2.6
Governmental Entity..................................2.5(c)
Hazardous Materials..................................2.10
HSR Act..............................................2.5(c)
Indebtedness.........................................2.18(b)
Indemnification Parties..............................5.9(b)
Indemnified Parties..................................5.9(a)
Indemnifying Parties.................................5.9(a)
Joint Proxy Statement................................5.1(a)
Knowledge of Cornerstone.............................2.22
Knowledge of EOP.....................................3.18
Laws.................................................2.5(c)
Liens................................................2.2(b)
Maryland Articles of Merger..........................D
Maximum Amount.......................................7.2
Merger...............................................A
Mergers..............................................B
Merger Consideration.................................1.10(b)
Nevada Articles of Merger............................E
Non-Electing Shares..................................1.12(e)
NRS..................................................1.2
NYSE.................................................1.15(g)(ii)
Partner Approvals....................................1.13
Partnership Merger ..................................B
Payor................................................7.2
Pension Plan.........................................2.12
Permitted Title Exceptions...........................2.9(a)
Person...............................................2.2(a)
PGGM.................................................6.3(h)
Prohibited Transaction...............................2.12(c)
Property Restrictions................................2.9(a)
Proposed EOP Charter Amendment Relating to
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Domestically Controlled REIT Status.............4.2(h)
Proposed EOP Charter Amendment Relating to Certain
Voting Requirements.............................4.2(h)
Proposed EOP Charter Amendments......................4.2(h)
Qualifying Income....................................7.2
Recipient............................................7.2
REIT.................................................2.14(b)
REIT Requirements....................................7.2
Release..............................................2.10(a)
Rule 145 Affiliates..................................4.4
SEC..................................................2.5(c)
Section 704(c) values................................5.4(b)
Securities Act.......................................2.3(g)
Share Election.......................................1.11(a)
Shareholder Approvals................................3.5(a)
Stock Election Shares................................1.12(a)
Stock Fraction.......................................1.12(c)
Stock Purchase Agreement.............................J
Subsidiary...........................................2.2(a)
Substituted Option...................................5.8(c)
Superior Acquisition Proposal........................4.3(d)
Surviving Trust......................................1.2
Takeover Statute.....................................2.20
Taxes................................................2.14(a)
Tax Protection Agreements............................2.18(j)
Title 3..............................................1.2
Title 8..............................................1.2
Transfer and Gains Taxes.............................5.7
Welfare Plan.........................................2.12
1940 Act.............................................2.21
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
February 11, 2000, by and among EQUITY OFFICE PROPERTIES TRUST, a Maryland real
estate investment trust ("EOP"), EOP OPERATING LIMITED PARTNERSHIP, a Delaware
limited partnership ("EOP Partnership"), CORNERSTONE PROPERTIES INC., a Nevada
corporation ("Cornerstone"), and CORNERSTONE PROPERTIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("Cornerstone Partnership").
R E C I T A L S:
A. The Board of Trustees of EOP and the Board of Directors of
Cornerstone deem it advisable and in the best interests of their respective
shareholders and stockholders, upon the terms and subject to the conditions
contained herein, that Cornerstone shall merge with and into EOP (the "Merger").
B. EOP, as the managing general partner of EOP Partnership, and
Cornerstone, as the sole general partner of Cornerstone Partnership, deem it
advisable and in the best interests of their respective limited partners,
subject to the conditions and other provisions contained herein, that,
immediately prior to the Merger, Cornerstone Partnership shall merge with and
into EOP Partnership, with the holders of partnership interests in Cornerstone
Partnership at the time of the Partnership Merger receiving in any event units
of limited partnership interest in EOP Partnership, as set forth herein (the
"Partnership Merger" and, together with the Merger, the "Mergers"). As an
alternative to receiving units of limited partnership interest in EOP
Partnership in connection with the Partnership Merger, limited partners in
Cornerstone Partnership (other than Cornerstone) shall have the right to elect,
effective immediately prior to the Partnership Merger, to exercise their
redemption right under the Cornerstone Partnership Agreement (as defined
herein), regardless of whether or not they would otherwise be entitled to
exercise that redemption right under the Cornerstone Partnership Agreement, and
Cornerstone shall issue shares of Cornerstone Common Stock (as defined herein)
in satisfaction of that right, thereby allowing former limited partners in
Cornerstone Partnership (other than Cornerstone) to participate in the Merger as
holders of Cornerstone Common Stock.
C. Upon the terms and subject to the conditions set forth herein,
immediately prior to the Merger, EOP Partnership and Cornerstone Partnership
shall execute a Certificate of Merger (the "Certificate of Merger") in
substantially the form attached hereto as EXHIBIT A and shall file such
Certificate of Merger in accordance with Delaware law to effectuate the
Partnership Merger.
D. Upon the terms and subject to the conditions set forth herein,
immediately following the effectiveness of the Partnership Merger, EOP and
Cornerstone shall execute Articles of Merger (the "Maryland Articles of Merger")
in
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substantially the form attached hereto as EXHIBIT B and shall file such Maryland
Articles of Merger in accordance with Maryland law to effectuate the Merger.
E. Upon the terms and subject to the conditions set forth herein,
immediately following the effectiveness of the Partnership Merger, EOP and
Cornerstone shall execute Articles of Merger (the "Nevada Articles of Merger")
in substantially the form attached hereto as EXHIBIT C and concurrently with the
filing of the Maryland Articles of Merger, shall file such Nevada Articles of
Merger in accordance with Nevada law to effectuate the Merger.
F. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement shall constitute
a plan of reorganization under Section 368(a) of the Code.
G. For federal income tax purposes, it is intended that the Partnership
Merger, regardless of form, be treated as a contribution by Cornerstone
Partnership of all of its assets to EOP Partnership in exchange for partnership
interests in EOP Partnership, as provided for herein, under Section 721 of the
Code, and a distribution of such partnership interests by Cornerstone
Partnership to its partners under Section 731 of the Code.
H. EOP and Cornerstone have each received a fairness opinion relating
to the transactions contemplated hereby as more fully described herein.
I. EOP, EOP Partnership, Cornerstone and Cornerstone Partnership desire
to make certain representations, warranties and agreements in connection with
the Mergers.
J. Concurrently with the execution of this Agreement and as an
inducement to EOP and EOP Partnership to enter into this Agreement, William
Wilson III and John S. Moody, as the owners of 99% of the voting capital stock
of WCP Services, Inc., a Delaware corporation (the "Cornerstone Non-controlled
Subsidiary"), have entered into a Stock Purchase Agreement, dated as of the date
hereof, relating to the voting capital stock of the Cornerstone Non-controlled
Subsidiary (the "Stock Purchase Agreement"), providing for the sale of all of
the outstanding voting capital stock of the Cornerstone Non-controlled
Subsidiary to EOP Office Properties Management Corporation ("EOP NCS Sub") or
its assigns.
K. As an inducement to EOP to enter into this Agreement, (a) Stichting
Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen, a
stichting formed according to the laws of the Kingdom of The Netherlands, each
of the directors and certain executive officers of Cornerstone (and the spouses
of certain of the foregoing) and certain entities controlled by any of the
foregoing have entered into a voting agreement (each, a "Cornerstone Voting
Agreement"), pursuant to which such person or entity has agreed, among other
things, to vote his
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or its shares of Cornerstone Common Stock and Cornerstone OP Units (as defined
herein) to approve this Agreement, the respective Mergers and any other matter
which requires his or its vote in connection with the transactions contemplated
by this Agreement and (b) the holders of the outstanding Cornerstone 7%
Preferred Stock (as defined herein) have entered into a stock option agreement,
pursuant to which such holders have granted Cornerstone and EOP an option to
acquire, among other things, all of their Cornerstone 7% Preferred Stock at any
time prior to the Effective Time (as defined herein) of the Merger at a per
share purchase price of $18.00, together with accrued and unpaid dividends to
the Effective Time, in cash (subject to adjustment).
L. As an inducement to Cornerstone to enter into this Agreement, each
of the trustees and certain executive officers of EOP (and the spouses of
certain of the foregoing) and certain entities controlled by any of the
foregoing have entered into a voting agreement pursuant to which such person or
entity has agreed, among other things, to vote his or its EOP Common Shares (as
defined herein) to approve this Agreement, the Merger and any other matter which
requires his or its vote in connection with the transactions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGERS
1.1 ELECTION BY LIMITED PARTNERS IN CORNERSTONE PARTNERSHIP TO
EXERCISE THE REDEMPTION RIGHT; THE PARTNERSHIP MERGER.
(a) Notwithstanding any limitation or
restriction contained in the Cornerstone Partnership Agreement with respect to
the ability of a Limited Partner (as defined in the Cornerstone Partnership
Agreement) to exercise the Redemption Right (as defined in the Cornerstone
Partnership Agreement) (including, without limitation, any limitation or
restriction contained in Section 8.6A of the Cornerstone Partnership Agreement),
every Limited Partner shall have the right to exercise the Redemption Right by
submitting to Cornerstone Partnership (with a copy to Cornerstone) during the
period between the mailing date of the Joint Proxy Statement (as defined herein)
for the Cornerstone Stockholders Meeting (as defined herein) and 5:00 p.m.,
Eastern time, on the second business day prior to the date of the Cornerstone
Stockholders Meeting a Notice of Redemption (as defined in the Cornerstone
Partnership Agreement) specifying the number of Class A Partnership Common Units
(as defined in the Cornerstone Partnership Agreement) of Cornerstone Partnership
(the "Cornerstone OP Units") which such Limited Partner desires to have redeemed
pursuant to Section 8.6A of the Cornerstone Partnership Agreement (as modified
by this Section 1.1(a)), which
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Notice of Redemption shall be conditioned upon the closing of the Partnership
Merger and can be conditional as set forth in clause (v) below; PROVIDED, THAT,
(i) with respect to each Notice of Redemption (a copy
of the form of which shall accompany or form a part of the Form of
Election (as defined herein)) properly submitted by a Limited Partner
in accordance with this Section 1.1(a) (an "Exercise"), Cornerstone
shall elect in accordance with Section 8.6B of the Cornerstone
Partnership Agreement to purchase the Cornerstone OP Units relating to
such Exercise by paying the REIT Shares Amount (as defined in the
Cornerstone Partnership Agreement) and not the Cash Amount (as defined
in the Cornerstone Partnership Agreement);
(ii) notwithstanding the provisions of Section 8.6B
of the Cornerstone Partnership Agreement, Cornerstone shall not be
required to notify the Redeeming Partner (as defined in the Cornerstone
Partnership Agreement) of Cornerstone's election to purchase the
Cornerstone OP Units as described in the foregoing clause (i);
(iii) the Specified Redemption Date (as defined in
the Cornerstone Partnership Agreement) shall be the Closing Date (as
defined herein) at a time prior to the consummation of the Partnership
Merger;
(iv) each Redeeming Partner shall be treated as an
owner of the shares of Cornerstone Common Stock issued pursuant to this
Agreement at the Effective Time (as defined herein) of the Merger and
shall have the same right as each of the other holders of shares of
Cornerstone Common Stock to make an Election (as defined herein)
pursuant to Section 1.11 as to the form of consideration to be received
in the Merger with respect to such shares of Cornerstone Common Stock;
and
(v) a Redeeming Partner shall have the option, in its
discretion, to make its Notice of Redemption conditional upon part or
all of the shares of Cornerstone Common Stock that would be issued
pursuant thereto being converted solely into the right to receive cash
in the Merger pursuant to Section 1.10(b)(i) and the procedures set
forth in Sections 1.11 and 1.12, in which event the Notice of
Redemption shall not be effective with respect to any Cornerstone OP
Units for which the shares of Cornerstone Common Stock that would be
received therefor would not be converted entirely into the right to
receive cash in the Merger (and any Cornerstone OP Units not redeemed
as a result thereof would be converted into EOP OP Units (as defined
herein) in the Partnership Merger as set forth in Section 1.10(a)(i)).
(b) Upon the terms and subject to the conditions of
this Agreement, and in accordance with Title 6, Chapter 17 of the Delaware Code
Annotated, as amended (the "DRULPA"), immediately prior to the consummation of
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the Merger, Cornerstone Partnership shall be merged with and into EOP
Partnership, with EOP Partnership as the surviving limited partnership or
limited liability company, and with the holders of partnership interests in
Cornerstone Partnership receiving in any event units of partnership interest in
EOP Partnership, as set forth in Section 1.10.
1.2 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Title 3 of the Corporations
and Associations Article of the Annotated Code of Maryland, as amended ("Title
3"), Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended ("Title 8"), and Chapter 92A of Title 7 of the Nevada
Revised Statutes Annotated (the "NRS"), immediately following the effectiveness
of the Partnership Merger, Cornerstone shall be merged with and into EOP, with
EOP surviving as a real estate investment trust (the "Surviving Trust").
1.3 CLOSING. The closing of the Mergers (the "Closing") will
take place commencing at 9:00 a.m., local time, on the date to be specified by
the parties, which (subject to satisfaction or waiver of the conditions set
forth in Article 6) shall be no later than the third business day after
satisfaction or waiver of the conditions set forth in Section 6.1(a) (the
"Closing Date"), at the offices of Hogan & Hartson L.L.P., 555 Thirteenth
Street, N.W., Washington, D.C. 20004, unless another date or place is agreed to
in writing by the parties.
1.4 EFFECTIVE TIME. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article 6, (i) EOP
Partnership and Cornerstone Partnership shall execute and file the Certificate
of Merger, executed in accordance with the DRULPA, with the Office of the
Secretary of State of the State of Delaware, and (ii) EOP and Cornerstone shall
then execute and file the Maryland Articles of Merger, executed in accordance
with Title 3 and Title 8, with the State Department of Assessments and Taxation
of Maryland (the "Department"), and the Nevada Articles of Merger, executed in
accordance with Title 7 of the NRS with the Secretary of State of the State of
Nevada, and shall make all other filings and recordings required, with respect
to the Partnership Merger, under the DRULPA or, with respect to the Merger,
under Title 3, Title 8 and the NRS. The Mergers shall become effective (each an
"Effective Time" and collectively the "Effective Times") at such times as EOP
and Cornerstone shall agree should be specified in the Certificate of Merger,
the Maryland Articles of Merger and the Nevada Articles of Merger (not to exceed
thirty (30) days after the Maryland Articles of Merger are accepted for record
by the Department). Unless otherwise agreed, the parties shall cause the
Effective Times to occur on the Closing Date, with not less than one hour
between the Effective Time of the Partnership Merger and the Effective Time of
the Merger.
1.5 EFFECT OF PARTNERSHIP MERGER ON AGREEMENTS OF LIMITED
PARTNERSHIP. The Agreement of Limited Partnership, as amended, of EOP
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Partnership, as in effect immediately prior to the Effective Time of the
Partnership Merger (the "EOP Partnership Agreement"), shall continue in full
force and effect after the Partnership Merger until further amended in
accordance with applicable Delaware law. The Agreement of Limited Partnership,
as amended, of Cornerstone Partnership, as in effect immediately prior to the
Effective Time of the Partnership Merger (the "Cornerstone Partnership
Agreement") shall terminate at the Effective Time of Partnership Merger.
1.6 EFFECT OF MERGER ON DECLARATION OF TRUST AND BYLAWS. The
Articles of Amendment and Restatement of Declaration of Trust, as amended, of
EOP (the "EOP Declaration of Trust") and the Bylaws of EOP (the "EOP Bylaws"),
as in effect immediately prior to the Effective Time of the Merger and, if
approved by the EOP shareholders, as amended by the Proposed EOP Charter
Amendment Relating to Domestically Controlled REIT Status (as defined herein)
and the Proposed EOP Charter Amendment Relating to Certain Voting Requirements
(as defined herein), shall continue in full force and effect after the Merger
and, until further amended in accordance with applicable Maryland law and, if
approved by the EOP shareholders, as amended by the Proposed EOP Charter
Amendment Relating to Domestically Controlled REIT Status (as defined herein)
and the Proposed EOP Charter Amendment Relating to Certain Voting Requirements
(as defined herein).
1.7 TRUSTEES OF EOP. The trustees of EOP following the Merger
shall consist of the trustees of EOP immediately prior to the Effective Time of
the Merger, who shall continue to serve for the balance of their unexpired terms
or their earlier death, resignation or removal, together with John S. Moody,
William Wilson III and Jan van der Vlist, each of whom shall, no later than the
third business day after the Effective Time of the Merger, become a trustee with
terms expiring in 2002, 2003 and 2003, respectively. Upon the expiration of the
terms of Mr. van der Vlist in 2003 and 2006, so long as PGGM and its Affiliates
continue to own in the aggregate 21,000,000 (as adjusted for stock splits,
reverse stock splits, stock dividends and similar actions) or more of the issued
and outstanding EOP Common Shares at all times up to the meeting of shareholders
at which trustees are being elected in such years, EOP shall take all action
necessary to nominate Mr. van der Vlist for re-election as a trustee of EOP for
an additional three-year term at any special or annual meeting of shareholders
at which trustees are being elected (or in connection with a written consent in
lieu of a meeting pursuant to which trustees are proposed to be elected). In the
event that Mr. Van der Vlist shall fail to stand for re-election as aforesaid
for any reason in either 2003 or 2006 or in the event of his earlier death or
resignation, and so long as PGGM and its Affiliates continue to own in the
aggregate 21,000,000 (as adjusted for stock splits, reverse stock splits, stock
dividends and similar actions) or more of the issued and outstanding EOP Common
Shares at such time, EOP shall take all action necessary to nominate a
replacement designated by PGGM, which replacement shall be subject to the
approval of EOP if such replacement is not an officer, director or employee of
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PGGM, for election or re-election as a trustee of EOP for an additional
three-year term at any special or annual meeting of shareholders at which
trustees are being elected (or in connection with a written consent in lieu of a
meeting pursuant to which trustees are proposed to be elected) or, in the case
of a vacancy, at a meeting of the Board of Trustees called for such purpose.
Except as expressly provided above in this Section 1.7, following their election
as trustees, such persons shall serve for their designated terms, subject to
their earlier death, resignation or removal.
1.8 EFFECT ON SHARES. The effect of the Merger on the shares
of capital stock of Cornerstone shall be as provided in the Articles of Merger
and in Section 1.10 hereof. The Merger shall not change the shares of beneficial
interest of EOP outstanding immediately prior to the Merger.
1.9 EFFECT ON PARTNERSHIP INTERESTS. The effect of the
Partnership Merger on the partnership interests of Cornerstone Partnership shall
be as provided in the Certificate of Merger and in Section 1.10 hereof. The
Partnership Merger shall not change the partnership interests of EOP Partnership
outstanding immediately prior to the Merger.
1.10 EXCHANGE RATIOS AND OTHER MERGER CONSIDERATION.
(a) (i) The exchange ratio relating to the
Partnership Merger shall be 0.7009 of a Class A Unit (as defined in the EOP
Partnership Agreement) of EOP Partnership ("EOP OP Unit"), for each Cornerstone
OP Unit outstanding immediately prior to the Effective Time of the Partnership
Merger. The holders of the EOP OP Units issued in the Partnership Merger (other
than Cornerstone and Subsidiaries (as defined herein) of Cornerstone) shall be
entitled to redeem such EOP OP Units immediately following the consummation of
the Partnership Merger (and thereafter) pursuant to the terms of the EOP
Partnership Agreement, except that for purposes of the exchange provisions
thereof such EOP OP Units shall be deemed to have been issued as of the date the
related Cornerstone OP Units were issued by Cornerstone Partnership (or if
earlier, one year prior to the Effective Time of the Partnership Merger), and
shall be entitled to the same rights and privileges as the holders of EOP OP
Units outstanding on the date hereof.
(ii) The exchange ratio relating to the Partnership
Merger shall be one Class D Preferred Unit (as defined in the EOP Partnership
Agreement), designated a Class D 7.0% Cumulative Convertible Preferred Unit, of
EOP Partnership ("EOP Preferred OP Units"), for each Class A Partnership
Preferred Unit (as defined in the Cornerstone Partnership Agreement), designated
a Class A 7% Cumulative Convertible Preferred Unit of Cornerstone Partnership
("Cornerstone Preferred OP Unit") outstanding immediately prior to the Effective
Time of the Partnership Merger. EOP, as the holder of the EOP Preferred OP Units
issued in the Partnership Merger, shall be entitled to the same rights and
privileges
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as Cornerstone, as the holder of the Cornerstone Preferred Units outstanding on
the date hereof.
(b) The merger consideration to be paid to holders of capital
stock of Cornerstone in the Merger (collectively, the "Merger Consideration") is
as follows:
(i) Each share of common stock with no par value of
Cornerstone ("Cornerstone Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger, which under the
terms of Section 1.12 is to be converted into cash, shall be converted
into the right to receive $18.00 in cash, without interest;
(ii) Except as otherwise provided in Sections
1.10(b)(i) and 1.12, and subject to Section 1.15(g), each share of
Cornerstone Common Stock issued and outstanding immediately prior to
the Effective Time of the Merger (other than shares to be converted
into the right to receive cash pursuant to Sections 1.10(b)(i) and
1.12) shall be converted into the right to receive 0.7009 of a validly
issued, fully paid and nonassessable common share of beneficial
interest, par value $.01 per share, of EOP (an "EOP Common Share") (the
"Common Stock Exchange Ratio");
(iii) Each share of 7.0% Cumulative Convertible
Preferred Stock with no par value of Cornerstone ("Cornerstone 7%
Preferred Stock") outstanding immediately prior to the Effective Time
of the Merger shall be converted into the right to receive $18.00,
together with accrued and unpaid dividends to the Effective Time of the
Merger, in cash, without interest; and
(iv) All such shares of Cornerstone Common Stock,
when so converted as provided in Section 1.10(b)(i) or (ii), and all
such shares of Cornerstone 7% Preferred Stock, when so converted as
provided in Section 1.10(b)(iii), shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate (a "Certificate") theretofore
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive, upon the surrender of
such Certificate in accordance with Section 1.15(c), as applicable, (A)
any dividends and other distributions in accordance with Section
1.15(d), (B) certificates representing the EOP Common Shares into which
such shares of Cornerstone Common Stock are converted pursuant to
Section 1.10(c)(ii) (if any), (C) cash into which such shares of
Cornerstone Common Stock are converted pursuant to Section 1.10(c)(i),
(D) cash into which such shares of Cornerstone 7% Preferred Stock are
converted pursuant to Section 1.10(b)(iii), and (E) any cash, without
interest, in lieu of fractional EOP Common Shares to be issued or paid
in consideration for Cornerstone Common Stock upon the surrender of
such Certificate in accordance with Sections 1.15(c) and 1.15(g).
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1.11 ELECTION BY HOLDERS OF CORNERSTONE COMMON STOCK TO
RECEIVE EOP COMMON SHARES OR CASH. Each holder of shares of Cornerstone Common
Stock (including, without limitation, Limited Partners of Cornerstone
Partnership who elect to exercise, on a conditional or unconditional basis, the
Redemption Right with respect to all or a portion of their Cornerstone OP Units
held by such Limited Partners pursuant to Section 1.1(a) (with the Cornerstone
OP Units with respect to which such Exercise is made referred to as "Electing
Cornerstone OP Units")) shall have the right to submit a Form of Election
specifying the number of shares of Cornerstone Common Stock which such holder
desires to have converted into the right to receive EOP Common Shares in the
Merger pursuant to Section 1.10(a)(ii) and the number which such holder desires
to have converted into the right to receive cash pursuant to Section 1.10(a)(i)
in accordance with the following procedures:
(a) Each holder of shares of Cornerstone Common Stock
and each holder of Electing Cornerstone OP Units may specify in a request made
in accordance with the provisions of this Section 1.11 (an "Election") (i) the
number of such shares which such holder desires to have converted into the right
to receive cash in the Merger pursuant to Section 1.10(a)(i) (a "Cash Election")
and (ii) the number of such shares which such holder desires to have converted
into the right to receive EOP Common Shares in the Merger pursuant to Section
1.10(a)(ii) (a "Share Election").
(b) EOP and Cornerstone shall prepare, for use by
stockholders of Cornerstone (and each holder of Electing Cornerstone OP Units)
in surrendering Certificates representing shares of Cornerstone Common Stock, a
form of election (the "Form of Election") pursuant to which each holder of
Cornerstone Common Stock and each holder of Electing Cornerstone OP Units may
make Elections. The Form of Election shall be mailed to stockholders of record
of Cornerstone as of the record date for the Cornerstone Stockholders Meeting
(as defined herein) and to each holder of Cornerstone OP Units and shall
accompany the Joint Proxy Statement (as defined herein).
(c) Cornerstone shall use commercially reasonable
efforts to make the Form of Election available to all persons who become
stockholders of record of Cornerstone and to all Limited Partners of Cornerstone
Partnership during the period between such record date and the second business
day prior to the date of the Cornerstone Stockholders Meeting, provided that
only a Limited Partner of Cornerstone Partnership who is a holder of Electing
Cornerstone OP Units may submit a Form of Election and such Form of Election
shall apply only with respect to shares of Cornerstone Common Stock issued to
such Limited Partner prior to the Effective Time of the Partnership Merger
pursuant to the Redemption Right as set forth in Section 1.1(a).
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(d) An Election shall have been properly made only if
the Exchange Agent (as defined herein) shall have received, by 5:00 p.m.,
Eastern Standard Time, on the second business day (such time on such day being
referred to herein as the "Election Date") preceding the date of the Cornerstone
Stockholders Meeting, a Form of Election properly completed and signed (and not
revoked) and accompanied (in the case of holders of shares of Cornerstone Common
Stock) by the Certificate or Certificates representing the shares of Cornerstone
Common Stock to which such Form of Election relates, duly endorsed in blank or
otherwise in form acceptable for transfer on the books of Cornerstone (or by an
appropriate guarantee of delivery of such Certificate or Certificates as set
forth in such Form of Election from a member of any registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such Certificate or Certificates are in fact delivered
by the time set forth in such guarantee of delivery).
(e) Any holder of record of shares of Cornerstone
Common Stock (and any holder of Electing Cornerstone OP Units) may at any time
prior to the Election Date change such holder's Election by written notice
received by the Exchange Agent at or prior to the Election Date accompanied by a
properly completed Form of Election. EOP and Cornerstone shall have the right in
their sole discretion and by mutual agreement to permit changes in Elections
after the Election Date.
(f) Any holder of record of shares of Cornerstone
Common Stock (and any holder of Electing Cornerstone OP Units) may at any time
prior to the Election Date revoke such holder's Election by written notice
received by the Exchange Agent at or prior to the Election Date or by withdrawal
prior to the Election Date of such holder's Certificates previously deposited
with the Exchange Agent. Any revocation of an Election may be withdrawn by
notice of such withdrawal delivered at or prior to the Election Date. Any such
holder who shall have deposited Certificates with the Exchange Agent shall have
the right to withdraw such Certificates by written notice received by the
Exchange Agent and thereby revoke such holder's Election as of the Election Date
at any time after the expiration of the period of 60 days following the Election
Date if the Merger shall not have been consummated prior thereto. EOP shall
obtain from the Exchange Agent an agreement to return all Forms of Election and
accompanying Certificates to the stockholders submitting the same in the event
this Agreement shall be terminated in accordance with its terms.
(g) EOP and Cornerstone by mutual agreement shall
have the right to make rules, not inconsistent with the terms of this Agreement,
governing the validity of Forms of Election, the manner and extent to which
Elections are to be taken into account in making the determinations prescribed
by Section 1.12, the issuance and delivery of certificates for EOP Common Shares
into which shares of Cornerstone Common Stock are converted in the Merger and
the
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payment for shares of Cornerstone Common Stock converted into the right to
receive cash in the Merger.
1.12 PRORATION. The determination of whether shares of
Cornerstone Common Stock shall be converted in the Merger into EOP Common Shares
in accordance with the Common Stock Exchange Ratio or the right to receive
$18.00 in cash shall be made as set forth in this Section 1.12.
(a) As is more fully set forth below, 58,551,525
shares of Cornerstone Common Stock shall be converted in the Merger into the
right to receive $18.00 per share in cash (which shares of Cornerstone Common
Stock are referred to as the "Cash Election Shares"), and all shares of
Cornerstone Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger in excess of 58,551,525 shares shall be converted
in the Merger into the right to receive EOP Common Shares in accordance with the
Common Stock Exchange Ratio (which shares of Cornerstone Common Stock are
referred to as the "Stock Election Shares").
(b) If Cash Elections are received for a number of
shares of Cornerstone Common Stock which is greater than 58,551,525 shares of
Cornerstone Common Stock, each Non-Electing Share (as defined herein) and each
share of Cornerstone Common Stock for which a Share Election has been received
shall be converted in the Merger into EOP Common Shares in accordance with the
Common Stock Exchange Ratio, and the shares of Cornerstone Common Stock for
which Cash Elections have been received shall be converted in the Merger into
the right to receive cash and EOP Common Shares in accordance with the Common
Stock Exchange Ratio in the following manner:
each share of Cornerstone Common Stock covered by a
Cash Election shall be converted into the right to
receive (i) an amount in cash, without interest,
equal to the product of (x) $18.00 and (y) a fraction
(the "Cash Fraction") the numerator of which shall be
58,551,525 and the denominator of which shall be the
aggregate number of shares of Cornerstone Common
Stock covered by all Cash Elections, and (ii) a
number of EOP Common Shares equal to the product of
(x) the Common Stock Exchange Ratio and (y) a
fraction equal to one minus the Cash Fraction.
(c) If Share Elections are received for a number of
shares of Cornerstone Common Stock which is greater than the total number of
Stock Election Shares issued and outstanding immediately prior to the Effective
Time of the Merger, each Non-Electing Share and each share of Cornerstone Common
Stock for which a Cash Election has been received shall be converted in the
Merger into the right to receive $18.00 in cash, without interest, and the
shares of Cornerstone
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Common Stock for which Share Elections have been received shall be converted in
the Merger into EOP Shares in accordance with the Common Stock Exchange Ratio
and the right to receive cash in the following manner:
each share of Cornerstone Common Stock covered by a
Share Election shall be converted into the right to
receive (i) a number of EOP Common Shares equal to
the product of (x) the Common Stock Exchange Ratio
and (y) a fraction (the "Stock Fraction"), the
numerator of which shall be a number equal to the
total number of Stock Election Shares issued and
outstanding immediately prior to the Effective Time
of the Merger and the denominator of which shall be
the aggregate number of shares of Cornerstone Common
Stock covered by all Share Elections, and (ii) an
amount in cash, without interest, equal to the
product of (x) $18.00 and (y) a fraction equal to one
minus the Stock Fraction.
(d) If Non-Electing Shares (as defined herein) are
not converted under either Section 1.12(b) or Section 1.12(c), then each
Non-Electing Share shall be converted into the right to receive EOP Common
Shares and the right to receive cash on a proportionate basis, relative to all
other Non-Electing Shares, so that the aggregate number of shares of Cornerstone
Common Stock converted into the right to receive EOP Common Shares equals, as
closely as possible, the number of Stock Election Shares, and the aggregate
number of shares of Cornerstone Common Stock converted into the right to receive
cash equals, as closely as possible, the number of Cash Election Shares.
(e) For purposes of this Section 1.12, outstanding
shares of Cornerstone as to which an election is not in effect at the Election
Date and shares as to which an Election has been withdrawn after the 60-day
period following the Election Date and prior to the Effective Time of the Merger
shall be called "Non-Electing Shares." If EOP and Cornerstone shall determine
for any reason that any Election was not properly made with respect to shares of
Cornerstone Common Stock, such Election shall be deemed ineffective and shares
of Cornerstone Common Stock covered by such Election shall, for purposes hereof,
be deemed to be Non-Electing Shares.
1.13 PARTNER APPROVAL. Cornerstone shall seek the requisite
approval of the partners of Cornerstone Partnership of the Merger, the
withdrawal of Cornerstone as general partner and the Partnership Merger to the
extent required by the Cornerstone Partnership Agreement to effectuate the
transactions contemplated by this Agreement (collectively, the "Cornerstone
Partner Approvals"). EOP shall seek the requisite approval of the partners of
EOP Partnership of the Merger and the Partnership Merger to the extent required
by the EOP Partnership Agreement to effectuate the transactions contemplated by
this
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Agreement (collectively, the "EOP Partner Approvals," and together with the
Cornerstone Partner Approvals, the "Partner Approvals").
1.14 NO APPRAISAL RIGHTS. The holders of Cornerstone Common
Stock, Cornerstone OP Units, EOP Common Shares and EOP OP Units are not entitled
under applicable law to appraisal or similar rights as a result of the Mergers
and, in the case of the holders of the Cornerstone 7% Preferred Stock, such
holders irrevocably have waived all such rights.
1.15 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS;
FRACTIONAL SHARES.
(a) EXCHANGE AGENT. Prior to the Effective Time, EOP
shall appoint Equiserve LLC as the exchange agent, or another bank or trust
company reasonably acceptable to Cornerstone, to act as exchange agent (the
"Exchange Agent") for the exchange of the Merger Consideration upon surrender of
certificates representing issued and outstanding shares of Cornerstone Common
Stock and Cornerstone 7% Preferred Stock.
(b) EOP TO PROVIDE MERGER CONSIDERATION. EOP shall
provide to the Exchange Agent on or before the Effective Time of the Merger, for
the benefit of the holders of Cornerstone Common Stock and Cornerstone 7%
Preferred Stock, the Merger Consideration issuable in exchange for the issued
and outstanding Cornerstone Common Stock and Cornerstone 7% Preferred Stock
pursuant to Section 1.10, together with any cash required to make payments in
lieu of any fractional shares pursuant to Section 1.15(g) (the "Exchange Fund").
The Exchange Agent shall invest any cash included in the Exchange Fund as
directed by EOP, on a daily basis. Any interest or other income resulting from
such investments shall be paid to EOP. Cornerstone shall provide to the Exchange
Agent not later than one business day prior to the Effective Time of the Merger,
for the benefit of the holders of Cornerstone Common Stock, cash payable in
respect of any dividends required pursuant to Section 1.15(d)(i) or (ii). Such
cash shall be invested in accordance with written directions delivered by
Cornerstone to the Exchange Agent not later than one business day prior to the
Effective Time of the Merger, with any cash earned on such investments to be
paid to EOP as the successor to Cornerstone in the Merger. EOP shall use
commercially reasonable efforts to cause the Exchange Agent to mail the Merger
Consideration to the holders of Cornerstone Common Stock (including to holders
of Electing Cornerstone OP Units who made an unconditional Exercise of the
Redemption Right or who made a conditional exercise thereof and who will receive
cash in the Merger, in each case who have properly submitted a Form of Election
prior to the Election Date) and Cornerstone 7% Preferred Stock not later than
five business days after the Effective Time of the Merger.
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(c) EXCHANGE PROCEDURE. As soon as reasonably
practicable after the Effective Time, EOP shall use commercially reasonable
efforts to cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates which immediately prior to the Effective Time
represented outstanding shares of Cornerstone Common Stock (other than to
holders of Cornerstone Common Stock who previously surrendered with their Forms
of Election their Certificates for Cornerstone Common Stock) or Cornerstone 7%
Preferred Stock Certificate whose shares were converted into the right to
receive the Merger Consideration pursuant to Section 1.10, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as EOP may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. To the extent not previously surrendered with a Form of Election,
upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by EOP, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration into which the shares
of Cornerstone Common Stock or Cornerstone 7% Preferred Stock, as applicable,
theretofore represented by such Certificate shall have been converted pursuant
to Section 1.10, together with any dividends or other distributions to which
such holder is entitled pursuant to Section 1.15(d) and cash, if any, payable in
lieu of fractional shares pursuant to Section 1.15(g), to be mailed (or made
available for collection by hand if so elected by the surrendering holder)
within five business days of receipt thereof, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of Cornerstone Common Stock or Cornerstone 7% Preferred Stock which is not
registered in the transfer records of Cornerstone, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment either shall pay
any transfer or other taxes required by reason of such payment being made to a
person other than the registered holder of such Certificate or establish to the
satisfaction of EOP that such tax or taxes have been paid or are not applicable.
Until surrendered as contemplated by this Section 1.15, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without interest, into
which the shares of Cornerstone Common Stock or Cornerstone 7% Preferred Stock
heretofore represented by such Certificate shall have been converted pursuant to
Section 1.10, and any dividends or other distributions to which such holder is
entitled pursuant to Section 1.15(d). No interest will be paid or will accrue on
the Merger Consideration upon the surrender of any Certificate or on any cash
payable pursuant to Section 1.15(d) or Section 1.15(g). EOP or the Exchange
Agent, as applicable, shall be entitled, in its sole and absolute discretion, to
deduct and withhold from the cash or EOP Common Shares, or any combination
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thereof, that otherwise is payable pursuant to this Agreement to any holder of
shares of Cornerstone Common Stock or Cornerstone 7% Preferred Stock such
amounts as EOP or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code or under any provision of
state, local or foreign tax law, PROVIDED THAT in determining whether
withholding under Section 1445 of the Code is required, EOP shall take into
account (and shall request the Exchange Agent to take into account) Section
1445(b)(6) of the Code and Treasury Regulations Section 1.1445-2(c)(2). For this
purpose, any EOP Common Shares deducted and withheld by EOP shall be valued at
the last trading price of the EOP Common Shares on the New York Stock Exchange
on the Effective Date of the Merger. To the extent that amounts are so withheld
by EOP or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Cornerstone Common Stock or Cornerstone 7% Preferred Stock, as applicable, in
respect of which such deduction and withholding was made by EOP or the Exchange
Agent.
(d) RECORD DATES FOR FINAL DIVIDENDS; DISTRIBUTIONS
WITH RESPECT TO UNEXCHANGED SHARES.
(i) To the extent necessary to satisfy the
requirements of Section 857(a)(1) of the Code for the taxable year of
Cornerstone ending at the Effective Time of the Merger (and avoid the payment of
tax with respect to undistributed income), Cornerstone shall declare a dividend
(the "Final Company Dividend") to holders of shares of Cornerstone Common Stock
and Cornerstone 7% Preferred Stock, the record date for which shall be the close
of business on the last business day prior to the Effective Time of the Merger,
in an amount equal to the minimum dividend sufficient to permit Cornerstone to
satisfy such requirements. If Cornerstone determines it is necessary to declare
the Final Company Dividend, it shall notify EOP at least 10 days prior to the
date for the Cornerstone Stockholders Meeting, and EOP shall declare a dividend
per share to holders of shares of EOP Common Shares, the record date for which
shall be the close of business on the last business day prior to the Effective
Time, in an amount per EOP Common Share equal to the quotient obtained by
dividing (x) the Final Company Dividend paid by Cornerstone with respect to each
share of Cornerstone Common Stock by (y) the Common Stock Exchange Ratio. The
dividends payable hereunder to holders of Cornerstone Common Stock and
Cornerstone 7% Preferred Stock shall be paid on the last business day
immediately preceding the Closing Date.
(ii) No dividends or other distributions
with respect to EOP Common Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of EOP Common Shares represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.15(g),
in each case until the surrender of such Certificate in accordance with this
Section 1.15. Subject to the effect of applicable escheat laws, following
surrender of any such Certificate
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there shall be paid to the holder of such Certificate, without interest, (i) at
the time of such surrender, the amount of any cash payable pursuant to Section
1.10 and/or in lieu of any fractional EOP Common Shares to which such holder is
entitled pursuant to Section 1.15(g) and (ii) if such Certificate is
exchangeable for one or more whole EOP Common Shares, (x) at the time of such
surrender the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole EOP Common
Shares and (y) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole EOP Common Shares.
(e) NO FURTHER OWNERSHIP RIGHTS IN CORNERSTONE COMMON
STOCK AND CORNERSTONE 7% PREFERRED STOCK. All Merger Consideration paid upon the
surrender of Certificates in accordance with the terms of this Section 1.15
(including any cash paid pursuant to Section 1.15(g)) shall be deemed to have
been paid in full satisfaction of all rights pertaining to the Cornerstone
Common Stock and Cornerstone 7% Preferred Stock, as applicable, theretofore
represented by such Certificates; PROVIDED, HOWEVER, that Cornerstone shall
transfer to the Exchange Agent cash sufficient to pay any dividends or make any
other distributions with a record date prior to the Effective Time which may
have been declared or made by Cornerstone on such Cornerstone Common Stock or
Cornerstone 7% Preferred Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time and have not been paid prior to such surrender, and there shall be no
further registration of transfers on the stock transfer books of Cornerstone of
the Cornerstone Common Stock or Cornerstone 7% Preferred Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to EOP for any reason, they shall be canceled
and exchanged as provided in this Section 1.15.
(f) NO LIABILITY. None of Cornerstone, EOP or the
Exchange Agent shall be liable to any person in respect of any Merger
Consideration or dividends delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any portion of the
Exchange Fund delivered to the Exchange Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time shall be redelivered by
the Exchange Agent to EOP, upon demand, and any holders of Certificates who have
not theretofore complied with Section 1.15(c) shall thereafter look only to EOP
for delivery of the Merger Consideration and any unpaid dividends, subject to
applicable escheat and other similar laws.
(g) NO FRACTIONAL SHARES
(i) No certificates or scrip representing
fractional EOP Common Shares shall be issued upon the surrender for exchange of
Certificates,
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and such fractional share interests will not entitle the owner thereof to vote,
to receive dividends or to any other rights of a shareholder of EOP.
(ii) No fractional EOP Common Shares shall
be issued pursuant to this Agreement. In lieu of the issuance of any fractional
EOP Common Shares pursuant to this Agreement, each holder of Cornerstone Common
Stock upon surrender of a Certificate for exchange shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the average closing price of one EOP Common Share on the New York Stock
Exchange on the five trading days immediately preceding the Closing Date by (ii)
the fractional amount of 0.7009 of an EOP Common Share which such holder would
otherwise be entitled to receive under this Section 1.15.
(h) LOST CERTIFICATES. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by EOP or the Exchange Agent, the posting by such person of a bond in
such reasonable amount as EOP or the Exchange Agent may direct (but consistent
with the practices EOP applies to its own shareholders) as indemnity against any
claim that may be made against them with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the EOP Common Shares or cash to which the holders thereof are
entitled pursuant to Section 1.10, any cash payable pursuant to Section 1.15(g)
to which the holders thereof are entitled and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
1.15(d).
(i) APPLICABILITY TO PARTNERSHIP MERGER. Except for
the provisions relating to the Exchange Agent, certificates and the exchange
procedure (which shall not be applicable), all other provisions of this Section
1.15 shall apply to Cornerstone Partnership, EOP Partnership, the Cornerstone OP
Units and the Cornerstone OP Preferred Units with respect to the Partnership
Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CORNERSTONE AND
CORNERSTONE PARTNERSHIP
Except as set forth in the Cornerstone SEC Documents (as
defined herein) or in the letter of even date herewith signed by the President
and Chief Executive Officer or the Chief Operating Officer of Cornerstone and
delivered to EOP prior to the execution hereof (the "Cornerstone Disclosure
Letter"), Cornerstone and Cornerstone Partnership represent and warrant to EOP
and EOP Partnership as follows:
2.1 ORGANIZATION, STANDING AND POWER. Cornerstone has been
duly organized and is validly existing and in good standing under the laws of
the State of
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Nevada. Cornerstone has all requisite corporate power and authority to own,
operate, lease and encumber its properties and carry on its business as now
being conducted. The Cornerstone Restated Articles of Incorporation, as amended
(the "Cornerstone Articles") are in effect, and no dissolution, revocation or
forfeiture proceedings regarding Cornerstone have been commenced. Cornerstone is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a material adverse
effect on the business, properties, assets, financial condition or results of
operations of Cornerstone, Cornerstone Partnership and the Cornerstone
Subsidiaries (as defined herein), taken as a whole (a "Cornerstone Material
Adverse Effect"). Cornerstone has delivered to EOP complete and correct copies
of the Cornerstone Articles and Cornerstone's Amended and Restated Bylaws (the
"Cornerstone Bylaws"), in each case, as amended or supplemented to the date of
this Agreement.
2.2 CORNERSTONE SUBSIDIARIES.
(a) SCHEDULE 2.2 to the Cornerstone Disclosure Letter
sets forth (i) each Subsidiary (as defined herein) of Cornerstone (the
"Cornerstone Subsidiaries") and the Cornerstone Non-controlled Subsidiary (which
Cornerstone Non-controlled Subsidiary constitutes the only entity in which
Cornerstone owns a non-voting equity interest and has no right to control except
as set forth on Schedule 2.4 of the Cornerstone Disclosure Letter), (ii) the
ownership interest therein of Cornerstone, (iii) if not, directly or indirectly,
wholly owned by Cornerstone, the identity and ownership interest of each of the
other owners of such Cornerstone Subsidiary or Cornerstone Non-controlled
Subsidiary, as applicable, (iv) each office property and other commercial
property owned by such Cornerstone Subsidiary or Cornerstone Non-controlled
Subsidiary, as applicable, and (v) if not wholly owned by such Cornerstone
Subsidiary or Cornerstone Non-controlled Subsidiary, as applicable, the identity
and ownership interest of each of the other owners of such property. As used in
this Agreement, "Subsidiary" of any Person (as defined herein) means any
corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person owns (either directly or through or
together with another Subsidiary of such Person) either (i) a general partner,
managing member or other similar interest, or (ii)(A) 10% or more of the voting
power of the voting capital stock or other equity interests, or (B) 10% or more
of the outstanding voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity. As used herein, "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity. SCHEDULE 2.4 of the Cornerstone
Disclosure Letter sets forth a true and complete list of the equity securities
owned by Cornerstone, directly or indirectly, in any corporation, partnership,
limited liability company, joint
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venture or other legal entity, excluding Cornerstone Subsidiaries and the
Cornerstone Non-controlled Subsidiary.
(b) Except as set forth in SCHEDULE 2.2 to the
Cornerstone Disclosure Letter, (i) all of the outstanding shares of capital
stock of each Cornerstone Subsidiary and Cornerstone Non-controlled Subsidiary
that is a corporation have been duly authorized, validly issued and are (A)
fully paid and nonassessable and not subject to preemptive rights, (B) owned by
Cornerstone or by another Cornerstone Subsidiary or Cornerstone Non-controlled
Subsidiary and (C) owned free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each Cornerstone
Subsidiary that is a partnership, joint venture, limited liability company or
trust which are owned by Cornerstone, by another Cornerstone Subsidiary or
Cornerstone Non-controlled Subsidiary or by Cornerstone and another Cornerstone
Subsidiary or Cornerstone Non-controlled Subsidiary are owned free and clear of
all Liens other than pledges, if any, contained in organizational documents of
such Cornerstone Subsidiary and given to secure performance thereunder. Each
Cornerstone Subsidiary and Cornerstone Non-controlled Subsidiary that is a
corporation is duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to own, operate, lease and encumber its properties and carry
on its business as now being conducted, and each Cornerstone Subsidiary that is
a partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Each
Cornerstone Subsidiary and Cornerstone Non-controlled Subsidiary is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not reasonably be expected to have a
Cornerstone Material Adverse Effect. Complete and correct copies of the Articles
of Incorporation, Bylaws, organization documents and partnership, joint venture
and operating agreements of each Cornerstone Subsidiary and Cornerstone
Non-controlled Subsidiary, as amended to the date of this Agreement, have been
previously delivered or made available to EOP. No effective amendment has been
made to the Cornerstone Partnership Agreement since January 21, 2000.
2.3 CAPITAL STRUCTURE.
(a) The authorized shares of capital stock of
Cornerstone consist of 250,000,000 shares of Cornerstone Common Stock,
129,638,245 of which are issued and 129,280,012 of which are outstanding on the
date of this Agreement, and 65,000,000 shares of preferred stock with no par
value, of which 3,030,303
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shares of Cornerstone 7% Preferred Stock are issued and outstanding and 344,828
shares of Redeemable Preferred Stock are designated with none outstanding on the
date of this Agreement.
(b) Set forth in SCHEDULE 2.3(B) to the Cornerstone
Disclosure Letter is a true and complete list of the following: (i) each
qualified or nonqualified option to purchase shares of Common Stock granted
under Cornerstone's 1998 Long-Term Incentive Plan or any other formal or
informal arrangement (collectively, the "Cornerstone Stock Options"); and (ii)
all other warrants or other rights to acquire Cornerstone Common Stock, all
stock appreciation rights, restricted stock, dividend equivalents, deferred
compensation accounts, performance awards, restricted stock unit awards and
other awards which are outstanding on the date of this Agreement ("Cornerstone
Stock Rights"). SCHEDULE 2.3(B) to the Cornerstone Disclosure Letter sets forth
for each Cornerstone Stock Option and Cornerstone Stock Right the name of the
grantee, the date of the grant, the number of shares of Cornerstone Common Stock
subject to each option or other award, and the exercise price per share. On the
date of this Agreement, except as set forth in this Section 2.3 or in SCHEDULE
2.3(B) to the Cornerstone Disclosure Letter, no shares of Cornerstone Common
Stock were outstanding or reserved for issuance.
(c) All outstanding shares of Cornerstone Common
Stock are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of Cornerstone having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of Cornerstone may vote, except for the Cornerstone convertible
promissory note dated as of January 1, 1996 which does not have voting rights
but is convertible into Cornerstone Common Stock (the "Cornerstone Convertible
Promissory Note").
(d) Other than (i) as set forth in this Section 2.3
or in SCHEDULE 2.3(B), 2.3(C), or 2.3(D) to the Cornerstone Disclosure Letter,
(ii) Cornerstone OP Units, which may be redeemed for cash or, at the option of
Cornerstone, Cornerstone Common Stock at a rate of one share of Cornerstone
Common Stock for each Cornerstone OP Unit, (iii) shares of Cornerstone Common
Stock issuable upon the conversion of Cornerstone 7% Preferred Stock, and (iv)
shares of Cornerstone Common Stock issuable pursuant to the Cornerstone
Convertible Promissory Note, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Cornerstone or any
Cornerstone Subsidiary or Cornerstone Non-controlled Subsidiary is a party or by
which such entity is bound, obligating Cornerstone or any Cornerstone Subsidiary
or Cornerstone Non-controlled Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of Cornerstone or any Cornerstone
Subsidiary or Cornerstone Non-controlled Subsidiary or obligating Cornerstone or
any
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Cornerstone Subsidiary or Cornerstone Non-controlled Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to Cornerstone or
a Cornerstone Subsidiary or a Cornerstone Non-controlled Subsidiary).
(e) As of the date of this Agreement, 148,735,829
Cornerstone OP Units are validly issued and outstanding, fully paid and
nonassessable and not subject to preemptive rights, of which 129,638,245 are
owned by Cornerstone and 3,030,303 Cornerstone Preferred OP Units are validly
issued and outstanding, fully paid and nonassessable and not subject to
preemptive rights, all of which are owned by Cornerstone. SCHEDULE 2.3(E) to the
Cornerstone Disclosure Schedule sets forth the name of each holder of
Cornerstone OP Units and the number of Cornerstone OP Units owned by each such
holder as of the date of this Agreement. Except as provided in the Cornerstone
Partnership Agreement or as set forth on SCHEDULE 2.3(D), Cornerstone
Partnership has not issued or granted and is not a party to any outstanding
commitments of any kind relating to, or any presently effective agreements or
understandings with respect to, the issuance or sale of interests in Cornerstone
Partnership, whether issued or unissued, or securities convertible or
exchangeable into interests in Cornerstone Partnership.
(f) Except for the distribution of $0.31 per share of
Cornerstone Common Stock and per Cornerstone OP Unit declared on January 20,
2000, and payable on February 29, 2000, to holders of record on January 31,
2000, of shares of Cornerstone Common Stock and Cornerstone OP Units, all
dividends on Cornerstone Common Stock and Cornerstone 7% Preferred Stock and all
distributions on Cornerstone OP Units, which have been declared prior to the
date of this Agreement, have been paid in full.
(g) Set forth on SCHEDULE 2.3(G) to the Cornerstone
Disclosure Letter is a list of each registration rights agreement or other
agreement between Cornerstone and/or Cornerstone Partnership, on the one hand,
and one or more other parties, on the other hand, which sets forth the rights of
any such other party or parties to cause the registration of any securities of
Cornerstone and/or Cornerstone Partnership pursuant to the Securities Act of
1933, as amended (the "Securities Act").
2.4 OTHER INTERESTS. Except for interests in the Cornerstone
Subsidiaries, the Cornerstone Non-controlled Subsidiary and certain other
entities as set forth in SCHEDULE 2.4 to the Cornerstone Disclosure Letter (the
"Cornerstone Other Interests"), none of Cornerstone, Cornerstone Partnership,
any Cornerstone Subsidiary or the Cornerstone Non-controlled Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust, limited liability
company or other entity (other than investments in short-term investment
securities). With respect to the Cornerstone Other Interests, Cornerstone
Partnership owns such interests free and clear of all
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Liens other than pledges, if any, contained in organizational documents of such
Cornerstone Other Interests and given to secure performance thereunder. None of
Cornerstone, Cornerstone Partnership, any Cornerstone Subsidiary or the
Cornerstone Non-controlled Subsidiary is in material breach of any provision of
any agreement, document or contract which is of a material nature governing its
rights in or to the Cornerstone Other Interests, all of which agreements,
documents and contracts are (a) listed in Schedule 2.4 to the Cornerstone
Disclosure Letter, (b) unmodified except as described therein and (c) in full
force and effect. To the Knowledge of Cornerstone (as defined herein), the other
parties to any such agreement, document or contract which is of a material
nature are not in material breach of any of their respective obligations under
such agreements, documents or contracts.
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Cornerstone has the requisite corporate power and
authority to enter into this Agreement and, subject to the requisite Cornerstone
stockholder approval of the Merger Agreement and the Merger and any other
matters reasonably and timely requested by any other party to effectuate the
transactions contemplated by this Agreement (collectively, the "Cornerstone
Stockholder Approvals"), to consummate the transactions contemplated by this
Agreement to which Cornerstone is a party. The execution and delivery of this
Agreement by Cornerstone and the consummation by Cornerstone of the transactions
contemplated by this Agreement to which Cornerstone is a party have been duly
authorized by all necessary action on the part of Cornerstone, except for and
subject to the Cornerstone Stockholder Approvals and the Cornerstone Partner
Approvals. This Agreement has been duly executed and delivered by Cornerstone
and constitutes a valid and binding obligation of Cornerstone, enforceable
against Cornerstone in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(b) Cornerstone Partnership has the requisite
partnership power and authority to enter into this Agreement and, subject to the
requisite Cornerstone Partner Approvals, to consummate the transactions
contemplated by this Agreement to which Cornerstone Partnership is a party. The
execution and delivery of this Agreement by Cornerstone Partnership and the
consummation by Cornerstone Partnership of the transactions contemplated by this
Agreement to which Cornerstone Partnership is a party have been duly authorized
by all necessary action on the part of Cornerstone Partnership, except for and
subject to the Cornerstone Stockholder Approvals and the Cornerstone Partner
Approvals. This Agreement has been duly executed and delivered by Cornerstone
Partnership and constitutes a valid and binding obligation of Cornerstone
Partnership, enforceable against Cornerstone Partnership in accordance with and
subject to its
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terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
(c) Except as set forth in SCHEDULE 2.5(C)(1) to the
Cornerstone Disclosure Letter, the execution and delivery of this Agreement by
Cornerstone do not, and the consummation of the transactions contemplated by
this Agreement to which Cornerstone is a party and compliance by Cornerstone
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to material loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Cornerstone or any
Cornerstone Subsidiary under, (i) the Cornerstone Articles or Cornerstone Bylaws
or the comparable charter or organizational documents or partnership, operating,
or similar agreement (as the case may be) of any Cornerstone Subsidiary or
Cornerstone Non-controlled Subsidiary, each as amended or supplemented, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, merger or other
acquisition agreement, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Cornerstone
or any Cornerstone Subsidiary or Cornerstone Non-controlled Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to Cornerstone or any Cornerstone Subsidiary or Cornerstone
Non-controlled Subsidiary, or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights, loss or Liens that individually or in the aggregate would not (x) have a
Cornerstone Material Adverse Effect or (y) prevent the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to Cornerstone or any
Cornerstone Subsidiary or Cornerstone Non-controlled Subsidiary in connection
with the execution and delivery of this Agreement by Cornerstone or the
consummation by Cornerstone of the transactions contemplated by this Agreement,
except for (i) the filing with the Securities and Exchange Commission (the
"SEC") of the Joint Proxy Statement (as defined herein), (ii) the acceptance for
record of the Maryland Articles of Merger by the Department, (iii) the filing of
the Nevada Articles of Merger with the Secretary of State of the State of
Nevada, (iv) the filing of the Certificate of Merger with the Office of the
Secretary of State of the State of Delaware and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings (A)
as are set forth in SCHEDULE 2.5(C)(2) to the Cornerstone Disclosure Letter, (B)
as may be required under (w) the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (x) laws requiring transfer, recordation or
gains tax filings, (y) federal, state or local environmental laws or (z)
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the "blue sky" laws of various states, to the extent applicable or (C) which, if
not obtained or made, would not prevent or delay in any material respect the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Cornerstone from performing its obligations under this
Agreement in any material respect or reasonably be expected to have,
individually or in the aggregate, a Cornerstone Material Adverse Effect.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED
LIABILITIES. Cornerstone has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1997 through the
date hereof (the "Cornerstone SEC Documents"). SCHEDULE 2.6(A) to the
Cornerstone Disclosure Letter contains a complete list of all Cornerstone SEC
Documents filed by Cornerstone with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), between January 1, 1997 and the date of
this Agreement. All of the Cornerstone SEC Documents (other than preliminary
material), as of their respective filing dates, complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act and, in each case, the rules and regulations promulgated thereunder
applicable to such Cornerstone SEC Documents. None of the Cornerstone SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Cornerstone SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of Cornerstone included in the Cornerstone SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements, as permitted
by the applicable rules and regulations of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly presented in all material respects, in accordance with the
applicable requirements of GAAP and the applicable rules and regulations of the
SEC, the consolidated financial position of Cornerstone and its Subsidiaries
taken as a whole, as of the dates thereof and the consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set forth
in SCHEDULE 2.6(B) to the Cornerstone Disclosure Letter, Cornerstone has no
Subsidiaries which are not consolidated for accounting purposes. Except for
liabilities and obligations set forth in the Cornerstone SEC Documents or in
SCHEDULE 2.6(C) to the Cornerstone Disclosure Letter, none of Cornerstone, any
Cornerstone Subsidiary or the Cornerstone Non-controlled Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of
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Cornerstone or in the notes thereto and which, individually or in the aggregate,
would have a Cornerstone Material Adverse Effect.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Cornerstone SEC Documents or in SCHEDULE 2.7 to the Cornerstone
Disclosure Letter, since the date of the most recent audited financial
statements included in Cornerstone SEC Documents (the "Cornerstone Financial
Statement Date"), Cornerstone, its Subsidiaries and the Cornerstone
Non-controlled Subsidiary have conducted their business only in the ordinary
course (taking into account prior practices, including the acquisition and
disposition of properties and issuance of securities) and there has not been (a)
any material adverse change in the business, financial condition or results of
operations of Cornerstone and its Subsidiaries taken as a whole (a "Cornerstone
Material Adverse Change"), nor has there been any occurrence or circumstance
that with the passage of time would reasonably be expected to result in a
Cornerstone Material Adverse Change, (b) except for regular quarterly
distributions not in excess of $0.31 per share of Cornerstone Common Stock or
Cornerstone OP Unit and except for regular annual distributions not in excess of
$1.155 per share of Cornerstone 7% Preferred Stock (or, in each case, with
respect to the period commencing on the date hereof and ending on the Closing
Date, distributions as necessary to maintain REIT (as defined herein) status),
in each case with customary record and payment dates, any authorization,
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the Cornerstone Common
Stock, the Cornerstone OP Units or the Cornerstone 7% Preferred Stock, (c) any
split, combination or reclassification of the Cornerstone Common Stock, the
Cornerstone OP Units or the Cornerstone 7% Preferred Stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of stock of Cornerstone or partnership interests in Cornerstone
Partnership or any issuance of an ownership interest in, any Cornerstone
Subsidiary or the Cornerstone Non-controlled Subsidiary, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would have
a Cornerstone Material Adverse Effect, (e) any change in accounting methods,
principles or practices by Cornerstone or any Cornerstone Subsidiary or the
Cornerstone Non-controlled Subsidiary materially affecting its assets,
liabilities or business, except insofar as may have been disclosed in
Cornerstone SEC Documents or required by a change in GAAP, or (f) any amendment
of any employment, consulting, severance, retention or any other agreement
between Cornerstone and any officer or director of Cornerstone.
2.8 LITIGATION. Except as disclosed in the Cornerstone SEC
Documents or in SCHEDULE 2.8 to the Cornerstone Disclosure Letter, and other
than personal injury and other routine tort litigation arising from the ordinary
course of operations of Cornerstone, the Cornerstone Subsidiaries and the
Cornerstone Non-controlled Subsidiary (a) which are covered by adequate
insurance subject to a
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reasonable deductible or retention limit or (b) for which all material costs and
liabilities arising therefrom are reimbursable pursuant to common area
maintenance or similar agreements, there is no suit, action or proceeding
pending (in which service of process has been received by an employee of
Cornerstone, a Cornerstone Subsidiary or a Cornerstone Non-controlled
Subsidiary) or, to the Knowledge of Cornerstone (as hereinafter defined),
threatened in writing against or affecting Cornerstone, or any Cornerstone
Subsidiary or Cornerstone Non-controlled Subsidiary that, individually or in the
aggregate, would reasonably be expected to (i) have a Cornerstone Material
Adverse Effect or (ii) prevent the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any court or Governmental Entity or arbitrator outstanding
against Cornerstone, any Cornerstone Subsidiary or the Cornerstone
Non-controlled Subsidiary having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect. Notwithstanding the
foregoing, (y) SCHEDULE 2.8 to the Cornerstone Disclosure Letter sets forth each
and every material uninsured claim, equal employment opportunity claim and claim
relating to sexual harassment and/or discrimination pending or, to the Knowledge
of Cornerstone, threatened as of the date hereof, and (z) no claim has been made
under any directors' and officers' liability insurance policy maintained at any
time by Cornerstone, any of the Cornerstone Subsidiaries or the Cornerstone
Non-controlled Subsidiary.
2.9 PROPERTIES.
(a) Except as provided in SCHEDULE 2.2 or SCHEDULE
2.9(A) to the Cornerstone Disclosure Letter, Cornerstone or the Cornerstone
Subsidiary or Cornerstone Non-controlled Subsidiary set forth on SCHEDULE 2.2 to
the Cornerstone Disclosure Letter owns fee simple title to or holds a leasehold
interest in each of the real properties identified in SCHEDULE 2.2 to the
Cornerstone Disclosure Letter (the "Cornerstone Properties"), which are all of
the real estate properties owned by them, in each case (except for the Permitted
Title Exceptions (as defined herein)) free and clear of liens, mortgages or
deeds of trust, claims against title, charges which are liens, security
interests or other encumbrances on title ("Encumbrances"). SCHEDULE 2.2 to the
Cornerstone Disclosure Letter further identifies which of the Cornerstone
Properties are owned in fee simple by Cornerstone or the Cornerstone Subsidiary
or the Cornerstone Non-controlled Subsidiary and which of the Cornerstone
Properties are subject to a ground lease. Except as set forth in SCHEDULE 2.2 to
the Cornerstone Disclosure Letter, no other Person has any ownership interest in
any of the Cornerstone Properties, and any such ownership interest so scheduled
does not materially detract from the value of the Cornerstone Subsidiary's or
Cornerstone Non-controlled Subsidiary's (as the case may be) interest in, or
materially interfere with the present use of, any of the Cornerstone Properties
subject thereto or affected thereby. Except as set forth in SCHEDULE 2.9(A) to
the Cornerstone Disclosure Letter, none of the Cornerstone Properties is subject
to any restriction on the sale or other disposition thereof or on the financing
or
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release of financing thereon. The Cornerstone Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or Encumbrances, except for the
following (collectively, the "Permitted Title Exceptions") (i) Property
Restrictions and Encumbrances set forth in the Cornerstone Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
which do not materially adversely affect the current use of any Cornerstone
Property, (iii) Property Restrictions and Encumbrances disclosed on existing
title reports or policies or existing surveys or subsequently granted by
Cornerstone or the Cornerstone Subsidiary or Cornerstone Non-controlled
Subsidiary, which Property Restrictions and Encumbrances, in any event, do not
materially detract from the value of, or materially interfere with the present
use of, any of the Cornerstone Properties subject thereto or affected thereby
and (iv) liens for real estate taxes not yet due and payable, mechanics',
carriers', workmen's, repairmen's liens and other Encumbrances and Property
Restrictions, if any, which, individually or in the aggregate, do not materially
detract from the value of or materially interfere with the present use of any of
the Cornerstone Properties subject thereto or affected thereby. SCHEDULE 2.9(A)
to the Cornerstone Disclosure Letter lists each of the Cornerstone Properties
which are under development as of the date of this Agreement and describes the
status of such development as of the date hereof.
(b) Except as provided in SCHEDULE 2.2 or SCHEDULE
2.9(B) to the Cornerstone Disclosure Letter, valid policies of title insurance
or fully-paid and enforceable commitments therefor have been issued insuring the
applicable Cornerstone Subsidiary's or Cornerstone Non-controlled Subsidiary's
(as the case may be) fee simple title or leasehold estate, as the case may be,
to the Cornerstone Properties owned by it in amounts approximately equal to the
purchase price therefor paid by such Cornerstone Subsidiary or Cornerstone
Non-controlled Subsidiary, subject only to the matters disclosed above and in
the Cornerstone Disclosure Letter. Such policies are, at the date hereof, in
full force and effect. No claim has been made against any such policy.
(c) Except as provided in SCHEDULE 2.9(C) to the
Cornerstone Disclosure Letter, Cornerstone has no Knowledge (i) that, any
certificate, permit or license from any governmental authority having
jurisdiction over any of the Cornerstone Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the Cornerstone Properties or which is
necessary to permit the lawful use and operation of all driveways, roads and
other means of egress and ingress to and from any of the Cornerstone Properties
has not been obtained and is not in full force and effect, or of any pending
threat of modification or cancellation of any of the same which would have a
material adverse effect on such Cornerstone Property, (ii) of any written notice
of any violation of any federal, state or municipal law,
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ordinance, order, regulation or requirement affecting any of the Cornerstone
Properties issued by any governmental authority which would have a material
adverse effect on such Cornerstone Property, (iii) of any structural defects
relating to any Cornerstone Property which would have a material adverse effect
on such Cornerstone Property, (iv) of any Cornerstone Property whose building
systems are not in working order so as to have a material adverse effect on such
Cornerstone Property, or (v) of any physical damage to any Cornerstone Property
which would have a material adverse effect on such Cornerstone Property for
which there is no insurance in effect covering the cost of the restoration.
(d) None of Cornerstone, any Cornerstone Subsidiary
or the Cornerstone Non-controlled Subsidiary has received any written or
published notice to the effect that (i) any condemnation or rezoning proceedings
are pending or threatened with respect to any of the Cornerstone Properties or
(ii) any zoning, building or similar law, code, ordinance, order or regulation
is or will be violated by the continued maintenance, operation or use of any
buildings or other improvements on any of the Cornerstone Properties or by the
continued maintenance, operation or use of the parking areas which would have a
material adverse effect on such Cornerstone Property. Except as set forth in
SCHEDULE 2.9(D) to the Cornerstone Disclosure Letter, all work required to be
performed, payments required to be made and actions required to be taken prior
to the date hereof pursuant to any agreement entered into with a governmental
body or authority in connection with a site approval, zoning reclassification or
other similar action relating to any Cornerstone Properties (E.G., Local
Improvement District, Road Improvement District, Environmental Mitigation) have
been performed, paid or taken, as the case may be, and Cornerstone has no
Knowledge of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as set forth
in development or operating budgets for such Cornerstone Properties delivered to
EOP and EOP Partnership prior to the date hereof and other than those which
would not reasonably be expected to have a material adverse effect on any of
Cornerstone or the Cornerstone Subsidiaries or the Cornerstone Non-controlled
Subsidiary.
(e) The rent rolls previously provided by Cornerstone
to EOP (the "Cornerstone Rent Roll") list each Cornerstone Space Lease (as
defined herein) in effect as of the dates set forth therein, none of which are
earlier than December 31, 1999. "Cornerstone Space Lease" means each lease or
other right of occupancy affecting or relating to a property in which
Cornerstone Partnership (or an entity in which it directly or indirectly has an
interest) is the landlord, either pursuant to the terms of the lease agreement
or as successor to any prior landlord, but excluding any ground lease.
Cornerstone has made available to EOP true, correct and complete copies of all
Cornerstone Space Leases, including all amendments, modifications, supplements,
renewals, extensions and guarantees related thereto, as of the date hereof.
Except for discrepancies that, either individually or in the aggregate, would
not reasonably be expected to have a
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Cornerstone Material Adverse Effect, all information set forth in the
Cornerstone Rent Roll is true, correct and complete as of the date thereof.
Except as set forth in a delinquency report made available to EOP, none of
Cornerstone, any Cornerstone Subsidiary or the Cornerstone Non-controlled
Subsidiary, on the one hand, nor, to the knowledge of Cornerstone or Cornerstone
Partnership, any other party, on the other hand, is in monetary default under
any Cornerstone Space Lease, except for such defaults that would not reasonably
be expected to have a Cornerstone Material Adverse Effect.
2.10 ENVIRONMENTAL MATTERS.
(a) "Environmental Law" shall mean all applicable Laws
relating to the protection of human health or safety and natural resources or
the environment, including, without limitation, Laws relating to the use,
manufacturing, generation, recycling, reuse, sale, storage, handling, transport,
treatment or disposal of any Hazardous Materials (including the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C.
ss 9601 et seq. ("CERCLA")). "Hazardous Materials" shall mean substances, wastes
or materials listed, regulated or defined under any Environmental Law, and shall
include "hazardous wastes," "hazardous substances," "hazardous materials,"
petroleum or any fraction thereof, asbestos, lead-paint, urea-formaldehyde, and
polychlorinated biphenyls. "Release" shall have the meaning set forth in Section
101 of CERCLA, without regard to the exclusions set forth therein.
(b) Except as disclosed in the Cornerstone SEC Documents or in
SCHEDULE 2.10(A) to the Cornerstone Disclosure Letter,
(i) none of Cornerstone, any of the Cornerstone
Subsidiaries or the Cornerstone Non-controlled Subsidiary or, to Cornerstone's
Knowledge, any other Person has caused or permitted the presence of any
Hazardous Materials at, on or under any of the Cornerstone Properties and none
of Cornerstone, any of the Cornerstone Subsidiaries or the Cornerstone
Non-controlled Subsidiary has any knowledge of the presence of any Hazardous
Materials at, on or under any of the Cornerstone Properties, in each of the
foregoing cases, such that the presence of such Hazardous Materials (including
the presence of asbestos in any buildings or improvements at the Cornerstone
Properties) would, individually or in the aggregate, reasonably be expected to
have a Cornerstone Material Adverse Effect;
(ii) except in accordance with the Environmental
Permits (as defined herein) there have been no Releases of Hazardous Materials
at, on, under or from (A) the Cornerstone Properties or (B) any real property
previously owned, operated or leased by Cornerstone, the Cornerstone
Subsidiaries, or the Cornerstone Non-controlled Subsidiary (the "Former
Cornerstone Properties") during the period of such ownership, operation or
tenancy, and none of Cornerstone, any of the Cornerstone Subsidiaries or the
Cornerstone Non-controlled Subsidiary
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has any knowledge of any Releases of Hazardous Materials having occurred or
presently occurring at, on, under or from the Cornerstone Properties or the
Former Cornerstone Properties, which would, individually or in the aggregate,
reasonably be expected to have a Cornerstone Material Adverse Effect;
(iii) Cornerstone, the Cornerstone Subsidiaries and
the Cornerstone Non-controlled Subsidiary have not failed to comply with all
Environmental Laws, and none of Cornerstone, any of the Cornerstone Subsidiaries
or the Cornerstone Non-controlled Subsidiary has any liability under the
Environmental Laws, except to the extent that any such failure to comply or any
such liability, individually or in the aggregate, would not reasonably be
expected to have a Cornerstone Material Adverse Effect; and
(iv) Cornerstone, the Cornerstone Subsidiaries and
the Cornerstone Non-controlled Subsidiary have been duly issued, and currently
have and will maintain through the Closing Date, all permits, licenses,
certificates and approvals required under any Environmental Law (collectively,
the "Environmental Permits") necessary to operate their businesses as currently
operated except where the failure to obtain and maintain such Environmental
Permit would not have a material adverse effect on the Cornerstone Property.
Cornerstone, the Cornerstone Subsidiaries and the Cornerstone Non-controlled
Subsidiary have timely filed applications for all Environmental Permits. All of
the Environmental Permits are transferable and none require consent,
notification or other action to remain in full force and effect following
consummation of the transactions contemplated hereby.
(c) Cornerstone has previously delivered or made available to
EOP complete copies of all material information, documents and reports,
including, without limitation, environmental investigations and testing or
analysis that are in the possession or control of any of Cornerstone, the
Cornerstone Subsidiaries and the Cornerstone Non-controlled Subsidiary and which
relate to compliance with Environmental Laws by any of them or to the past or
current environmental condition of the Cornerstone Properties.
2.11 RELATED PARTY TRANSACTIONS. Set forth in SCHEDULE 2.11 to
the Cornerstone Disclosure Letter is a list of all material arrangements,
agreements and contracts entered into by Cornerstone, any Cornerstone Subsidiary
and the Cornerstone Non-controlled Subsidiary with (a) any investment banker or
financial advisor, (b) any person who is an officer, director or Affiliate (as
defined herein) of Cornerstone or any Subsidiary or the Cornerstone
Non-controlled Subsidiary, any relative of any of the foregoing or any entity of
which any of the foregoing is an Affiliate or (c) any person who acquired
Cornerstone Common Stock, Cornerstone OP Units or Cornerstone 7% Preferred Stock
in a private placement, in each case which remain in effect and are not
otherwise disclosed in the SEC Documents. Such documents, copies of all of which
have previously been delivered or made available to EOP, are listed in SCHEDULE
2.11 to the Cornerstone Disclosure Letter.
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As used in this Agreement, the term "Affiliate" shall have the same meaning as
such term is defined in Rule 405 promulgated under the Securities Act.
2.12 EMPLOYEE BENEFITS. As used herein, the term "Employee
Plan" includes any pension, retirement, savings, disability, medical, dental,
health, life, death benef