<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 249.14a-11(c) or Section 240.14a-12
BURNHAM PACIFIC PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the contrary pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
-------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:__________________________________________________
2) Form, Schedule or Registration No.:______________________________________
3) Filing Party:____________________________________________________________
4) Date Filed:______________________________________________________________
<PAGE>
PRELIMINARY INFORMATION FOR SECURITIES AND EXCHANGE COMMISSION ONLY
BURNHAM PACIFIC PROPERTIES, INC.
610 West Ash Street
San Diego, CA 92101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 3, 1994
TO THE SHAREHOLDERS OF BURNHAM PACIFIC PROPERTIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Burnham
Pacific Properties, Inc. ("the Corporation") will be held at the Hyatt Regency
San Diego, One Market Place, San Diego, California 92101 on Tuesday, May 3, 1994
at 10:30 a.m. for the following purposes:
1. To elect seven Directors for the ensuing year;
2. To approve amended and restated Bylaws;
3. To approve amendment to Stock Option Plan increasing from 1,000 to
5,000 the number of shares granted to Non-employee Directors upon
their election each year;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting. The Board of Directors has determined that shareholders of record at
the close of business on March 15, 1994 are entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof.
March 18, 1994 By order of the Board of Directors
BURNHAM PACIFIC PROPERTIES, INC.
Nina Galloway,
Secretary
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
YOU ARE URGED TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
610 WEST ASH STREET
SAN DIEGO, CA 92101
ANNUAL MEETING OF SHAREHOLDERS
MAY 3, 1994
This Proxy Statement is furnished to the shareholders of Burnham
Pacific Properties, Inc., a California corporation ("the Corporation"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors for the Annual Meeting of Shareholders of the Corporation to be held
at the Hyatt Regency San Diego, One Market Place, San Diego, California 92101,
on Tuesday, May 3, 1994 at 10:30 a.m. and any adjournment thereof ("the Annual
Meeting"). The mailing date of this Proxy Statement is March 18, 1994.
As more fully described in this Proxy Statement, the shareholders will
be asked to consider and act upon the annual election of Directors, to approve
amended and restated Bylaws, to approve amendment to Stock Option Plan
increasing from 1,000 to 5,000 the number of shares granted to Non-employee
Directors upon their election each year, and any other matters that may properly
come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 15, 1994 are
entitled to notice of and to vote at such meeting. On such date, there were
_________ shares of the Corporation's no par value common stock issued and
outstanding. A majority of the shares represented in person or by proxy
constitutes a quorum for the meeting. If a quorum is not present, the Annual
Meeting may be adjourned to a later date at which a quorum is present, and
shares represented by proxies may be voted for such adjournment.
A shareholder may revoke a proxy given with respect to the meeting at
any time prior to the exercise thereof at the Annual Meeting by filing with the
Corporation a written revocation or a duly executed proxy bearing a later date
or, if such shareholder is present, indicating his or her intention to vote in
person at the Annual Meeting.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Corporation's Bylaws currently provide that the number of
Directors shall be not less than five, nor more than nine. The Board of
Directors has fixed the number of Directors to be elected at the Annual Meeting
at seven, each to hold office for the term of one year or until his successor is
elected.
As no nominations for other than the incumbent Directors were received
prior to December 31, 1993, as required by the Bylaws, voting will be non-
cumulative. The affirmative vote of a majority of the shares represented and
voting at the meeting at which a quorum is present will be required to elect
each Director. Shares of shareholders represented at the meeting who abstain
will not be considered in determining the outcome of the election.
1
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The Directors and principal officers of the Corporation have indicated
that they intend to vote all shares of the Corporation's common stock which they
are entitled to vote FOR the election of each of the incumbent Directors and FOR
Proposals 2 and 3. On March 15, 1994, the Directors and executive officers of
the Corporation in the aggregate had the right to vote 332,794 shares of the
Corporation's common stock, representing approximately ____% of the
Corporation's outstanding common stock as of such date.
It is intended that the proxies received by management will be voted
FOR the election of the nominees for Directors described below, unless authority
to do so is withheld. It is not contemplated that any of the nominees will be
unable to serve as a Director, but if that contingency should occur prior to the
Annual Meeting, the holders of proxies reserve the right to substitute and vote
for another person of their choice. The following persons are nominees for
Directors:
MALIN BURNHAM, age 66, has been Chairman of the Board of Directors
since 1986. He is Chairman of the Board of Directors of John Burnham & Company
and First National Bank, a Trustee of Stanford University, and Chairman of
La Jolla Cancer Research Foundation.
LOUIS J. GARDAY, age 47, has been a Director and President and Chief
Executive Officer of the Corporation since 1986. Mr. Garday is a licensed
certified public accountant and a Senior Vice President, member of the Executive
Committee and of the Board of Governors, and Chairman of the Public Relations
Committee of the National Association of Real Estate Investment Trusts.
PHILIP L. GILDRED, JR., age 57, has been a Director since 1986. He is
a Director and President of Gildred Development Company, and serves as
Secretary-Treasurer of Gildred Building Company. Both of these companies are
engaged in the ownership and development of Southern California real estate.
Mr. Gildred is also a Director of the San Diego Automotive Museum, and a
Director and Founding Chairman of the Sharp Hospital Foundation.
ROBERT J. LAUER, age 53, has been a Director since 1992. He is the
principal shareholder in Lauer & Georgatos A.P.C., a tax specialty accounting
firm. Mr. Lauer is a licensed certified public accountant and is admitted to
the bar in the State of New York. Mr. Lauer is also a director of the Marine
Corps Recruit Depot Museum Historical Society.
THOMAS A. PAGE, age 60, has been a Director since 1992. He is
Chairman of the Board and Chief Executive Officer of San Diego Gas & Electric
Company, and also chairs the boards of both of SDG&E's non-utility business
corporations, Pacific Diversified Capital and Wahlco Environmental Systems. Mr.
Page is a certified public accountant and a professional engineer. Mr. Page is
also a Director of the American Gas Association and a Member of the California
Business Roundtable, a member of the Board of Overseers of the University of
California at San Diego, and a Trustee of the La Jolla Cancer Research
Foundation.
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HENRY RASMUSSEN, JR., age 77, has been a Director since 1986, and is a
private investor. Mr. Rasmussen retired as an Executive Vice President of John
Burnham & Company in 1976. Mr. Rasmussen is a Director of the Lundy and
Crawford Real Estate Educational Foundation, Director Emeritus of the San Diego
Better Business Bureau, Director Emeritus of Villa View Community Hospital, past
President of the California and San Diego Mortgage Bankers Association, and past
President of the San Diego Chapter of Lambda Alpha, an honorary land economics
society.
RICHARD R. TARTRE, age 55, has been a Director since 1986. He is a
Founder and Managing Director of Eden Financial Group, Inc., a marketer of
insurance and investment products through securities firms. Mr. Tartre is a
licensed securities principal, and also serves as Chairman of the Board of Bio-
Safety Systems, Inc., and as a Director of Mission West Properties and Triton
Group, Ltd.
MANAGEMENT
The following persons are executive officers of the Corporation:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Louis J. Garday President, Chief Executive Officer
Michael L. Rubin Executive Vice President, Chief Operating Officer
Kim S. Kundrak Senior Vice President,Finance (Principal
Financial Officer)
</TABLE>
MR. RUBIN, age 48, has been an officer of the Corporation since 1986.
Mr. Rubin is a Certified Property Manager and a licensed real estate broker.
MR. KUNDRAK, age 37, has been an officer of the Corporation since
1988. Mr. Kundrak is a certified shopping center manager and is a licensed real
estate salesperson.
3
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BENEFICIAL OWNERSHIP
At March 1, 1994, the Corporation had 15,051,494 shares outstanding.
The following table sets forth the beneficial ownership of the Corporation's
common stock with respect to each person known by the Corporation to be the
beneficial owner of more than five percent of the Corporation's currently
outstanding common stock, as well as the ownership of shares by the Directors of
the Corporation.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ---- -------------------- --------
<S> <C> <C>
Cohen & Steers Capital Management, Inc. 1,305,900(1) 8.7%
FMR Corp. 1,342,219(2) 8.9%
Malin Burnham 145,353(3) *
Louis J. Garday 143,914(3) *
Philip L. Gildred, Jr. 20,528(3) *
Robert J. Lauer 8,311(3) *
Thomas A. Page 13,644(3) *
Henry Rasmussen, Jr. 105,809(3) *
Richard R. Tartre 25,808(3) *
All Directors and executive officers of
the Corporation as a group (9) 532,674(3) 3.5%
</TABLE>
- --------------
*less than 1%
(1) Cohen & Steers Capital Management, Inc. - 757 Third Avenue, New York, New
York 10017, has filed with the Securities and Exchange Commission a
Schedule 13G dated January 24, 1994 in which it reported that the aggregate
number of shares of the Corporation's common stock beneficially owned by
Cohen & Steers Capital Management, Inc. is 1,305,900 shares (8.7% of shares
outstanding on December 31, 1993) and that it has sole voting power with
respect to 1,220,100 shares (8.1%) and sole dispositive power with respect
to 1,305,900 shares (8.7%).
(2) FMR Corp. - 82 Devonshire Street, Boston, Massachusetts 02109, has filed
with the Securities and Exchange Commission a Schedule 13G dated February
11, 1994 in which it reported that the aggregate number of shares of the
Corporation's common stock beneficially owned by FMR Corp. is 1,342,219
shares (8.9% of shares outstanding on December 31, 1993), which includes
547,688 shares of common stock resulting from the assumed conversion of
$8,763,000 principal amount of 8.5% convertible debentures and that it has
sole voting power with respect to 320,900 shares (2.1%) and sole
dispositive power with respect to 1,342,219 shares (8.9%).
(3) Based upon information provided by the Directors and executive officers to
the Corporation, the Directors and executive officers have the direct right
to vote and dispose of all such shares, except for the following number of
shares not yet outstanding which the following persons have the right
presently to acquire under outstanding options or convertible debentures:
Messrs. Burnham 36,500, Garday 56,052, Gildred 17,000, Lauer 5,500, Page
5,000, Rasmussen 17,000, Tartre 11,040, all Directors and executive
officers as a group 200,242.
4
<PAGE>
DIRECTORS' AND COMMITTEE MEETINGS
During 1993, the Board of Directors met nine times. Each of the Directors
attended at least 75% of (1) the total number of Board meetings and (2) the
total number of meetings of Board committees on which he served. The
Corporation has standing Audit, Compensation, and Indenture/Stock Review
Committees. There is no separate Nominating Committee.
AUDIT COMMITTEE. The members of this committee are Messrs. Page
(Chairman), Rasmussen and Tartre. This committee advises and assists the
Corporation's principal financial officer in making periodic overall reviews of
the Corporation's internal controls and financial statements, meets periodically
with the Corporation's independent auditors to discuss their audit, appoints the
auditor for the Corporation's annual audit, and advises and provides oversight
of the Corporation's internal audit activities. The committee held two meetings
in 1993.
COMPENSATION COMMITTEE. The members of this committee are Messrs. Lauer
(Chairman), Gildred, Rasmussen and Tartre. This committee held two meetings in
1993. See "Report of the Compensation Committee."
INDENTURE/STOCK REVIEW COMMITTEE. Members of this committee are Messrs.
Tartre (Chairman), Burnham, Garday and Page. This committee has the duty to
establish the price of any securities sold by the Corporation in a public
offering. The committee held one meeting in 1993.
COMPENSATION
DIRECTORS. During 1993, the Corporation paid Directors Burnham, Gildred,
Lauer, Page, Rasmussen and Tartre retainer fees of $8,000, plus $750 to each
Director for each board or committee meeting attended. In addition all
Directors except Mr. Garday received a grant of options to purchase 1,000 shares
when they were elected Directors on May 25, 1993 and a further grant of options
to purchase 4,000 shares in recognition of their services in connection with the
Corporation's 1993 stock offering. See "Stock Options." Mr. Garday receives no
compensation for his services as a Director in addition to his compensation as
President and Chief Executive Officer. Commencing January 1, 1994, all Directors
except Mr. Garday will receive an annual retainer of $12,000, plus $750 for each
board or committee meeting attended, except that the fee for telephonic
meetings will be reduced from $750 to $500. In addition, the Directors who
chair the Audit Committee and the Compensation Committee will receive an
additional $500 per quarter.
OFFICERS. Compensation paid to the Chief Executive Officer and each
other officer whose total compensation for 1993 was $100,000 or more is
summarized in the following table. Also see "Report of the Compensation
Committee."
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
- -------------------------------------------------------- -----------------------
Name Other
and Annual All Other
Principal Compen- Options Compen-
Position Year Salary Bonus sation (#) sation
- ----------------- ---- ----------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis J. Garday 1993 $340,000(1) $120,000 (3) 15,000 $4,362(5)
President/CEO 1992 $340,000(1) $ -0- (4) 10,000 1,454(5)
1991 (2)
Michael L. Rubin 1993 $149,000 $ 30,000 (4) 10,000 $2,981(5)
Executive VP/COO 1992 $135,000 $ 35,000 (4) 7,000 902(5)
1991 (2)
Kim S. Kundrak 1993 $ 99,000 $ 30,000 (4) 8,000 $1,981(5)
Senior VP/Finance 1992 $ 85,000 $ 15,000 (4) 5,000 577(5)
1991 (2)
</TABLE>
_____________
(1) Includes deferred compensation of $90,000 per year payable in January 1995,
provided that Mr. Garday has not theretofore voluntarily terminated his
employment with the Corporation. The Corporation has the right to
terminate his employment on 90 days' notice or at any time upon payment of
severance pay equal to 90 days' base salary and any accrued deferred
compensation.
(2) Prior to January 1, 1992, the Corporation had no employees and paid no
compensation to officers, retaining Burnham Investment Group, Inc.
("BIGI"), a wholly owned subsidiary of John Burnham & Company ("JB"), to
provide administrative services to the Corporation. The present officers
of the Corporation were also officers of BIGI and JB. As such, they were
paid a single salary by JB for acting in all three capacities. Effective
January 1, 1992, the Corporation became self-administered, with the
officers becoming full-time employees and receiving 100% of their
compensation from the Corporation.
(3) During 1993, the Corporation loaned Mr. Garday $898,700 secured by 70,667
shares of its common stock owned by him. The loan bears interest at the
same variable rate the Corporation pays on its unsecured line of credit.
The loan is due March 31, 1995.
(4) Other compensation paid to Messrs. Garday, Rubin and Kundrak is less than
10% of their salary and bonus.
(5) Corporation's matching contributions to employee's 401(k) plan.
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STOCK OPTIONS
The Corporation adopted a stock option plan in November 1987, which was
amended in 1992 and 1993. The plan is administered by the Compensation
Committee. The plan provides for options, which may be either "incentive stock
options" as defined by the Internal Revenue Code or "non-qualified options", for
up to 1,000,000 shares of common stock. Each grant must provide an exercise
price of at least 100% of the fair market value on the date the options are
granted as determined by the Committee. All options expire 10 years from the
date of grant.
In addition to options granted at the discretion of the Committee, the plan
also provides annual grants of non-qualified options to purchase 1,000 shares of
common stock to each of the non-employee Directors, upon election or re-election
at each Annual Meeting. The per share option exercise price will be equal to
the average stock exchange closing price of the shares for the 10 trading days
ending on the date of the meeting. The exercise price of the options granted to
the Directors elected at the 1993 Annual Meeting was $18.813 per share. The
Corporation expects to issue 5,000 options to each Director other than Mr.
Garday upon election at the 1994 Annual Meeting subject to shareholder approval
of Proposal No. 3 of this Proxy Statement.
Following the Corporation's 1993 public offering of common stock, the
Corporation awarded the officers and employees options to purchase a total of
57,500 shares of common stock at an exercise price of $18.875 per share, which
was the public offering price on June 10, 1993. The Corporation on July 26,
1993 awarded each of the Directors, except Mr. Garday, options to purchase 4,000
shares of common stock at an exercise price of $18.875 per share, which was the
closing price on the New York Stock Exchange on the date of grant. This award
is subject to shareholder approval of Proposal No. 3 of this Proxy Statement.
The options granted to the executive officers of the Corporation are
summarized in the following table.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ----------------------------------------------------------------- ----------------------
% of Total
Options
Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price Per tion
Name (#) Year Share Date 5%(1) 10%(2)
- ---- -------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Louis J. Garday 15,000 26% $18.875 6/10/2003 $178,056 $451,228
President/CEO
Michael L. Rubin 10,000 17% $18.875 6/10/2003 $118,704 $300,819
Executive VP/COO
Kim S. Kundrak 8,000 14% $18.875 6/10/2003 $ 94,963 $240,655
Senior VP/Finance
</TABLE>
_______________
(1) Assumes a 5% per annum cumulative increase in price for 10 years.
(2) Assumes a 10% per annum cumulative increase in price for 10 years.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End FY-End
(#) ($)
Shares
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- -------------------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Louis J. Garday - - 56,052/-0- 24,340/-0-
President/CEO
Michael L. Rubin - - 33,700/-0- 12,550/-0-
Executive VP/COO
Kim S. Kundrak - - 18,450/-0- 5,859/-0-
Senior VP/Finance
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has the responsibility
to evaluate the performance of the Corporation's executives and to establish
standards by which the compensation of those executives will be determined.
EXECUTIVE COMPENSATION
Prior to 1992 the Corporation was managed by an independent Advisor,
Burnham Investment Group, Inc. ("BIGI"), a subsidiary of John Burnham & Company.
Effective January 1, 1992 the Corporation converted to a self advised form of
management and entered into direct employment relationships with the former
executives and support staff of the Advisor. Negotiations leading to the
conversion to a self advised form of management were undertaken by a special
committee of the Board of Directors (the "Special Committee").
In connection with this conversion, a subcommittee (the "Subcommittee") of
the Special Committee negotiated an employment contract with Louis Garday as
President and Chief Executive Officer of the Corporation. This contract (the
terms of which were disclosed in the proxy statement for the Special Meeting of
Stockholders of the Corporation held on January 27, 1992 that approved the
merger agreement with BIGI pursuant to which self administration was
9
<PAGE>
implemented) is for a term extending through March 31, 1995. On August 20,
1992, the Board amended the contract to include a commitment to make Mr. Garday
a $900,000 loan. See Note (3) to Summary Compensation Table. The contract
calls for a minimum base annual salary of $250,000 and deferred compensation of
$90,000 per annum, payable in January, 1995, provided Mr. Garday has not
voluntarily terminated his employment with the Corporation. The Board of
Directors also has the right to terminate the contract on 90 days notice at any
time upon payment of severance pay equal to 90 days base salary plus accrued
deferred compensation.
The terms of Mr. Garday's contract were negotiated without assistance from
a compensation specialist, the Subcommittee having determined that the expense
of such a specialist was not warranted. In connection with determining the
amount of compensation to Mr. Garday, the Subcommittee considered compensation
packages offered to other executive officers of equity real estate investment
trusts having characteristics similar to that of the Corporation. The
Subcommittee applied the same standard for determining the annual compensation
for executives other than Mr. Garday. The recommendations of the Subcommittee
were adopted by all members of the Board of Directors comprising the Special
Committee.
OPTIONS
Prior to 1992, the Corporation automatically granted to its employees
options that in the aggregate equaled 2-1/2% of all newly issued shares. The
shareholder approved agreement, pursuant to which the Corporation became self
administered in 1992, amended the Stock Option Plan to provide that future
option grants would be in the sole and exclusive discretion of the Board.
COMMITTEES
Prior to March 1993, a subcommittee of the Board (the "Salary Committee")
determined the compensation of the executives of the Corporation and a separate
subcommittee (the "Option Committee") was responsible for the granting of
options to acquire stock of the Corporation. On March 2, 1993 the Board of
Directors formally combined the functions of the Salary Committee with those of
the Option Committee and renamed the combined committee the Compensation
Committee (the "Committee"), with all members of both former committees becoming
the initial members of the Compensation Committee, namely Messrs. Barkley,
Gildred, Lauer, Rasmussen and Tartre. Mr. Barkley died during 1993. The
primary responsibility of the Compensation Committee is to reevaluate from time
to time the compensation paid to the Chief Executive Officer under his 1992
employment contract, as well as the compensation to be paid to other executives
of the Corporation. In addition the Committee determines when and under what
circumstances to grant to individual officers and employees of the Corporation
options to acquire additional shares of stock, which options shall be granted at
market prices prevailing at the time of the option grant.
STANDARDS FOR DETERMINING COMPENSATION
The Committee has established standards for measuring the compensation of
the Chief Executive Officer of the Corporation. Those standards include the
success of the Corporation in (i) raising capital, giving due consideration to
conditions existing in the capital markets, (ii)
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<PAGE>
reinvesting such capital in properties at rents which will produce positive
returns for the benefit of the Corporation and its shareholders over both the
short and long term, and (iii) assembling and managing a portfolio that provides
both (a) opportunities for long term growth in per share distributions and
value, and (b) downside protection to limit the effect on the Corporation from
either adverse market forces generally or the financial difficulty of any
particular tenant.
With respect to other officers of the Corporation, the standard for
determining compensation is the effective management of the Corporation's
properties and the achievement of individual performance goals assigned to each
executive by the Chief Executive Officer.
EXECUTIVE COMPENSATION FOR THE YEAR
The base annual compensation and deferred compensation of the Chief
Executive Officer is set forth in his employment contract with the Corporation.
The base annual salary of the other executives of the Corporation is evaluated
biannually. The next biannual evaluation is scheduled for May, 1995.
Supplemental or bonus compensation is awarded to executive officers of the
Corporation within the discretion of the Committee, which meets from time to
time to consider such awards. The Committee met on December 3, 1993 to
determine whether supplemental bonus compensation should be awarded to any of
the Corporation's executive officers.
The Chief Executive Officer had not previously been awarded any
supplemental compensation, the Committee having determined that the compensation
set forth in his employment contract with the Corporation represented fair and
reasonable compensation for prior periods. That fact notwithstanding, the
Committee determined that the employment contract between Mr. Garday and the
Corporation does not preclude an award of bonus compensation. After careful
consideration of (i) the standards established by the Committee for determining
the compensation of the Chief Executive Officer, (ii) the Chief Executive
Officer's performance during 1993 when measured against those standards, and
(iii) the compensation paid by other equity real estate investment trusts having
characteristics similar to those of the Corporation, the Committee has awarded
bonus compensation to Mr. Garday for calendar year 1993 in the amount of
$120,000.
With respect to the other executive officers of the Corporation, in
particular Messrs. Rubin and Kundrak, the Committee on the recommendation of the
Chief Executive Officer has awarded bonus compensation of $30,000 each to
Messrs. Rubin and Kundrak.
STOCK OPTIONS
On June 10, 1993 the Committee met to consider the granting of options to
directors, executives and employees of the Corporation. After careful
consideration of the recommendations of the Chief Executive Officer with respect
to executives and employees, and consideration of the individual performance of
the Chief Executive Officer the Committee granted options to acquire a total of
57,500 shares of the stock of the Corporation at the market price of the stock
on the date of the grant. This option included a grant to the Chief Executive
Officer to acquire 15,000 shares.
11
<PAGE>
COMMITTEE MEMBERSHIP AND INDEPENDENCE
No member of the Committee is an officer or employee of the Corporation.
However, Mr. Lauer, who is the chairman of the Committee, is a principal of the
accounting firm of Lauer & Georgatos, which provides tax planning and tax return
preparation services to the Corporation. In 1993, the Corporation paid fees to
Lauer & Georgatos totaling $21,875 for such services.
Robert J. Lauer (Chairman)
Philip L. Gildred, Jr.
Henry Rasmussen, Jr.
Richard R. Tartre
STOCK PERFORMANCE
The following graph compares the Corporation's stock price for the past
five years with the Standard and Poor's 500 Index and the Equity Reit Index
prepared by the National Association of Real Estate Investment Trusts
("NAREIT"). The graph assumes all dividends were reinvested at the market price
on the day the dividend was paid.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BURNHAM PACIFIC PROPERTIES INC., S&P 500 INDEX
AND NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS
<TABLE>
<CAPTION>
BURNHAM
Measurement Period PACIFIC
(Fiscal Year Covered) PROPERTIES, INC. NAREIT/Eq S&P 500
- ------------------- ---------------- --------- --------
<S> <C> <C> <C>
Measurement Pt-12/31/1988 $100 $100 $100
QUARTER ENDED 03/31/1989 $ 85.15 $102.39 $107.03
QUARTER ENDED 06/30/1989 $108.08 $108.32 $116.44
QUARTER ENDED 09/30/1989 $111.97 $112.30 $128.84
QUARTER ENDED 12/31 1989 $110.96 $108.84 $131.49
QUARTER ENDED 03/31/1990 $ 99.89 $104.63 $127.52
QUARTER ENDED 06/30/1990 $ 95.14 $104.50 $135.54
QUARTER ENDED 09/30/1990 $ 80.60 $ 89.30 $116.86
QUARTER ENDED 12/31/1990 $ 70.25 $ 92.13 $127.32
QUARTER ENDED 03/31/1991 $100.16 $113.08 $145.86
QUARTER ENDED 06/30/1991 $100.39 $113.96 $145.55
QUARTER ENDED 09/30/1991 $ 98.15 $118.63 $153.39
QUARTER ENDED 12/31/1991 $ 99.97 $125.02 $166.21
QUARTER ENDED 03/31/1992 $109.34 $125.85 $161.97
QUARTER ENDED 06/30/1992 $111.15 $129.17 $165.16
QUARTER ENDED 09/30/1992 $106.02 $137.98 $170.28
QUARTER ENDED 12/31/1992 $114.02 $143.26 $178.96
QUARTER ENDED 03/31/1993 $145.46 $174.26 $186.63
QUARTER ENDED 06/30/1993 $143.69 $169.26 $187.59
QUARTER ENDED 09/30/1993 $143.71 $185.09 $192.39
QUARTER ENDED 12/31/1993 $129.71 $171.42 $196.84
</TABLE>
12
<PAGE>
PROPOSAL NO. 2 - AMENDED AND RESTATED BYLAWS
Shareholders are being asked to approve Amended and Restated Bylaws for the
Corporation. Said Bylaws have been approved by the Board of Directors.
As the Corporation has grown from a small entity to a large, self-
administered, stock exchange listed corporation, much of its Bylaws have become
obsolete or non-workable. For example, as the Corporation is now self-
administered provisions dealing with the outside advisor are no longer relevant.
The adoption of provisions by unanimous consent are no longer practical
provisions for a large public corporation as are investment restrictions imposed
on start-up real estate investment trusts. The proposed Amended and Restated
Bylaws showing by interlineation deletions from the existing Bylaws and by
underscoring additions to existing Bylaw provisions, are set forth in the
exhibit to this proxy statement.
The Board voted to put into effect the Amended and Restated Bylaws upon
their approval by the affirmative vote of a majority of the shares represented
and voting at the Annual Meeting on May 3, 1994. The Board recommends a vote
FOR the approval of the Amended and Restated Bylaws. Unless otherwise
instructed, proxies received by management will be voted FOR such proposal.
Shares of shareholders represented at the meeting who do not vote or who abstain
will not be considered in determining the outcome of this proposal.
PROPOSAL NO . 3 - AMENDMENT TO STOCK OPTION PLAN
Shareholders are being asked to approve an amendment to the Corporation's
Stock Option Plan that has been approved by the Board of Directors.
Previously the plan provided for the automatic grant of an option to
purchase 1,000 shares of common stock to each Director who is not an employee of
the Corporation upon his election each year. Management believes that Directors
should be awarded a greater number of options to encourage greater ownership of
the Corporation's common stock. In 1993, management recommended to the
Compensation Committee that each Non-employee Director be awarded options for an
additional 4,000 shares in recognition of their services in connection with the
Corporation's 1993 stock offering. The Committee agreed. Such award was made
on July 26, 1993, at an exercise price of $18.875 per share, the then market
value of such stock, subject to approval by the shareholders of an amendment to
the Stock Option Plan increasing the annual grant of Director options to 5,000
shares.
Subject to the approval by the shareholders, the Board of Directors also
voted to amend the automatic grant provision of the plan to provide that each
Non-employee Director receive a grant of non-qualified options to purchase 5,000
shares of common stock on his annual election. No change is made in the
provisions of the plan that the per share option exercise price will be equal to
the average stock exchange closing price of shares of the Corporation's common
stock for the 10 trading days ending on the date of the meeting.
The effect of this proposal, if approved by the affirmative vote of a
majority of the shares represented at the Annual Meeting, will be both to ratify
the grant of the additional 4,000 shares in July, 1993 as options granted under
the Stock Option Plan, and to increase to 5,000 shares the automatic grant of
options under the plan to each Non-employee Director upon his election each
year, effective with his election at this Annual Meeting.
13
<PAGE>
The Board recommends a vote FOR approval of the amendment to the
Corporation's Stock Option Plan. Unless otherwise instructed, proxies received
by management will be voted FOR such proposal. Shares of shareholders
represented at the meeting who do not vote or who abstain will have the same
effect as a vote against this proposal.
AUDITORS
The Corporation's financial statements for the year ended December 31, 1993
were audited by Deloitte & Touche, which has audited the Corporation's books and
records since 1986.
Representatives of Deloitte & Touche are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders (including nominations for Directors) intended to
be presented at the next Annual Meeting must be received by the Secretary,
Burnham Pacific Properties, 610 West Ash Street, San Diego, California, no later
than December 31, 1994.
OTHER MATTERS
All shareholders of record at the close of business on March 15, 1994, the
record date for the determination of shareholders entitled to vote at the Annual
Meeting, are concurrently being sent a copy of the Corporation's Annual Report,
including financial statements for the fiscal year ended December 31, 1993.
The expense of preparing, printing and mailing the Notice of Meeting and
proxy material, and all other expenses of soliciting proxies will be borne by
the Corporation. In addition to the solicitation of proxies by use of the
mails, the Directors, officers and regular employees of the Corporation, who
will receive no compensation in addition to regular salary, if any, may solicit
proxies by mail, telegraph, telephone, or personal interview. The Corporation
may also reimburse brokerage firms, banks, trustees, nominees and other persons
for their expenses in forwarding proxy material to the beneficial owners of
shares held by them of record.
Management knows of no business which will be presented for consideration
at the Annual Meeting other than that stated in the Notice of Meeting. However,
if any such matter shall properly come before the meeting, the person named in
the enclosed proxy form will vote the same in accordance with their best
judgment.
By Order of the Board of Directors
BURNHAM PACIFIC PROPERTIES, INC.
Nina Galloway
Secretary
San Diego, California
March 18, 1994
14
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
BURNHAM PACIFIC PROPERTIES, INC.
AS AMENDED May 3, 1994
ARTICLE I
THE CORPORATION: DEFINITIONS
1.1 Name. The name of the corporation is "BURNHAM PACIFIC PROPERTIES,
----
INC.," referred to herein as the "Corporation."
1.2 Nature of Corporation. The Corporation is organized under the laws of
---------------------
the State of California. It is intended that the Corporation shall carry on its
affairs in a manner that will enable it to elect to qualify for Federal income
tax purposes as a "real estate investment trust" ("REIT"), but the failure of
the Corporation to qualify shall not affect the rights and obligations of the
Shareholders, Directors, officers and other Persons set forth in these Bylaws.
ARTICLE II
OFFICES
2.1 Principal Office. The principal office of the Corporation is located
----------------
at 610 West Ash Street, San Diego, California or at such other place as
determined by the Directors.
2.2 Other Offices. The Board may establish branch offices or subordinate
-------------
offices at any time at any place or places where the Corporation is qualified to
do business.
ARTICLE III
MEETINGS OF SHAREHOLDERS
3.1 Place of Meeting. All annual and other meetings of Shareholders shall
----------------
be held at the principal office of the Corporation, or at such other place
within or without the State of California as may be designated by the Board.
A-1
<PAGE>
3.2 Annual Meetings.
---------------
(a) Time of Holding. The Annual Meetings of Shareholders shall be held at
---------------
10:00 a.m. on the first Tuesday in May of each year, or such other date as fixed
by the Board. At such meetings, Directors shall be elected, reports of the
affairs of the Corporation shall be considered, and any other business that is
within the powers of the Shareholders and for which notice has been duly given
may be transacted.
(b) Notice. Written notice of each Annual Meeting shall be given to each
------
Shareholder of record entitled to vote, personally, by first-class mail or by
other means of written communication, addressed to such Shareholder at his
address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice; or if no such address appears or is given
at the place where the principal executive office of the corporation is located
or if by publication at least once in a newspaper or general circulation in the
county in which the principal executive office is located. The notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by other means of written communication. All such notices shall
be sent to each Shareholder entitled thereto not less than 10 days nor more than
60 days before each Annual Meeting. Such notice shall state the place, the date
and the hour of the meeting and those matters which the Board, at the time of
the notice, intends to present for action by the Shareholders. If directors are
to be elected, the notice shall include the names of nominees intended at the
time of the notice to be presented by the Board for election.
(c) Affidavit of Notice. An affidavit of mailing of any notice of any
-------------------
Shareholders' meeting shall be executed by the Secretary, Assistant Secretary or
any transfer agent of the Corporation giving the notice shall be filed and
maintained in the Corporation's minute book.
3.3 Special Meetings and Notice Thereof.
-----------------------------------
(a) How Called. Special meetings of the Shareholders for any purpose
----------
whatsoever may be called at any time by the Board, the president, the chairman
of the Board or the holders of shares entitled to cast not less than 10 percent
of the votes. If a meeting is called by any Person or Persons other than the
Board, the chairman of the Board, or the president, a request shall be made in
writing, specifying the time of such meeting and the general nature of the
business proposed to be transacted and shall be delivered personally or sent by
registered mail or by facsimile transmission to the chairman of the Board, the
president, or the Secretary. The officer receiving the request shall cause
notice to be promptly given to the Shareholders entitled to vote. Any special
meeting will be held at the time requested by the Person or Persons calling the
meeting, not less than 35 nor more than 60 days after the receipt of the
request, subject to proxy materials with respect to such meeting having been
cleared by the Securities and Exchange Commission at least 20 days prior to the
date of such meeting. Nothing contained in this Section shall be construed as
limiting, fixing, or affecting the time when a meeting of Shareholders called by
action of the Board may be held.
A-2
<PAGE>
(b) Notice. Except in special cases where other express provision is made
------
by statute, notice of special meetings shall be given in the same manner as for
Annual Meetings of Shareholders. Notices of any special meeting shall specify,
in addition to the place, the day and the hour of such meeting, the general
nature of the business to be transacted, and no other business may in fact be
transacted.
3.4 Record Date for Shareholder Notice and, Voting. For purposes of
----------------------------------------------
determining the Shareholders entitled to notice of any meeting, the Board may
fix a record date that shall not be more than 60 days nor less than 10 days
before the date of any such meeting. Except as otherwise provided in the
California Corporations Code, only Shareholders of record on the date so fixed
are entitled to notice and to vote, notwithstanding any transfer of any Shares
on the books of the Corporation after the record date. If the Board does not fix
a record date: The record date for determining Shareholders entitled to notice
of or to vote at a meeting of Shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held.
3.5 Adjourned Meetings and Notice Thereof. Whether or not a quorum is
-------------------------------------
present, any annual or special Shareholders' meeting may be adjourned from time
to time by the vote of the majority of the Shares of the holders of which are
either present in person or represented by proxy thereat. In the absence of a
quorum no other business may be transacted at such meeting.
It shall not be necessary to give any notice of an adjournment or of the
business to be transacted at an adjourned meeting other than by announcement at
the meeting at which such adjournment is taken, provided, however, that if any
annual or special Shareholders' meeting is adjourned for more than 45 days or if
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
3.6 Voting at Meetings of Shareholders. Subject to the provisions of the
----------------------------------
California Corporations Code, and subject to the right of the Board to provide
otherwise, only persons in whose names Shares entitled to vote are registered on
the stock records of the Corporation on the record date shall be entitled to
notice of and to vote at such meeting, notwithstanding any transfer of any
Shares on the books of the Corporation after such record date.
Such vote may be by voice or by ballot; provided, however, that all
-------- -------
elections for Directors may be by ballot upon demand made by any Shareholder at
any election and before the voting begins. Each outstanding Share shall be
entitled to one vote on each matter submitted to a vote of Shareholders.
Every Shareholder entitled to vote at any election for Directors shall
have the right to cumulate his votes and give one candidate a number of votes
equal to the number of Directors to be elected, multiplied by the number of
votes to which his Shares are entitled, or to distribute his votes on the same
principle amount as many candidates as he shall think fit; provided that the
names of the candidate or candidates for whom the Shareholder votes have been
placed in
A-3
<PAGE>
nomination order prior to the voting and that at least one Shareholder has given
notice at the meeting prior to the voting of an intention to cumulate votes. The
candidates receiving the highest number of votes up to the number of Directors
to be elected shall be elected.
3.7 Quorum. The presence in person or by proxy of a majority of the Shares
------
entitled to vote at any meeting shall constitute a quorum for the transaction of
business. The affirmative vote of a majority of the Shares represented and
voting at a duly held meeting at which a quorum is present shall be an act of
the Shareholders, unless a vote of a greater number is required by these Bylaws
or by the California Corporations Code. The Shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken (other than an
adjournment) is approved by at least a majority of the Shares required to
constitute a quorum.
3.8 Proxies. Every person entitled to vote shares may authorize another
-------
Person or Persons to act by a written proxy executed by such person or his duly
authorized agent and filed with the Secretary of the Corporation, provided that
no such proxy shall be valid after the expiration of 11 months from the date of
its execution unless the person executing it specifies therein the length of
time for which such proxy is to continue in force.
A proxy shall be deemed signed if the Shareholder's name is placed on the
proxy (whether by manual signature, typewriting, facsimile transmission or
otherwise) by the Shareholder or the Shareholder's attorney in fact. A validly
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless revoked by Person executing it before the vote
pursuant to that proxy by (1) a writing delivered to the Corporation stating
that the proxy is revoked, (2) execution of a subsequent proxy, (3) attendance
at the meeting and voting in person, or (4) transfer of Shares represented by
the proxy to a transferee who becomes a Shareholder of record prior to the
record date established for the vote. Such validly executed proxy otherwise may
be revoked by written notice of the death or incapacity of the maker of that
proxy received by the Corporation before the vote pursuant to that proxy is
counted. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 705(e) and (f) of the
Corporations Code of California.
3.9 Inspectors of Election. Before any meeting of Shareholders, the Board
----------------------
may appoint any Persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the Chairman of the meeting may, and on the request of any
Shareholder or a Shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more Shareholders
or proxies, the holders of a majority of Shares of their proxies present at the
meeting shall determine whether one or three inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the Chairman of the meeting may, and upon the request of any Shareholder or a
Shareholder's proxy shall, appoint a Person to fill that vacancy.
A-4
<PAGE>
The inspectors shall:
(1) determine the number of Shares outstanding and the voting power of
each, the Shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies;
(2) receive votes, ballots, or consents;
(3) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(4) count and tabulate all votes;
(5) determine when the polls shall close;
(6) determine the result; and
(7) do such acts as may be proper to conduct the election or vote with
fairness to all Shareholders.
3.10 Shareholder Nominations or Proposals. Any shareholders desiring to
------------------------------------
place in nomination the name of any person for election to the Board of
Directors of the Corporation may do so by delivering a written nomination to the
Secretary of the Corporation on or before December 31 of the year immediately
preceding the Annual Meeting, at which time, said nominee shall stand for
election. Said nomination shall contain all of the information required by
Securities and Exchange Commission Regulation 240.14a. Any nominee who does not
receive 10% or more of the votes cast by the Shareholders at the Annual Meeting
may not be nominated as a director at any subsequent meeting during the
immediately following five year period without approval of the Board. Any
shareholder desiring to place any proposal before the shareholders at the Annual
Meeting shall do so in accordance with applicable rules under Securities and
Exchange Commission Regulation 240.14a. Nominations or proposals by shareholders
which are not received by December 31 need not be considered at the Annual
Meeting. Proposals which are similar in concept to those failing to receive 3%
or more of the votes cast by the Shareholders at any Annual Meeting may not be
placed before the Shareholders during the immediately following five year
period.
ARTICLE IV
DIRECTORS
4.1 Powers. The Directors of the Corporation shall have the fiduciary
------
obligations to the Shareholders of directors of any California business
corporation generally. Subject to limitations of the Articles of Incorporation,
the Bylaws and the law of the State of California, all corporate powers shall
be exercised by or under the authority of, and the business and affairs of
A-5
<PAGE>
the Corporation shall be controlled by, the Directors acting as a board. Without
prejudice to those general powers, but subject to the same limitations, it is
hereby expressly declared that the Board shall have the following powers:
(1) To conduct, manage and control the affairs and business of the
Corporation and to make such rules and regulations therefor not inconsistent
with law or with the Organizational Documents as they may deem just.
(2) To select and remove all officers, agents and employees of the
Corporation, to prescribe lawful powers and duties for them and to fix their
compensation.
(3) To change the principal office for the transaction of the business of
the Corporation from one location to another, to fix and locate from time to
time one or more other offices of the Corporation within or without the State of
California, to designate any place within or without the State of California for
the holding of any Shareholders' meeting or meetings; to adopt, make and use a
corporate seal, to prescribe the forms of certificates of stock and to alter the
form of such seal and of such certificates as in their judgment they may deem
appropriate, and to cause the Corporation to qualify to do business in such one
or more jurisdictions as they may determine to be appropriate.
(4) To authorize from time to time the issue of Shares, warrants, options
and convertible debt, of the Corporation as dividends or in consideration of
money paid, labor done or services actually rendered, debts or Securities
canceled, or tangible or intangible property actually received.
(5) To borrow money and incur indebtedness for the purposes of the
Corporation and to cause to be executed and delivered in the Corporation's name
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecation's or other evidences of debt, to guarantee, indemnify, or act as
surety with respect to payment or performance of obligations of third parties;
to enter into other obligations on behalf of the Corporation
(6) To designate one or more committees, including an Executive Committee,
each consisting of two or more Directors to serve at the pleasure of the Board.
The Board may designate one or more Directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
Any committee shall have all the authority of the Board to the extent provided
in the resolution of the Board or in the Bylaws, subject to the limitations of
law.
(7) To declare dividends and other distributions, whether from earnings,
earned or capital surplus, or other sources, in their absolute discretion at
such times and in such amounts as the condition of the Corporations affairs may
warrant.
(8) To purchase and pay for from corporate assets insurance contracts and
policies insuring the corporate assets against any and all risks and insuring
the Corporation and the Directors, Shareholders, officers, employees, agents,
and independent contractors against any and
A-6
<PAGE>
all claims and liabilities of every nature asserted by any Person arising by
reason of any action alleged to have been taken or omitted by the Corporation or
by any Person acting on its behalf whether or not the Corporation would have the
power to indemnify such Person against such liability.
(9) To cause the Corporation to enter into joint ventures, general or
limited partnerships, and other lawful combinations or associations with
independent third parties.
(10) To sell, lease, convey, exchange, transfer or otherwise dispose of
any of the Corporation's properties and assets in the ordinary course of
business.
(11) Generally, to exercise all the powers and to perform all of the acts
and duties pertaining to their office that from time to time may be permitted by
law.
(12) To cause the Corporation to repurchase, in any type of transaction,
any convertible debentures or any outstanding shares of stock and to cancel said
shares or to retain the same as treasury stock.
Directors shall not be required to devote their entire time to the
business and affairs of the Corporation.
4.2 Number of Directors. The authorized number of Directors may be
-------------------
increased or decreased by the Board or by the Shareholders, but shall be not
less than seven nor more than thirteen until changed by an amendment to this
Bylaw.
4.3 Election and Term of Office. The Directors shall be elected at each
---------------------------
Annual Meeting of Shareholders. However, if any Annual Meeting is not held or if
the Directors are not elected thereat, the Shareholders may elect the Directors
at any special meeting held for that purpose. All Directors shall hold office
until their respective successors are elected.
4.4 Vacancies. Vacancies in the Board may be filled by a majority of the
---------
remaining Directors (even if less than a quorum) or by a sole remaining
Director, except that a vacancy created by the removal of a Director by the vote
of the Shareholders may be filled only by the vote of a majority of the Shares
entitled to vote represented at a duly held meeting at which a quorum is
present. Each Director so elected shall hold office until his successor is
elected at an Annual or a special meeting of the Shareholders.
A vacancy or vacancies in the Board shall be deemed to exist in case of
death, resignation, or removal of any Director, if the authorized number of
Directors is increased, or if the Shareholders fail to elect the authorized
number of Directors to be voted for at any meeting at which any Director or
directors are elected.
Any Director may resign effective on giving written notice to the Chairman
of the Board, the President, the Secretary, or the Board. The Shareholders may
elect a Director or Directors at any time to fill any vacancy or vacancies not
filled by the Directors.
A-7
<PAGE>
If the Board accepts the resignation of a Director tendered to take effect
at a future time, the Board or the Shareholders shall have the power to elect a
successor to take office when the resignation is to become effective.
No reduction in the authorized number of Directors shall have the effect
of removing any Director prior to the expiration of his term of office.
If the number of vacancies occurring during a year is sufficiently large
that a majority of the Directors in office has not been elected by the
Shareholders, the holders of 5% or more of the outstanding Shares entitled to
vote may call a special meeting of Shareholders to elect the entire Board of
Directors.
4.5 Place of Meeting. Regular meetings of the Board shall be held at any
----------------
place within or without the State of California which has been designated by the
Chairman of the Board. In the absence of such other designation, regular
meetings shall be held at the principal office of the Corporation. Special
meetings of the Board may be held either at a place so designated or at the
principal office. Special meetings of any committee established hereunder shall
be held at any place designated by the Chairman of the committee or at the
principal office. Members of the Board and any such committee may participate in
a meeting through use of conference telephone or similar communication
equipment, so long as all members participating in such meeting can hear one
another. Participation by a Director in a meeting by means of the above
described procedure at the time that the roll in called for such meeting shall
constitute presence in person throughout such meeting.
4.6 Organization Meeting. Unless the Board decides otherwise, it shall
--------------------
hold a regular meeting for the purpose of election of officers and the
transaction of other business immediately following each Annual Meeting of
Shareholders or special meeting of which Directors are elected, and no notice of
such regular meeting shall be required.
4.7 Special Meetings. Special meetings of the Board for any purpose may be
----------------
called at any time by the Chairman, the President, the Vice President, the
Secretary, or any two Directors. Special meetings of any committee established
hereunder may be called by the Chairman of the committee or any two members of
that committee.
Written notice of the time and place of special meetings of the Board, or
any committee, shall be delivered personally to the Directors or committee
members or sent to each Director or committee member by mail or by other form of
written communication, charges prepaid, addressed to him at his address as it
appears upon the records of the Corporation or, if that address is not so shown
or is not readily ascertainable, at the place in which the meetings of Directors
are regularly held. If that notice is mailed, it shall be deposited in the
United States mail in the location of the Corporation's principal office at
least 4 days before the meeting. If that notice is delivered personally or by
facsimile, it shall be so delivered or sent at least 48 hours before the
meeting. In addition to the written notice pursuant to this paragraph, notice of
A-8
<PAGE>
meetings of committees established hereunder may also be given orally by the
Chairman of the Board or President, either personally or by telephone, at least
48 hours before the meeting.
4.8 Adjournment. Irrespective of whether they constitute a quorum, a
-----------
majority of the Directors present may adjourn any Directors' meeting to another
time and place.
4.9 Notice of Adjournment. If a meeting is adjourned for more than 24
---------------------
hours, before the time of the adjourned meeting notice thereof shall be given to
the Directors who were not present at the time of adjournment.
4.10 Waiver of Notice. The transactions of any meeting of the Board,
----------------
however called and noticed and wherever held, shall be as valid as though
conducted at a meeting duly held after regular call and notice if a quorum is
present and if either before or after the meeting each of the Directors not
present signs a written waiver of notice of or consent to holding the meeting or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
4.11 Quorum. Except to adjourn, a majority of the Board or of any
------
committee, shall be necessary to constitute a quorum for the transaction of
business. Every act or decision of a majority of the Directors or committee
members at a meeting duly held at which a quorum is present shall be regarded as
an act of the Board unless a greater number is required by law or these Bylaws.
However, a meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of Directors or committee
members, provided that unless otherwise expressly permitted by these Bylaws, any
action taken under those circumstances must be approved by at least a majority
of the required quorum for such meeting.
4.12 Fees and Compensation. The Directors shall be entitled to receive
---------------------
such reasonable compensation for their services as the Board may determine;
provided, however, that Directors who are officers shall not receive
compensation from the Corporation for their services as Directors. The Directors
shall also be entitled to receive remuneration either directly or indirectly for
services rendered to the Corporation in any other capacity. Such services may
include, without limitation, services as an officer of the Corporation, legal,
accounting, brokerage or other professional services.
4.13 Action without Meeting. Any action required or permitted to be taken
----------------------
by the Board or a committee may be taken without a meeting if all members of the
Board or committee individually or collectively consent in writing to such
action. Any such consent or consents shall be filed with the minutes of the
meetings of the Board.
4.14 Removal of Director for Cause. The Board may declare vacant the
-----------------------------
office of a Director who has been declared of unsound mind by an order of court,
or who has pled guilty or nolo contendere to or been convicted of a felony.
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<PAGE>
4.15 Removal of Director without Cause. Any or all Directors may be
---------------------------------
removed without cause if their removal is approved by the affirmative vote of a
majority of the outstanding Shares entitled to vote, subject to the following
restrictions and those restrictions contained in Section 303 of the Corporations
Code of California.
4.16 Prohibited Activities. The Corporation shall not engage in
---------------------
transactions with any director, officer, or any person affiliated with such
person, except to the extent that each such transaction has, after disclosure of
such affiliation, been approved or ratified by the affirmative vote of a
majority of directors not affiliated with the person who is party to the
transaction and (a) the transaction is fair and reasonable to the Corporation
and its shareholders; (b) the terms of such transaction are at least as
favorable as the terms of any comparable transactions made on arm's length basis
and known to the directors; and (c) the total consideration is not in excess of
the appraised value of the property being acquired, if an acquisition is
involved.
ARTICLE V
OFFICERS
5.1 Officers. The officers of the Corporation shall be a Chairman of the
--------
Board, a President, a Secretary, a Chief Financial Officer, and such other
officers with such titles and duties as may be appointed by the Board. Any
number of offices may be held by the same person.
5.2 Election. The officers of the Corporation, except such officers as may
--------
be appointed in accordance with the provisions of Section 5.3 or Section 5.5
hereof, shall be chosen annually by the Board, and each shall hold his office
until he resigns, is removed, is otherwise disqualified to serve, or his
successor is elected and qualified.
5.3 Subordinate Officers. The Board may appoint such other officers as the
--------------------
Corporation's business requires, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in the Bylaws or as
the Board may from time to time determine.
5.4 Removal and Resignation. A majority of Directors may remove any
-----------------------
officer with or without cause at any regular or special meeting of the Board.
Any officer may resign at any time by giving written notice to the
Chairman of the Board, President or Secretary. Any such resignation shall take
effect at the date of the receipt of such notice or any later time specified
therein. Unless otherwise specified therein, the acceptance of such a
resignation shall not be necessary to make it effective.
5.5 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification, or any other cause shall be filled in the manner
prescribed in the Bylaws for regular appointments to such office.
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<PAGE>
5.6 Chairman of the Board. The chairman of the Board shall, if present,
---------------------
preside at all meetings of the Board of Directors and Shareholders, and shall be
an ex-officio member of all outstanding committees.
5.7 President. The President shall be the Chief Executive Officer of the
---------
Corporation, and shall have general supervision, direction and control of the
business of the Corporation. He shall preside at all meetings of the
Shareholders or at meetings of the Board if the Chairman is absent. He shall
have general powers and duties of management, together with such other powers
and duties as may be prescribed by the Board.
5.8 Vice President. In the absence or disability of the President, the
--------------
Vice Presidents in order of their rank as fixed by the Board or, if not ranked,
the Vice President designated by the Board, shall perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. The Vice Presidents shall have such
other powers and shall perform such other duties as may be prescribed for them
by the Board or the Bylaws.
5.9 Secretary. The Secretary shall keep a book of minutes at the
---------
Corporation's principal place of business or at such other place of business as
the Board may order. These minutes shall record the proceedings of Director and
Shareholder meetings and shall set forth the following items with respect to
each such meeting: its time and place; whether a regular or special meeting; the
manner of notice given; for Director meetings, the names of those present; for
Shareholder meetings, the number of Shares present or represented; and, for
special meetings, the manner in which authorized.
The Secretary shall keep or cause to be kept a Share register or duplicate
thereof at the Corporation's principal office or at the office of the
Corporation's transfer agent. This register shall set forth the names of the
Shareholders and their addresses, the number of classes of Shares held by each
(whether in certificate or "unissued certificate" form), the number and the date
of certificates issued for the same, if any, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give notice of all the meetings of the Shareholders
and of the Board required by the Bylaws or by law, shall keep the seal of the
Corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board or the Bylaws.
5.10 Assistant Secretaries. In the absence or disability of the Secretary,
---------------------
the Assistant Secretaries in order of their rank as fixed by the Board or, if
not ranked, the Assistant Secretary designated by the Board, shall perform all
the duties of the Secretary and, when so acting, shall have all the powers of
and be subject to, all the restrictions upon the Secretary. The Assistant
Secretaries shall have such other powers and shall perform such other duties as
from time to time may be prescribed for them respectively by the Board or the
Bylaws. If neither the Secretary nor any Assistant Secretary is present at any
meeting of the Shareholders or Board, the officer presiding at such meeting may
appoint a Secretary to keep the records thereof.
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5.11 The Chief Financial Officer (which may be referred to as the
---------------------------
principal financial officer) shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus, and Shares.
The Chief Financial Officer shall deposit all moneys and other valuables
in the name and to the credit of the Corporation with such depositories as may
be designated by the Board. He shall be responsible for the proper disbursement
of the Corporation's funds as may be ordered by the Board and shall render to
the Chairman or Directors, whenever they request it, an accounting of all of his
transactions and of the financial condition of the Corporation. He shall have
such other powers and shall perform such other duties as may be prescribed by
the Board. He shall see that all officers and employees handling cash, are, if
required by the Board, bonded in such amounts as may be fixed from time to time
by the Board.
5.12 Assistant Financial Officers. In the absence of or the disability of
----------------------------
the Chief Financial Officer, the Assistant Financial Officers in order of their
rank or, if not ranked, the Assistant Financial Officer designated by the Board,
shall perform all the duties of the Chief Financial Officer and, when so acting,
shall have the powers of and be subject to, all the restrictions upon the Chief
Financial Officer. The Assistant Financial Officer shall have such other powers
and perform such other duties as from time to time may be prescribed for them
respectively by the Board or the Bylaws.
5.13 Authority of Sign Documents. The President or any Vice President
---------------------------
shall have authority to sign, seal, acknowledge and deliver any deed, deed of
trust, mortgage, lease, release; the Chief Financial Officer shall have the
authority to sign and deliver any note, check or other financial instrument; the
Secretary and each Assistant Secretary shall have authority to attest the
signature and seal of the Corporation and any record of its corporate
proceedings. The Board may generally or in any particular instance authorize any
one or more of the other officers, or limit the authority provided in the
previous sentence in the case of any officer, to sign instruments on behalf of
the Corporation, and any person dealing with the Corporation may conclusively
rely upon a certificate of the Secretary or any Assistant Secretary with respect
to any officer purporting to sign any corporate instrument.
ARTICLE VI
SHARES OF STOCK
6.1 Registered Ownership, Share Certificates and Shares in "Unissued
----------------------------------------------------------------
Certificate" Form. Certificates shall be issued and transferred in accordance
- -----------------
with these Bylaws, but need not be issued unless the Shareholder elects to have
Share certificates issued to him. The Corporation may adopt a system of
issuance, recordation and transfer of its shares by electronic or other means
not involving any issuance of certificates, including provisions for notice to
purchasers in substitution for the required statements on certificates under
Sections 417, 418, and 1302 of the California Corporations Code, and as may be
required by the commissioner in administering the
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<PAGE>
Corporate Securities Law of 1968, which system (1) has been approved by the
United States Securities and Exchange Commission, (2) is authorized in any
statute of the United States, or (3) is in accordance with the California
Commercial Code. The Persons in whose names certificates or Shares in "unissued
certificate" form are registered on the records of the Corporation shall be
deemed the absolute owners of the Shares represented thereby for all purposes of
the Corporation. However, nothing herein shall preclude the Directors or
officers or their agents or representatives from inquiring as to the actual
ownership of Shares. Until a transfer is duly effected on the records of the
Corporation, the Corporation shall not be affected by any notice of such
transfer, either actual or constructive. The receipt by the Person in whose name
any Shares are registered on the Corporation's records by his duly authorized
agent or, if such Shares are so registered in the names of more than one Person,
the receipt of any one of those Persons or duly authorized agent hereof shall be
a sufficient discharge for all dividends or distributions payable or deliverable
in respect of those Shares and from all liability for the application thereof.
The certificates shall be in such form consistent with the Articles of
Incorporation and the laws of the State of California as shall be approved by
the Board. All such certificates shall be signed by the Chairman of the Board,
the President, or a Vice President and by the Treasurer, an Assistant Financial
Officer, the Secretary, or any Assistant Secretary, certifying the number of
Shares and the class or series of Shares owned by the Shareholder. Any or all of
the signatures on the certificate may be facsimile.
6.2 Transfer of Shares. Subject to the provisions of law and of Section
------------------
6.3, 6.4, and 6.5 hereof, Shares shall be transferable on the records of the
Corporation only by the record holder thereof or by his duly authorized agent.
Transfers will only be made upon delivery to the Corporation or a transfer agent
of (i) the certificate or certificates (unless held in "unissued certificate"
form, in which case an executed stock power duly guaranteed must be delivered),
properly endorsed or accompanied by duly executed instruments of transfer, and
(ii) all necessary documentary stamps, together with such evidence of the
genuineness of each endorsement, execution, or authorization and of other
matters as the Board or transfer agent may reasonably require. Upon delivery,
the transfer shall be recorded in the records of the Corporation, and, if
requested, a new certificate for the Shares shall be issued to the transferee.
In case of a transfer of only a part of the Shares represented by any
certificate or account, a new certificate or statement of account or the balance
shall be issued to the transferee. Any Person becoming entitled to any Shares in
consequence of the death of a Shareholder or by operation of law shall be
recorded as the holder of such Shares, and, if requested, shall receive a new
certificate therefor upon delivery to the Corporation or a transfer agent of (i)
instruments and other evidence required by the Corporation or the transfer agent
to demonstrate such entitlement, (ii) the existing certificate (or appropriate
instrument of transfer if held in "unissued certificate" form) for such Shares,
and (iii) necessary releases and authorizations from applicable governmental
authorities. Nothing in these Bylaws shall impose upon the Corporation, the
Board or a transfer agent an obligation or limitation upon their rights to
inquire into adverse claims.
6.3 Shareholders' Disclosure; Corporation's Right to Refuse to Transfer
-------------------------------------------------------------------
Shares; Limitation on Holdings; Redemption of Shares.
- ----------------------------------------------------
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<PAGE>
6.3.1 The Shareholders shall upon demand disclose to the Corporation
in writing such information with respect to direct and indirect ownership
of the Shares as the Directors deem necessary to comply with the REIT
Provisions of the Internal Revenue Code or to comply with the requirements
of any taxing authority or governmental agency.
6.3.2 Whenever it is deemed by them to be reasonably necessary to
protect the tax status of the Corporation as a REIT, the Directors may
require a statement or affidavit from each Shareholder or proposed
transferee of Shares setting forth the number of Shares already owned by
him and any related Person specified in the form prescribed by the
Directors for that purpose. If, in the opinion of the Directors, the
proposed transfer may jeopardize the qualification of the Corporation as a
REIT, the Directors shall have the right, but not a duty, to refuse to
transfer the Shares to the proposed transferee. All contracts for the sale
or other transfer of Shares shall be subject to this provision.
6.3.3 Notwithstanding any other provision of these Bylaws to the
contrary and subject to the provisions of subsection 6.3.5 hereof, no
Person shall at any time directly or indirectly acquire ownership in the
aggregate of more than 9.8% of the outstanding Shares of the Corporation
(the "Limit"). Shares owned by a Person in excess of the Limit at any time
shall be deemed "Excess Shares." For purposes of this Section 6.12, a
Person shall be deemed to own Shares actually owned by such Person and
shares constructively owned by such Person after applying the rules of
Section 544 of the Internal Revenue Code as modified in the case of REITs
by Section 856(a)(6) and Section 856(h) of said Code. All Shares which any
Person has the right to acquire upon exercise of outstanding rights,
options and warrants, and upon conversion of any Securities convertible
into Shares, if any, shall be considered outstanding for purposes of the
Limit if such inclusion will cause such person to own more than the Limit.
6.3.4 The Corporation, upon authorization by the Directors, by notice
to the holder thereof, may redeem any or all Shares that are Excess Shares
because of the decrease in outstanding Shares resulting from such
redemption; and from and after the date of giving such notice of redemption
("redemption date") the Shares called for redemption shall cease to be
outstanding and the holder thereof shall cease to be entitled to dividends,
voting rights and other benefits with respect to such Shares excepting only
the right to payment by the Corporation of the redemption price determined
and payable as set forth in the following two sentences. Subject to the
limitation on payment set forth in the following sentence, the redemption
shall be the average daily per Share closing sales price if the Shares of
the Corporation are listed on a national securities exchange or on the
National Association of Securities Dealers Automated Quotation National
Market System, and if the Shares are not so listed shall be the mean
between the average per Share closing bid prices and the average per Share
closing asked prices, in each case during the 30 day period ending on the
business day prior to the redemption date, or if there have been no sales
on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation National Market System and no
published bid quotations and no published asked quotations with respect to
Shares of the Corporation during such 30 day period, the redemption price
shall be the price determined by the Directors in good
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<PAGE>
faith. Unless the Directors determine that it is in the interest of the
Corporation to make earlier payment of all of the amount determined as the
redemption price per Share in accordance with the preceding sentence, the
redemption price shall be payable only upon the liquidation of the
Corporation and shall not exceed an amount which is the sum of the per
Share distribution designated as liquidating distributions and return of
capital distributions declared with respect to unredeemed Shares of the
Corporation of record subsequent to the redemption date, and no interest
shall accrue with respect to the period subsequent to the redemption date
to the date of such payment; provided, however, that in the event that
within 30 days after the redemption the Person from whom the Excess Shares
have been redeemed sells (and notifies the Corporation of such sale) a
number of the remaining Shares owned by him at least equal to the number
of such Excess Shares (and such sale is to a Person in whose hands the
Shares sold would not be Excess Shares), then the Corporation shall
rescind the redemption of the Excess Shares if following such rescission
such Person would not be the holder of Excess Shares, except that if the
Corporation receives an opinion of its counsel that such rescission would
jeopardize the tax status of the Corporation as a REIT then the Corporation
shall in lieu of rescission make immediate payment of the redemption price.
6.3.5 The limit set forth in Section 6.3.3 shall not apply to
acquisitions of Shares pursuant to a cash tender offer made for all
outstanding Shares of the Corporation (including Securities convertible
into Shares) in conformity with applicable federal and state securities
laws where two-thirds of the outstanding shares (not including Shares or
Securities convertible into Shares held by the tender offered and/or any
"affiliates" or "associates" thereof within the meaning of the Securities
Exchange Act) are duly tendered and accepted pursuant to the cash tender
offer; nor shall the Limit apply to the acquisition of Shares by an
underwriter in a public offering of Shares, or in any transaction involving
the issuance of Shares by the Corporation in which the Directors determine
that the underwriter or other person or party initially acquiring such
Shares will make a timely distribution of such Shares to or among other
holders such that, following such distribution, none of such Shares will be
Excess Shares. The Directors in their discretion may exempt from the Limit
ownership of certain designated Shares while owned by a Person who has
provided the Corporation with evidence and assurances acceptable to the
Directors that the qualification of the Corporation as a REIT would not be
jeopardized thereby.
6.3.6 Notwithstanding any other provision of these Bylaws to the
contrary, any purported acquisition of Shares of the Corporation which
would result in the disqualification of the Corporation as a REIT shall be
null and void.
6.3.7 Nothing contained in this Section 6.3 or in any other provision
of these Bylaws shall limit the authority of the Directors to take such
other action as they deem necessary or advisable to protect the Corporation
and the interests of the Shareholders by preservation of the Corporation's
qualification as a REIT under the REIT Provisions of the Internal Revenue
Code.
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<PAGE>
6.3.8 If any provision of this Section 6.3 or any application of any
such provision is determined to be invalid by any Federal or State court
having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other publications of such provision
shall be affected only to the extent necessary to comply with the
determination of such court. To the extent this Section 6.3 may be
inconsistent with any other provision of the Bylaws, this Section 6.3 shall
be controlling.
6.4 Lost or Destroyed Certificates. The holder of any Shares shall
------------------------------
immediately notify the Corporation of any loss or destruction of any
certificates, and the Corporation may issue a replacement certificate to said
holder upon approval of the Board. As a condition to authorizing the issue of a
new certificate, the Board may require the owner or his legal representation to
make proof satisfactory to the Board of the loss or destruction and to post a
bond or other security, in such amount and with such surety or sureties as the
Board may determine, as indemnity against any claim that may be made against the
Corporation on account of any certificate alleged to have been lost or
destroyed.
6.5 Dividend Record Date and Closing Stock Books. The Board may fix a
--------------------------------------------
record date for the determination of the Shareholders entitled to receive any
dividend or distribution or any allotment of rights or to exercise rights with
respect to any change, conversion, or exchange of Shares. The record date so
fixed shall not be more than 60 days nor less than 10 days prior to the date of
such event for the purposes of which it is fixed. When a record date is fixed,
only Shareholders of record on that day shall be entitled to receive
distribution, notwithstanding any transfer or any Shares on the books of the
Corporation after the record date.
ARTICLE VII
LIABILITY OF DIRECTORS, SHAREHOLDERS AND
OFFICERS AND OTHER MATTERS
7.1 Standard of Duty of Directors, Officers and Others. The Directors are
--------------------------------------------------
required to perform their duties with respect to the Corporation's business in
good faith, in a manner believed by the Directors to be in the best interests of
the Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent Person in a like position would use under similar
circumstances. A Director who performs his duties in accordance with the
foregoing standards shall not be liable to any person for failure to discharge
his obligations as a director.
The Corporation's officers, employees, and other agents are also required
to act in good faith, in a manner believed by them to be in the best interests
of the Corporation, and with such care, including reasonable inquiry, as an
ordinary prudent person in a like position would use under similar
circumstances, in handling its affairs. An officer, employee, or other agent who
performs his duties in accordance with the foregoing standards shall not be
liable to any person for failure to discharge his obligations as an officer,
employee or agent.
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<PAGE>
Directors and Officers of the Corporation and others acting on behalf of
the Corporation are entitled to rely upon counsel, financial statements, other
records and Persons to the full extent permitted to such Persons under the
California Corporations Code.
7.2 Indemnification and Reimbursement of Directors, Officers and Agents.
-------------------------------------------------------------------
The following provisions with respect to indemnification shall apply to the full
extent permitted under the California Corporations Code.
(a) Any Person made a party to any action, suit, or proceedings or
against whom a claim or liability is asserted by reason of the fact that he, his
testator, or his intestate was or is a Director or officer, employee, or agent
or was or is active in such capacity on behalf of the Corporation, or served in
any similar capacity with respect to the Predecessor Burnham Sleepy Hollow Ltd.,
shall be indemnified and held harmless by the Corporation against judgments,
fines, amounts paid on account thereof (whether in a settlement or otherwise),
and all other reasonable expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense of such action, suit,
proceeding, claim or alleged liability or in connection with an appeal therein,
whether or not the same proceeds to judgment, is settled, or is otherwise
brought to a conclusion; provided, however, such Person acted in good faith, in
a manner such Person reasonably believed to be in the best interests of the
Corporation and in the case of (i) a criminal proceeding, such Person had no
reasonable cause to believe the conduct of such Person was unlawful, or (ii) an
action by or in the right of the Corporation, acted with such care, including
reasonable inquiry, as an ordinary prudent Person in a like position would use
under similar circumstances; and provided, further, that such Person gives
prompt notice thereof, executes such documents and takes such action as will
permit the Corporation to conduct the defense or settlement thereof and
cooperates therein. In the event of a settlement approved by the Directors of
any such claim, alleged liability, action, suit or proceeding, indemnification
and reimbursement shall be provided except as to such matters covered by the
settlement which the Corporation determines arose from such Person's failure to
act in good faith and in the best interests of the Corporation, and in the case
of a (i) criminal proceeding had reasonable cause to believe the conduct of such
Person was unlawful, or (ii) in an action by or in the right of the Corporation,
lacking such care, including reasonable inquiry, as an ordinarily prudent Person
in a like position would use under similar circumstances.
(b) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final disposition
of such an action, suit or proceeding as authorized by the Corporation in the
specific action upon receipt of an undertaking by or on behalf of the Person
indemnified to return such amount unless it shall ultimately be determined he is
entitled to be indemnified by the Corporation as authorized herein.
(c) The rights accruing to any Person under these provisions shall
not exclude another right to which he may be lawfully entitled, nor shall
anything contained herein restrict (i) the right of the Corporation to
indemnify or reimburse such Person in any proper case even though not
specifically provided for herein or (ii) such Person's right to contribution as
may be available under applicable law. Rights of indemnification and
reimbursement under this Section shall be
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<PAGE>
satisfied only out of the assets of the Corporation (including the proceeds of
any insurance or any other indemnification rights of the Corporation).
(d) The Corporation shall have the power to purchase and maintain
insurance on behalf of any Person entitled to indemnity hereunder against any
liability asserted against him and incurred by him in any capacity or arising
out of his status as such.
7.3 Right of Directors, Officers and Others to Own Shares or Other
--------------------------------------------------------------
Property and to Engage in Other Business. Any Director, officer, employee or
- ----------------------------------------
agent of the Corporation may acquire, own, hold, and dispose of Shares for his
individual account, and may exercise all rights of a Shareholder to the same
extent and in the same manner as any other Shareholder. Any Director, Affiliate,
officer, employee, or agent of the Corporation may have personal business
interests and may engage in personal business activities; these interests and
activities may include the acquisition, syndication, holding, management,
operation or disposition, for his own account or for the account of others, of
interest in mortgages, interests in real property (including, but not limited
to, real property investments presented to and rejected by the Corporation or
the Advisor), or interests in Persons engaged in real estate business, including
Persons authorized as investments pursuant to Section 7.3 hereof. Subject to the
provisions of Article VII, any Director, officers, employee, or agent of the
Corporation may (i) be interested as trustee, officer, director, stockholder,
partners, member, advisor, or employee of or otherwise have direct or indirect
interest in any Person who may be engaged to render advice or services to the
Corporation, and (ii) receive compensation from such Person as well as
compensation as Director, officer, or otherwise hereunder. Notwithstanding the
foregoing, each Director shall disclose to the Corporation any interest he has
in any investment opportunity presented to the Corporation and any such interest
known by him to be held by any person of which he is an Affiliate.
7.4 Transactions Between the Corporation and Affiliated Persons. In the
-----------------------------------------------------------
absence of fraud, except as prohibited by these Bylaws, a contract, act, or
other transaction between the Corporation and any other Person shall be valid
even though (i) one or more Directors or officers are directly or indirectly
interested in or connected with, or are trustees, partners, directors, officers
or retired officers of, such other Person, or (ii) one or more Directors or
officers, individually or jointly with others, are a party or are parties to,
directly or indirectly interested in, or otherwise connected with, such
contract, act, or transaction. No Director or officer shall be under any
disability from or have any liability as a result of entering into any such
contract, act, or transaction unless he is aware of the conflict or
relationship, provided that (a) such interest or connection is disclosed or
known to the Directors and thereafter the Directors authorize such contract,
act, or other transaction by vote sufficient of such purpose by an affirmative
vote of a majority of the Directors not so interested, (b) such interest or
connection is disclosed or known to the Shareholders, and thereafter such
contract, act, or transaction is approved by the Shareholders, or (c) such
contact, act or transaction is fair and reasonable to the Corporation at the
time it is authorized by the Board or by the Shareholders.
The Corporation shall not directly or indirectly sell any asset to a
Director, or any affiliated Person, or any partnership in which any of the
foregoing may also be a general partner, and the Corporation will not directly
or indirectly purchase any asset from any such Person who
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acquired it for the purpose of reselling it to the Corporation unless that
Person acquired it for sale to the Corporation upon completion of financing
arrangements by the Corporation; provided, however, that nothing herein shall be
deemed to preclude the Corporation from (i) entering into a joint venture with
any such Person if it pays no more than the cost of that real property to that
Person and the purchase price does not exceed the appraised value of the
property.
ARTICLE VIII
MISCELLANEOUS
8.1 Inspection of Bylaws. The Corporation shall keep at its principal
--------------------
office the original or a copy of the Bylaws and any amendments thereto certified
by the Corporation Secretary. Those Bylaws shall be open to inspection by
Shareholders at all reasonable times during office hours.
8.2 Inspection of Corporate Records. The accounting books and records and
-------------------------------
the minutes of proceedings of the Shareholders and the Board and committees
thereof shall be open to inspection upon the written demand on the Corporation
by any Shareholder or holder of a voting trust certificate at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a Shareholder or as the holder of such voting trust
certificate.
8.3 Checks, Drafts, Etc. All checks, drafts, or other orders for payment
-------------------
of money, notes, or other evidences of indebtedness that are issued in the name
of or payable to the Corporation shall be signed or endorsed by such person or
persons and in such manner as determined by resolution of the Board.
8.4 Execution of Contracts, Etc. Except as otherwise provided herein, the
---------------------------
Board may authorize any officer or officers or agent or agents to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation. This authority may be general or confined to specific instances.
Unless so authorized by the Board, no officer, agent or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit to render it liable for any purpose or to any amount.
8.5 Representation of Shares of Other Corporations. The Chairman or the
----------------------------------------------
President (or, in the event of his absence or inability to serve, any Vice
President) and the Secretary or Assistant Secretary of the Corporation are
authorized to vote, represent, and exercise on behalf of the Corporation all
rights incidental to any and all interests of any other entity standing in the
name of the Corporation. The authority granted to said officers may be exercised
either by such officers in person or by any person authorized to do so by proxy
or power of attorney duly executed by said officers.
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8.6 Annual Report. Not later than 120 days after the close of the fiscal
-------------
or calendar year, the Board shall cause to be sent to the Shareholders, an
Annual Report in such form as may be deemed appropriate. The Annual Report shall
include a statement of assets and liabilities and a statement of income and
expense of the Corporation, along with a statement of changes in Shareholder
equity. These financial statements shall be accompanied by the report of an
independent certified public accountant thereon.
8.7 Quarterly Reports. At least quarterly, the Corporation shall send
-----------------
interim reports to the Shareholders having such form and content as the Board
deems proper.
8.8 Other Reports. Any distributions to security holders of income or
-------------
capital assets shall be accompanied by a written statement disclosing the source
of the funds distributed unless at the time of distributions this information is
not available, in which case the distribution shall be accompanied by a written
explanation of the relevant circumstances and a statement as to such source
shall be sent to the Shareholders not later than 60 days after the close of the
fiscal year in which the distributions were made.
8.9 Bylaws Severable. The provisions of these Bylaws are severable, and if
----------------
any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.
ARTICLE IX
AMENDMENTS TO BYLAWS
9.1 Power of Shareholders. No amendment may be made to these Bylaws unless
---------------------
approved by the vote of the holders of a majority of the voting securities
outstanding; except that no amendment which would change any rights with respect
to any outstanding class of securities, by reducing the amount payable thereon
upon liquidation, or by diminishing or eliminating any voting rights pertaining
thereto, may be made unless approved by the vote of the holders of two-thirds of
the outstanding securities of such class.
9.2 Dissolution by Shareholders. The Corporation may be dissolved at any
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time by the vote of the holders of a majority of its Shareholders.
A-20
<PAGE>
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PROXY
SOLICITED ON
BEHALF OF THE
BOARD OF DIRECTORS
___________________
BURNHAM PACIFIC
PROPERTIES, INC.
POST OFFICE BOX 1551
SAN DIEGO, CA 92112
___________________
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS--MAY 3, 1994
The undersigned hereby constitutes and appoints, LOUIS J. GARDAY and RONALD R.
HRUSOFF, or either of these with full power of substitution, attorneys and
proxies of the undersigned, to represent the undersigned and vote all shares of
Common Stock, no par value, of BURNHAM PACIFIC PROPERTIES, INC., which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders to be held at the Hyatt Regency, San Diego, One Market
Place, San Diego, California 92101 on Tuesday, May 3, 1994 at 10:30 a.m., and at
any adjournment thereof, in the following manner.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 1, 2 AND 3.
1. Election of Directors.
Nominees are: Malin Burnham, Louis J. Garday, Philip L. Gildred, Jr.,
Robert J. Lauer, Thomas A. Page, Henry Rasmussen, Jr. and Richard R. Tartre.
[_] FOR all nominees listed above, except vote withheld from following
nominees (if any)
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[_] WITHHELD from all nominees
FOR AGAINST ABSTAIN
2. To approve amended and restated bylaws. [_] [_] [_]
3. To approve amendment to Stock Option Plan increasing from 1,000 to 5,000 the
number of shares granted to Non-employee Directors upon their election each
year. [_] [_] [_]
If properly executed, the shares represented by this proxy will be voted in the
manner directed. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES AND FOR PROPOSALS 2 AND 3. To vote in accordance with
the Board's recommendations, just sign the reverse side of this card; no boxes
need to be checked.
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The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement relating to such meeting. If your account
is registered in more than one name, all joint owners should sign. Trustees and
others acting in representative capacities should indicate the capacity in
which they are signing. If a corporation, sign in full corporate name by
authorized officer. If a partnership, sign in partnership name by authorized
person.
Dated: ____________________________
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Please mark, date and sign this
proxy and return it promptly whether
or not you plan to attend the Annual
Meeting. If you do attend, you may
still vote in person if you desire.
CHECK HERE IF YOU PLAN TO ATTEND THE
MEETING [_]
IMPORTANT: PLEASE COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY.
A SELF-ADDRESSED STAMPED ENVELOPE IS ENCLOSED.
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