Agreement and Plan Of Merger - Equity Office Properties Trust and Cornerstone Properties Inc.


 
                FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
 
     THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this 'First
Amendment') is entered into as of May 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'), for the purpose of amending the Agreement and Plan
of Merger, dated as of February 11, 2000, entered into by and among EOP, EOP
Partnership, Cornerstone, and Cornerstone Partnership (the 'Merger Agreement').
All capitalized terms herein and not otherwise defined shall have the meanings
ascribed to them in the Merger Agreement.
 
     WHEREAS, the parties hereto desire to amend certain provisions of the
Merger Agreement to clarify certain matters as provided herein;
 
     NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
 
SECTION 1. SELECTION OF UNSATISFIED CONDITIONAL REDEMPTIONS BY LOT;
           CLARIFICATION OF PRORATION PROVISIONS.
 
     (a) Section 1.1(a)(v) of the Merger Agreement is amended by redesignating
such section as Section 1.1(a)(v)(A).
 
     (b) Section 1.1(a)(v) of the Merger Agreement is amended further by
changing the phrase 'the procedures set forth in Sections 1.11 and 1.12' to read
'the procedures set forth in Sections 1.1(a)(v)(B), 1.11 and 1.12'.
 
     (c) Section 1.1(a)(v) of the Merger Agreement is amended further by adding
the following new subparagraph (B):
 
          (B) In the event that Section 1.12(b)(ii)(B) is applicable and Excess
     Cash (as defined in Section 1.12(b)(ii)(B)) is allocated to the Conditional
     Cash Elections (as defined in Section 1.12(b)(i)(B)), each conditional
     Exercise made pursuant to Section 1.1(a)(v)(A) that, pursuant to Section
     1.1(a)(v)(A), would not be not effective (before giving effect to the
     procedures set forth in this subparagraph (B)) shall, together with all
     other such conditional Exercises, be subject to being chosen by lot from
     among other such conditional Exercises to receive a portion of the Excess
     Cash. Any conditional Exercise that is chosen by lot shall be made
     effective if sufficient remaining Excess Cash is available (after taking
     into account all prior conditional Exercises chosen by lot) to pay to the
     Redeeming Partner who submitted such conditional Exercise cash for each
     share of Cornerstone Common Stock that must be converted into solely cash
     in order for such conditional Exercise to be effective. Conditional
     Exercises described in the first sentence of this subparagraph (B) shall be
     subject to being chosen by lot until the amount of remaining Excess Cash
     available is less than the amount of cash that would be required to allow
     any of the remaining conditional Exercises to become effective pursuant to
     the requirements of Section 1.1(a)(v)(A).
 
     (d) Section 1.12(a) of the Merger Agreement is amended by adding the
following sentence at the end thereof:
 
          Except as otherwise expressly provided pursuant to this Section 1.12,
     each share of Cornerstone Common Stock for which a Cash Election is
     received shall be converted into the right to receive $18.00 per share in
     cash, without interest, and each share of Cornerstone Common Stock for
     which a Share Election is received shall be converted into EOP Common
     Shares in accordance with the Common Stock Exchange Ratio.

 
     (e) Section 1.12(b) of the Merger Agreement is amended by deleting the
indented language and substituting therefor the following subparagraphs (i) and
(ii):
 
          (i) in the event that Non-conditional Cash Elections (defined to mean
     all Cash Elections received other than Conditional Cash Elections as
     defined in Section 1.12(b)(i)(B), below) are received for a number of
     shares of Cornerstone Common Stock that is greater than 58,551,525 shares
     of Cornerstone Common Stock, then:
 
             (A) each share of Cornerstone Common Stock covered by a
        Non-conditional Cash Election shall be converted into the right to
        receive (1) 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
        Non-conditional Cash Elections, and (2) 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; and
 
             (B) each Conditional Cash Election (defined to mean any Cash
        Election received with respect to Electing Cornerstone OP Units with
        respect to which a conditional Exercise is made pursuant to Section
        1.1(a)(v)(A)) shall be of no force and effect; and
 
          (ii) in the event that Non-conditional Cash Elections are received for
     a number of shares of Cornerstone Common Stock that is equal to or less
     than 58,551,525 shares of Cornerstone Common Stock, then:
 
             (A) each share of Cornerstone Common Stock covered by a
        Non-conditional Cash Election shall be converted into the right to
        receive an amount in cash, without interest, equal to $18.00; and
 
             (B) an amount of cash equal to the product of (x) $18.00 and (y)
        the excess, if any, of 58,551,525 over the number of shares of
        Cornerstone Common Stock for which Non-conditional Cash Elections are
        received (referred to as 'Excess Cash') shall be allocated to the
        Conditional Cash Elections as a group, to be applied as provided for in
        Section 1.1(a)(v)(B).
 
SECTION 2. NOTICE PERIOD FOR FINAL DIVIDEND.
 
     Section 1.15(d)(i) of the Merger Agreement is amended by deleting the
number '10' in the second sentence of Section 1.15(d)(i) and substituting the
number '20' therefor.
 
SECTION 3. FRACTIONAL EOP OP UNITS.
 
     (a) Section 1.15(g) of the Merger Agreement is amended by adding '; No
Fractional EOP OP Units' after the word 'Shares' in the caption.
 
     (b) Section 1.15(g) of the Merger Agreement is amended by adding the
following new paragraph (iii):
 
          (iii) No fractional EOP Partnership Units shall be issued pursuant to
     this Agreement. In lieu of the issuance of any fractional EOP Partnership
     Units pursuant to this Agreement, each holder of Cornerstone OP Units who
     would receive, based on the exchange ratio specified in Section 1.10(a)(i),
     a number of EOP OP Units that is not a whole number shall receive instead a
     number of EOP OP Units that is equal to the whole number that is nearest to
     the fractional number of EOP OP Units that otherwise would be paid to such
     holder of Cornerstone OP Units based on the exchange ratio specified in
     Section 1.10(a)(i).
 
     (c) Section 1.15(i) of the Merger Agreement is amended by adding ',' and
deleting the word 'and' after the word 'certificates' in the second clause and
adding 'and fractional EOP Common Shares' after the word 'procedure' in such
second clause.
 
                                        2

 
SECTION 4. AMENDMENT OF SECTION 5.10 TO PROVIDE FOR A SPECIAL DIVIDEND BY
           CORNERSTONE OF $0.03 PER SHARE OF COMMON STOCK.
 
     Section 5.10 is amended to add at the end thereof the following new
language:
 
          Notwithstanding any of the foregoing or any provision of Section
     1.15(d), in the event that EOP and Cornerstone do not declare their regular
     dividend distributions for the second quarter of 2000 prior to the
     Effective Time of the Merger, (i) Cornerstone shall declare and pay to the
     holders of Cornerstone Common Stock a special dividend in the amount of
     $0.03 per share, the record date for which shall be not later than the
     close of business on the last day prior the Effective Time of the Merger
     (the 'Special Dividend'), and Cornerstone shall cause to be withheld from
     the Special Dividend payable to Persons who are not 'United States persons'
     (as defined in Section 7701(a)(30) of the Code) $0.02 per share or such
     higher amount as shall be sufficient so that Cornerstone shall be
     considered to have complied fully with the withholding requirements
     applicable to it under Treasury Regulations Section 1.1445-8 and Section
     1445 of the Code with respect to all distributions paid by it during
     calendar year 2000 (and to the extent such treatment is necessary, or
     Cornerstone deems it to be desirable, to permit or facilitate
     such withholding, Cornerstone shall treat the Special Dividend as a
     'capital gain dividend' for purposes of Treasury Regulations Section
     1.1445-8 and Section 1445 of the Code), and (ii) Cornerstone Partnership
     shall make a distribution to the holders of the Cornerstone OP Units at a
     time and in an amount sufficient to permit Cornerstone to pay the Special
     Dividend as contemplated hereby. The Special Dividend shall be paid on or
     prior to the last business day prior to the Closing Date. EOP shall not
     make any distribution to the holders of the EOP Common Shares to correspond
     to the Special Dividend to be paid to the holders of Cornerstone Common
     Stock.
 
SECTION 5. INDEX OF DEFINED TERMS.
 
     The Index of Defined Terms contained in the Merger Agreement is amended by
adding the following new entries:
 

                                                   
'Conditional Cash Election'.........................  1.12(b)(i)(B)'
'Excess Cash........................................  1.12(b)(ii)(B)'
'Non-conditional Cash Election'.....................  1.12(b)(i)'
'Special Dividend'..................................  5.10'

 
SECTION 6. CONSTRUCTION OF MERGER AGREEMENT.
 
     The Merger Agreement shall be read together and shall have the same force
and effect as if the provisions of the Merger Agreement and this First Amendment
were contained in one document. Except as expressly amended by this First
Amendment, the Merger Agreement shall remain in full force and effect in
accordance with its terms.
 
SECTION 7. COUNTERPARTS.
 
     This First Amendment may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
 
                                        3

 
     IN WITNESS WHEREOF, EOP, EOP Partnership, Cornerstone and Cornerstone
Partnership have caused this First Amendment to be signed by their respective
officers (or general partners) thereunto duly authorized all as of the date
first written above.
 
                                          EQUITY OFFICE PROPERTIES TRUST
 
                                          By: /s/ STANLEY M. STEVENS
                                             -----------------------------------
                                          Name: Stanley M. Stevens
                                               ---------------------------------
                                          Title: Executive Vice President
                                                --------------------------------
 
                                          EOP OPERATING LIMITED PARTNERSHIP
 
                                          By: Equity Office Properties Trust,
                                          its general partner
 
                                          By: /s/ STANLEY M. STEVENS
                                             -----------------------------------
                                          Name: Stanley M. Stevens
                                               ---------------------------------
                                          Title: Executive Vice President
 
                                          CORNERSTONE PROPERTIES INC.
 
                                          By: /s/ JOHN S. MOODY     
                                             -----------------------------------
                                          Name: John S. Moody     
                                               ---------------------------------
                                          Title: President & CEO           
                                                --------------------------------
 
                                          CORNERSTONE PROPERTIES LIMITED
                                          PARTNERSHIP

                                          By: Cornerstone Properties Inc., its
                                          sole general partner
 
                                          By: /s/ JOHN S. MOODY     
                                             -----------------------------------
                                          Name: John S. Moody     
                                               ---------------------------------
                                          Title: President & CEO           
                                                --------------------------------
 
                                        4