<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-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, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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 Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
610 WEST ASH STREET
SAN DIEGO, CA 92101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Friday, May 17, 1996
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 Red Lion Hotel,
7450 Hazard Center Drive, San Diego, California, on Friday, May 17, 1996 at
10:00 a.m. for the following purposes:
1. To elect nine Directors for the ensuing year;
2. To approve Amendments to the Corporation's Stock Option Plan (as
amended and restated through 1993, (the "Plan")) to (i) increase the
number of shares of the Corporation's Common Stock subject to issuance
under the Plan by approximately 4.7% of the total number of
outstanding shares, and (ii) replace the current cash retainer,
meeting fees and stock options granted to non-employee Directors with
a quarterly grant of 1,000 shares of Common Stock; and
3. 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 19, 1996 are entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof.
March 29, 1996 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 17, 1996
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 Red Lion
Hotel, 7450 Hazard Center Drive, San Diego, California, on Friday, May 17, 1996
at 10:00 a.m. and any adjournment or postponement thereof ("the Annual
Meeting"). The mailing date of this Proxy Statement is on or about March 29,
1996.
As more fully described in this Proxy Statement, the shareholders will be
asked to consider and act upon (i) the annual election of Directors; (ii)
certain amendments to the Corporation's Stock Option Plan; and (iii) any other
matters that may properly come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on March 19, 1996 are
entitled to notice of and to vote at such meeting. On such date, there were
17,081,452 shares of the Corporation's no par value common stock issued and
outstanding. A majority of the shares entitled to vote 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
Secretary of 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 I
ELECTION OF DIRECTORS
The Corporation's Bylaws currently provide that the number of Directors
shall be not less than seven, nor more than thirteen. The Board of Directors
has fixed the number of Directors to be elected at the Annual Meeting at nine,
each to hold office for the term of one year or until his successor is elected
and qualified.
As no nominations other than those made by the Board of Directors were
received prior to December 31, 1995, as required by the Bylaws, voting will be
non-cumulative. Assuming the presence of a quorum, the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted will be
elected, and votes withheld will have no legal effect.
The nominees for Director and the 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 nominees
for Director. As of March 19, 1995, the current Directors and executive
officers of the Corporation in the aggregate had the right to vote 368,891
shares of the Corporation's common stock, representing approximately 2.1% 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 will vote for another person of their
choice.
<PAGE>
NOMINEES FOR DIRECTOR
The following persons are the nominees for election to the Board of
Directors:
MALIN BURNHAM, age 68, has been Chairman of the Board of Directors since
1986 and served as interim President and Chief Executive Officer from October
1994 until J. David Martin's appointment effective October 1, 1995. Mr. Burnham
is a private investor. He is also Chairman of John Burnham & Company, a
Director of the First National Bank of San Diego and a Trustee of The Burnham
Institute.
PHILIP L. GILDRED, JR., age 59, has been a Director since 1986. He is a
Director and President of Gildred Development Company and Secretary-Treasurer of
Gildred Building Company. Both of these companies are engaged in the ownership
and development of Southern California real estate. Mr. Gildred also is a
Director and Founding Chairman of the Sharp Hospital Foundation.
JAMES D. KLINGBEIL, age 60, has been Chairman, President and Chief
Executive Officer of American Apartment Communities, Inc., which is the
successor entity to The Klingbeil Company, which he founded in 1961. Both of
these companies are engaged in the ownership and development of housing
nationwide. He is a Trustee and former President of the Urban Land Institute,
and a member of the Chief Executives Organization and World Business Council,
and serves on the Policy Advisory Board for the Center for Real Estate and Urban
Economics, University of California. He has also served as Public Interest
Director, Federal Home Loan Bank of Cincinnati, as a member of the Young
Presidents' Organization and the Federal Home Loan Mortgage Corporation
("FHLMC") Advisory Board.
VICTOR B. MACFARLANE, age 44, became Chief Executive Officer of General
Electric Capital Investment Advisors in January, 1996. Mr. MacFarlane is also a
partner in Johnson/MacFarlane Urban Partners, a joint venture with Johnson
Development Corporation. Prior to that, he was Chief Executive Officer of
MacFarlane Partners, L.P., an institutional real estate investment advisory
firm, for more than five years. He is currently Communications Chairman for the
Young Presidents' Organization, and a Trustee of the GESU School in
Philadelphia, Pennsylvania.
J. DAVID MARTIN, age 40, became President, Chief Executive Officer and a
Director of the Corporation effective October 1, 1995. From 1984 until joining
the Corporation, Mr. Martin was the Founder, Chairman and Chief Executive
Officer of The Martin Group of Companies, Inc. (the "Martin Group"), a
full-service real estate development and management company. Mr. Martin's
experience includes land, retail, research, office and residential real estate.
DONNE P. MOEN, age 60, is the retired President and Vice Chairman of Union
Bank in California, where he served in a variety of executive positions from
1963 until 1992. Mr. Moen is also a member of the board of a number of civic
and nonprofit organizations including The Los Angeles Library Foundation, The
Los Angeles Urban League, Los Angeles Educational Partnership, Toberman
Settlement House, and Chadwick School.
THOMAS A. PAGE, age 62, has been a Director since 1992. Since 1983, Mr.
Page has been Chairman of the Board and through 1995 served as Chief Executive
Officer of San Diego Gas & Electric Company. Mr. Page is also Chairman of Enova
Corp. and is a member of the California Business Roundtable, the Board of
Overseers of the University of California at San Diego, and a Trustee of The
Burnham Institute. He is a certified public accountant and a professional
engineer.
2
<PAGE>
RICHARD R. TARTRE, age 57, has been a Director since 1986. Since May 1995,
he has been President and CEO of Astra Management Corp., a mutual fund
management firm. Prior to that date, for more than five years, he had served as
Managing Director of Eden Financial Group Inc., a marketer of insurance and
investment products. Mr. Tartre is a licensed securities principal and also
serves as a Director of Mission West Properties and Triton Group, Ltd.
PHILIP S. SCHLEIN, age 61, has been a partner in U.S. Venture Partners, a
California based venture capital company, since 1985. Prior to that time, he
had a 28-year career in the retailing industry, including serving as President
and Chief Executive Officer of Macy's California from 1974 to 1985. Mr. Schlein
was a member of the Board of Directors of Apple Computer, Inc. from 1979 to
1987. He currently serves as a Director of Ross Stores, Inc., ReSound
Corporation, Quick Response Services, Imaginarium, Una Mas!, and Home Chef.
EXECUTIVE OFFICERS
The following persons are executive officers of the Corporation:
NAME POSITIONS
---- ---------
J. David Martin President, Chief Executive Officer
Daniel B. Platt Executive Vice President, Chief
Financial Officer, Chief Administrative
Officer
Michael L. Rubin Executive Vice President, Chief
Operating Officer
James M. Kessler Executive Vice President, Director of
Development
MR. MARTIN'S biography is set forth above.
MR. PLATT, age 49, became an officer of the Corporation effective October
1, 1995. Prior to joining the Corporation, Mr. Platt was a real estate
consultant. Until 1994 Mr. Platt was Group Executive Vice President of Bank of
America with responsibility for merging the real estate lending activities of
the two Banks upon Bank of America's acquisition of Security Pacific Bank in
1992. Mr. Platt joined Security Pacific in 1990 as Executive Vice President
responsible for creating a new real estate workout group and in 1991 was made
Vice Chairman of the Real Estate Industries Group, where he assumed additional
corporate management responsibilities for all real estate activities. Prior to
joining Security Pacific, Mr. Platt spent 20 years with Union Bank, where he was
responsible for all real estate and commercial lending activities.
MR. RUBIN, age 50, has been a Vice President of the Corporation since 1986
and became Executive Vice President in 1992 and Chief Operating officer in 1993.
Through 1991, he was concurrently an officer of John Burnham & Company. Mr.
Rubin is a Certified Property Manager and a licensed real estate broker.
MR. KESSLER, age 43, became an officer of the Corporation effective October
1, 1995. Since 1990, Mr. Kessler had served as Executive Vice President of the
Martin Group, with overall responsibility for the company's retail developments.
Between 1985 and 1990 Mr. Kessler served as Director of Marketing for
Transpacific Development Company, with overall responsibility for the marketing
of the company's northern California portfolio valued in excess of $500 million.
3
<PAGE>
BENEFICIAL OWNERSHIP
The following table sets forth the beneficial ownership of the
Corporation's common stock by the nominees for Director of the Corporation, as
of March 19, 1996. The Corporation is not aware of any beneficial owner of more
than five percent of the outstanding common stock as of that date.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
---- -------------------- --------
<S> <C> <C>
Malin Burnham 321,219(1)(2) 1.9%
Philip L. Gildred, Jr. 30,528(1) *
James D. Klingbeil 0 *
Victor B. MacFarlane 0 *
J. David Martin 273,310(1)(3) 1.6%
Donne P. Moen 700(1) *
Thomas A. Page 26,975(1) *
Philip S. Schlein 0 *
Richard R. Tartre 85,910(1) *
All Director nominees and executive
officers of the Corporation as a
group 12 persons) 1,032,962(1)(3) 5.8%
</TABLE>
------------------
*less than 1%
(1) Based upon information provided by the Director nominees and executive
officers, such persons have the direct right to vote and dispose of all
such shares except for the following number of shares included in the table
which are not yet outstanding which the following persons have the right
presently to acquire under outstanding options that are vested or will vest
within 60 days: Messrs. Burnham 166,500, Gildred 27,000, Martin 250,000,
Page 15,000, Tartre 17,440, all Director nominees and executive officers as
a group 732,140.
(2) Includes 8,837 shares of Common Stock held by Mr. Burnham as trustee, as to
which Mr. Burnham disclaims beneficial ownership.
(3) Mr. Martin also holds 23,310 limited partnership units in a partnership of
which the Corporation is general partner that owns a completed retail
center acquired from Mr. Martin and other affiliates of the Martin Group.
Each such unit is exchangeable on a 1-for-1 basis for a share of the
Corporation's common stock after November 30, 1996. Mr. Kessler, an
executive officer, holds 9,213 of such exchangeable limited partnership
units.
DIRECTORS' AND COMMITTEE MEETINGS
During 1995, the Board of Directors met 20 times. Each of the Directors
attended at least 75% of the total number of Board meetings and the total number
of meetings of Board committees on which he served. The Corporation has
standing Audit and Compensation Committees. There is no separate Nominating
Committee.
AUDIT COMMITTEE. The members of this committee during 1995 were Messrs.
Page (Chairman), Tartre and Henry Rasmussen, Jr., who will retire from the Board
of Directors as of the Annual Meeting. This committee advises and assists the
Corporation's principal financial officer in making periodic overall reviews
4
<PAGE>
of the Corporation's internal controls and financial statements, appoints the
Corporation's independent auditors for the Corporation's annual audit, meets
periodically with the auditors to discuss their audit, and advises and provides
oversight of the Corporation's internal audit activities. This committee held
two meetings in 1995.
COMPENSATION COMMITTEE. The members of this committee during 1995 were
Robert J. Lauer (Chairman), and Messrs. Gildred, Rasmussen and Tartre. Mr.
Lauer is not standing for re-election as a Director at the Annual Meeting. This
committee held five meetings in 1995. See "Report of the Compensation
Committee" for additional information.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Corporation's executive
officers and directors, and persons who are beneficial owners of more than 10%
of a registered class of the Corporation's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than 10% beneficial owners are
required by SEC regulations to furnish the Corporation with copies of all
Section 16(a) forms they file. To the Corporation's knowledge, based solely on
review of the copies of such reports furnished to the Corporation, and written
representations that no other reports were required during the fiscal year ended
December 31, 1995, all Section 16(a) filing requirements applicable to such
persons were satisfied.
EXECUTIVE COMPENSATION
DIRECTORS
During 1995, the Corporation paid Directors Gildred, Lauer, Page, Rasmussen
and Tartre an annual retainer fee of $12,000, plus $750 for each board or
committee meeting attended and $500 for each telephonic meeting. In addition,
the Directors who chair the Audit Committee and the Compensation Committee
receive an additional $500 per quarter. Each of these Directors also received a
grant of options to purchase 5,000 shares of common stock when they were elected
at the 1995 Annual Meeting. See "Report of the Compensation Committee" for
additional compensation paid to Lauer & Georgatos, of which Mr. Lauer is a
principal.
Mr. Burnham received a partial retainer of $3,000 plus $750 for one meeting
attended after his resignation as interim President and Chief Executive Officer.
Mr. Burnham also received a special grant of options to purchase 125,000 shares
in recognition of his contribution in stabilizing the affairs of the Corporation
and in developing its strategy for continuing operations. Mr. Martin receives
no compensation for his services as a Director in addition to his compensation
as President and Chief Executive Officer.
For 1996 and thereafter, in lieu of the cash compensation and option grants
for non-employee Directors described above each such Director will receive a
quarterly grant of 1,000 shares of common stock as of the last day of each
calendar quarter, subject to the approval at the Annual Meeting of the proposed
amendments to the Corporation's stock option plan described below under
"Proposal 2."
EXECUTIVE OFFICERS
Compensation paid to each person serving as Chief Executive Officer and
each other officer whose total compensation for 1995 was $100,000 or more is
summarized in the following table. Also see below under "Report of the
Compensation Committee" and "Certain Transactions with Management."
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 (# Shares) sation
- - -------- ---- -------- ------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. David Martin(1) 1995 $ 62,500 $ -0- (2) 250,000 $ -0-
President/CEO
Malin Burnham(3) 1995 $ 3,750 $ -0- (2) 125,000 $ -0-
Interim President/CEO 1994 $ 12,750 $ -0- (2) 5,000 $ -0-
Daniel B. Platt(1) 1995 $ 50,000 $ -0- (2) 175,000 $ -0-
Executive VP/CFO
Michael L. Rubin 1995 $175,000 $28,000 (2) -0- $ 3,500(4)
Executive VP/COO 1994 $160,000 $25,000 (2) -0- $ 3,200(4)
1993 $149,000 $30,000 (2) 10,000 $ 2,981(4)
James M. Kessler(1) 1995 $ 47,500 $ -0- (2) 30,000 $ -0-
Executive VP
Kim S. Kundrak(5) 1995 $140,000 $ -0- (2) -0- $ 2,333(4)
Senior VP/Finance 1994 $110,000 $25,000 (2) -0- $ 2,200(4)
1993 $ 99,000 $30,000 (2) 8,000 $ 1,981(4)
</TABLE>
- - --------------
(1) Messrs. Martin, Platt and Kessler joined the Corporation effective October
1, 1995.
(2) Other annual compensation, if any, constituted less than 10% of such
person's salary and bonus.
(3) Mr. Burnham served as interim President and Chief Executive Officer from
October, 1994 to October 1, 1995 without cash compensation. The amounts
shown as salary reflect compensation to Mr. Burnham in his capacity as a
non-employee Director.
(4) Corporation's matching contributions to employee's 401(k) plan.
(5) Mr. Kundrak resigned as an officer of the Corporation effective September
30, 1995.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Options granted to any of the officers listed in the Summary Compensation
Table above during 1995 are summarized in the following table.
<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 (# SHARES) YEAR SHARE DATE 5%(3) 10%(4)
---- ---------- ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
J. David Martin 250,000(1) 40% $12.875 7/18/2005 $2,024,255 $5,129,859
President/CEO
Malin Burnham 141,000(2) 23% $12.50 6/1/2005 $1,108,427 $2,808,971
Daniel B. Platt 175,000(1) 28% $12.875 7/18/2005 $1,416,978 $3,590,901
Executive VP/CFO
James M. Kessler 30,000(1) 5% $12.875 7/18/2005 $242,911 $615,583
Executive VP
</TABLE>
- - ----------------
(1) These options are nonqualified stock options and will be vested and
fully exercisable on the date of the Annual Meeting.
(2) These options are nonqualified stock options which were fully vested as
of the grant date, June 1, 1995.
(3) Assumes a 5% per annum cumulative increase in price for the 10 years of
the option term.
(4) Assumes a 10% per annum cumulative increase in price for the 10 years
of the option term.
7
<PAGE>
AGGREGATED OPTIONS EXERCISED IN LAST
FISCAL YEAR AND YEAR-END OPTION VALUE
The following table sets forth information with respect to options
exercised during 1995 and unexercised options at the end of the year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END
(#) ($)
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- - ---- --------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
J. David Martin -0- -0- 0/250,000 0/0
President/CEO
Malin Burnham 16,000 -0- 166,500/0 0/0
Interim Pres/CEO
Michael L. Rubin -0- -0- 33,700/0 0/0
Executive VP/COO
Kim S. Kundrak -0- -0- 18,450/0 0/0
Senior VP/Finance
</TABLE>
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION COMMITTEE RESPONSIBILITIES
Prior to 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. In March 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. The Committee has as one of
its primary responsibilities the periodic reevaluation of compensation to be
paid to the Chief Executive Officer, as well as the compensation to be paid to
certain 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 may not be granted at less than market prices prevailing at the
time of the option grant.
NEW CHIEF EXECUTIVE AND OTHER OFFICERS
Effective upon the resignation of the former Chief Executive Officer in
October 1994, Malin Burnham, who has served as Chairman of the Board of
Directors since the Corporation's inception, assumed the responsibilities of
President and Chief Executive Officer on an interim basis until such time as a
permanent Chief Executive Officer could be identified and hired. Mr. Burnham
served in this capacity without cash compensation.
After a thorough search and extensive negotiations, the Corporation and J.
David Martin agreed (i) that the Corporation would acquire from Mr. Martin's
development company, the Martin Group, interests in six San Francisco-area
retail properties consisting of one completed and operating center, one center
currently under construction and four properties to which the Martin Group
affiliates owned development rights and that were in various stages of pre-
construction development, and (ii) that Mr. Martin would become the new
President and Chief Executive Officer of the Corporation. See "Certain
Transactions with Management" below for additional information regarding the
acquisition transaction. Messrs. Platt and Kessler also agreed to join the
Corporation at this time as Executive Vice Presidents, strengthening the
Corporation's senior management ranks.
Mr. Martin joined the Corporation effective October 1, 1995. Pursuant to
his Employment Agreement of the same date (the "Employment Agreement"), Mr.
Martin serves as the Corporation's President, Chief Executive Officer and a
Director for an indefinite term, subject to termination by the Corporation or
Mr. Martin. Pursuant to the Employment Agreement, Mr. Martin receives a base
salary of $250,000 per year. Mr. Martin will also be entitled to a bonus for
1996 and each subsequent year in such amount as the Committee determines. As an
inducement to join the Corporation Mr. Martin was granted a non-transferable
stock option for 250,000 shares of the Corporation's common stock at an exercise
price of $12.875 per share. Pursuant to the Employment Agreement, Mr. Martin
may continue in his capacity as Chairman of the Board and sole stockholder, but
not as an employee, of the Martin Group.
9
<PAGE>
EXECUTIVE COMPENSATION FOR 1995
BASE COMPENSATION
In 1995, Mr. Burnham served as interim Chief Executive Officer without cash
compensation. Mr. Martin's base annual compensation in his capacity as Chief
Executive Officer since October 1, 1995 was established in his Employment
Agreement. It has been the practice of the Corporation to evaluate the base
annual salary of other executives of the Corporation annually after consultation
with the Chief Executive Officer.
In December 1994, the Committee met to consider adjustments in the base
compensation of the Corporation's executive officers and to determine whether
supplemental bonus compensation should be awarded. With respect to Mr. Rubin,
the Committee recognized that the number of properties under management had
increased significantly since the last evaluation of Mr. Rubin's performance in
May 1993. Further, the Committee was aware that the leasing environment in
southern California continued to be very competitive and that maintaining high
levels of occupancy at market rents would continue to require considerable time
and effort. In recognition of these factors, the Committee increased Mr.
Rubin's base compensation from $160,000 for 1994 to $175,000 for 1995. This
level of base compensation is commensurate with the responsibilities assigned to
Mr. Rubin as the Corporation's Chief Operating Officer, and the Committee
believes it is within the range of compensation paid to persons holding similar
positions in equity REITs having characteristics similar to those of the
Corporation.
With respect to Mr. Kundrak, who resigned as the Corporation's Chief
Financial Officer effective September 30, 1995, in December 1994 the Committee
increased Mr. Kundrak's base compensation from $110,000 for 1994 to $140,000 for
1995. This level of base compensation was felt to be commensurate with the
responsibilities assigned to Mr. Kundrak and was believed by the Committee to be
within the range of compensation paid to persons holding similar positions in
equity REITs having characteristics similar to those of the Corporation.
SUPPLEMENTAL COMPENSATION
Supplemental or bonus compensation is awarded to executive officers of the
Corporation at the discretion of the Committee, which generally meets near the
end of the fiscal year or early in the next fiscal year to consider such awards.
In January 1996, the Committee awarded supplemental compensation for 1995
to Mr. Rubin. The Committee measured his performance primarily by reference to
the occupancy levels in the Corporation's properties as well as his performance
of additional management responsibilities during 1995 following the resignation
of the former Chief Executive Officer in late 1994. Based on its subjective
evaluation, the Committee awarded Mr. Rubin bonus compensation of $28,000 for
1995.
STOCK OPTIONS
The Committee believes that the Chief Executive Officer and the other
executive officers should have an equity interest in the Corporation, and that
options to acquire increased stakes in the Corporation are an appropriate
component of an overall compensation program. However, the Committee does not
view such options as a significant component of current compensation. In
connection with his agreeing to join the Corporation, Mr. Martin received an
option grant for 250,000 shares of the Corporation's common stock. As discussed
under "Executive Compensation" above, for his contribution in stabilizing the
affairs of the
10
<PAGE>
Corporation and in developing its strategic plans, Mr. Burnham was granted an
option for 125,000 shares by the Committee in June 1995.
It had been the prior practice of the Committee to award stock options at
such times as the Corporation offers common stock for sale in a public offering.
Partly as a result of the need to recruit the Corporation's new senior
management, the Committee determined to discontinue the Corporation's practice
of awarding stock options only in connection with public stock offerings.
Similarly, at the request of the Corporation's new senior management team, the
Committee is reconsidering the Corporation's prior practice of not including
vesting or termination provisions as conditions of its option grants, and
intends to include such provisions in the future.
PROPOSED CHANGES FOR THE FUTURE
Upon joining the Corporation in late 1995, the new senior management team
engaged a number of specialists and consultants to report on various aspects of
the Corporation's operations, including reviews of property management,
accounting and legal matters. As part of this process, and with the assent of
the Committee, the Corporation engaged Watson Wyatt Worldwide, a leading
compensation consulting firm, to help the Corporation assess the competitiveness
of its compensation and benefits program and to make recommendations.
The Corporation's compensation consultant reviewed base salary, bonus and
stock option compensation at all levels of the organization, from Chief
Executive Officer to receptionist, and compared the Corporation's compensation
to published survey data for real estate companies with assets ranging from $500
million to $750 million. The consultant's final report was received in January
1996, and management and the Committee are considering the consultant's
findings. The consultant also worked with the Corporation to develop a proposal
to replace the existing program of cash retainers, meeting fees and stock
options for non-employee Directors with a stock-only program, as further
discussed under "Proposal 2" below.
COMMITTEE MEMBERSHIP AND INDEPENDENCE
No member of the Committee was or is an officer or employee of the
Corporation. However, Mr. Lauer, who served as 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 1995, the
Corporation paid fees and related disbursements to Lauer & Georgatos totaling
$100,000, of which $34,000 was for such tax services and an additional $66,000
was for special services of Mr. Lauer on behalf of the Board of Directors in
connection with the Company's negotiations and due diligence activities related
to the transactions with the Martin Group. (See "Certain Transactions With
Management.")
Robert J. Lauer, Chairman
Philip L. Gildred, Jr.
Henry Rasmussen, Jr.
Richard R. Tartre
11
<PAGE>
STOCK PERFORMANCE
The following graph compares the Corporation's stock price for the past
five years with the Standard & 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.
12
<PAGE>
PROXY.XLS
<TABLE>
<CAPTION>
BPP NAREIT/Eq S&P 500
------ --------- -------
<S> <C> <C> <C>
Q4 1990 100.00 100.00 100.00
Q1 1991 143.02 122.74 114.56
Q2 143.77 123.70 114.32
Q3 141.00 126.76 120.48
Q4 144.02 135.70 130.55
Q1 1992 157.94 136.60 127.22
Q2 160.96 140.20 129.72
Q3 153.92 149.76 133.74
Q4 165.92 155.49 140.56
Q1 1993 212.06 189.14 146.59
Q2 209.87 183.71 147.34
Q3 210.29 200.89 151.11
Q4 190.18 186.06 154.60
Q1 1994 204.40 192.39 148.71
Q2 194.83 195.93 149.31
Q3 186.52 191.92 156.67
Q4 151.83 191.95 156.63
Q1 1995 144.610 191.63 171.87
Q2 167.60 202.90 188.18
Q3 144.42 212.46 203.14
Q4 124.420 221.26 215.25
</TABLE>
<PAGE>
PROPOSAL 2
AMENDMENT OF THE 1987
STOCK OPTION PLAN
BACKGROUND OF THE PLAN
The Corporation adopted its stock option plan in November 1987 (as amended
in 1992 and 1993, the "Plan"). The Plan is administered by the Committee. The
Plan provides for options to purchase the Corporation's common stock, which may
be either "incentive stock options" as defined by the Internal Revenue Code or
"nonqualified options." Each grant must provide an exercise price of at least
100% of the fair market value of the common stock on the date the options are
granted as determined by the Committee. All options expire 10 years from the
date of grant, although the Committee has authority to establish an earlier
expiration date at the time of granting any options. The Plan may be amended by
the Board of Directors, subject to shareholder approval of certain amendments.
PROPOSED AMENDMENT OF THE PLAN
The Corporation is seeking shareholder approval of amendments to the Plan
approved by the Board of Directors (the "Amendments") to (i) increase the number
of shares of common stock available for issuance under the Plan by 800,000
shares, and (ii) replace the current 5,000-share option grants automatically
granted to non-employee Directors each year (and the cash retainer and meeting
fees currently paid to such Directors) with quarterly grants of 1,000 shares of
common stock.
INCREASE IN NUMBER OF SHARES
As last amended in 1993, the Plan provided for the issuance of up to
1,000,000 shares of common stock pursuant to the exercise of options granted
under the Plan. These shares had been significantly depleted by 1995, in part
because of the Board of Directors' belief that stock options should not be
reserved exclusively for senior management but should be granted as a
performance incentive throughout the organization. In addition, during 1995 the
Board of Directors was engaged in the process of searching for, and later
negotiating with, the Corporation's new Chief Executive Officer and several
other new senior executive officers. The Board recognized that significant
option grants would be a necessary inducement to attract the highly-qualified
individuals the Corporation was seeking (and ultimately found).
Accordingly, on November 28, 1995, the Board of Directors adopted an
amendment to the Plan, subject to shareholder approval, to increase the number
of shares of common stock available for issuance under the Plan by 800,000
shares, and to make certain non-substantive, conforming changes in the text of
the Plan. The Board of Directors believes that the additional 800,000 shares,
which represent approximately 4.7% of the current number of outstanding shares
of common stock, are necessary for the Corporation to continue to attract and
retain the type of highly-qualified officers and employees necessary for its
future growth.
REPLACEMENT OF ANNUAL OPTION GRANTS TO NON-EMPLOYEE DIRECTORS WITH
QUARTERLY STOCK GRANTS
The Plan currently provides for annual grants of nonqualified options to
purchase 5,000 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 is equal to the fair market value determined by the trailing 10-day
average closing price. In addition to these grants, the non-employee Directors
also currently receive a cash retainer and cash meeting fees as described above
under "Executive Compensation--Directors."
13
<PAGE>
In order to more closely align the interests of the Directors with those of
the Corporation's shareholders, while continuing to attract and retain the type
of experienced and knowledgeable outside Directors the Corporation relies upon
for strategic direction and guidance, the Board adopted an amendment to the Plan
on March 12, 1996. Pursuant to this amendment, which was adopted using the
advice of the Compensation Consultant and is subject to shareholder approval at
the meeting, the 5,000-share annual option grants to non-employee Directors, as
well as the cash retainer and meeting fees, would be terminated. In lieu
thereof, such Directors would receive a quarterly grant of 1,000 shares of the
Corporation's common stock, payable on the last day of each calendar quarter
(and prorated for service of less than the full quarter). The Board retains the
right to pay cash compensation to non-employee Directors for other services
rendered to the Corporation, including service as a Board or Committee Chairman.
The Board believes that this shift to straight equity in lieu of cash
compensation is appropriate and is in line with the director compensation
philosophy now being pursued by many public companies in the real estate and
other industries.
PLAN BENEFITS TABLE
The following table sets forth certain benefits which have already been
granted or may accrue in 1996 to the named individuals and groups under the
Plan, to the extent currently determinable, if the Amendments are approved by
the Corporation's shareholders. If the proposed Amendments are not approved,
the options to Messrs. Martin, Platt and Kessler described below will be deemed
to have been made outside of the Plan, with potential adverse consequences to
him under the federal securities laws.
<TABLE>
<CAPTION>
Number of
Name of Person or Group Options or Shares
- - ----------------------- -----------------
<S> <C>
J. David Martin................................................. 250,000(1)
Malin Burnham................................................... 4,000(2)
Daniel B. Platt................................................. 175,000(1)
Michael L. Rubin................................................ 17,500(3)
James M. Kessler................................................ 30,000(1)
Kim S. Kundrak.................................................. (4)
All non-employee Directors as a group........................... 32,000(2)
All executive officers as a group............................... 472,500(1)(3)
All employees, excluding executive officers, as a group......... 59,000(5)
</TABLE>
________________
(1) Options granted to Messrs. Martin, Platt and Kessler at an exercise price
of $12.875 per share in connection with their joining the Corporation.
(2) Under the Plan as proposed to be amended, each non-employee Director would
receive a quarterly grant of 1,000 shares of common stock.
(3) Options granted January 2, 1996 at an exercise price of $12.50 per share.
Executive officers and all other full-time employees are eligible to be
granted options at the discretion of the Committee. The amount of any such
grants is not known at this time.
(4) No longer employed by the Corporation.
14
<PAGE>
(5) This amount represents options granted to seven employees on January 2,
1996. These persons are eligible to be granted additional options at the
discretion of the Committee.
VOTE REQUIRED APPROVAL
Approval of the Amendments requires the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock represented and entitled to
vote at the Annual Meeting. Abstentions will have the same effect as a vote
against the Amendments and broker non-votes, if any, will have no effect. THE
BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENTS ARE IN THE BEST INTERESTS OF THE
CORPORATION AND THEREFORE RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENTS.
CERTAIN TRANSACTIONS WITH MANAGEMENT
MARTIN GROUP TRANSACTION
On September 28, 1995, immediately prior to Mr. Martin's appointment as
President, Chief Executive Officer and Director, the Corporation, Mr. Martin and
various other persons affiliated with the Martin Group (collectively "Martin
Group affiliates") entered into agreements relating to the Corporation's
acquisition from the Martin Group affiliates of a portfolio of six retail
properties in the San Francisco Bay area (the "Martin Properties") consisting of
one completed and operating retail center, one center currently under
construction and four properties (the "Development Properties") to which the
Martin Group affiliates owned development rights and that are in various stages
of pre-construction development. The acquisition vehicles for the six Martin
Properties are six separate limited partnerships of which the Corporation is
general partner and the Martin Group affiliates are the limited partners. Each
of the partnership agreements contemplates that the Corporation will acquire or
develop a specified Martin Property through the relevant partnership and that
upon completion and stabilization of the property the Corporation will receive
an initial 10% annual return on its investment. Under the terms of these
agreements, the Martin Group affiliates have contributed all of their interest
in the relevant Martin Properties in exchange for limited partnership interests
in the respective partnerships.
The Corporation closed the acquisition of the completed retail center
effective November 30, 1995. Consistent with the relevant September 28, 1995
agreement, at such closing the Corporation (i) funded the acquiring
partnership's payment of approximately $1.4 million to acquire minority
interests, (ii) as general partner of the acquiring partnership, became
responsible for mortgage indebtedness of approximately $7,132,000 secured by the
center, and (iii) issued 41,878 limited partnership units to the Martin Group
affiliates (23,310 of which were issued to Mr. Martin) in exchange for their
interest in the center. Each such unit may be "put" to the Corporation or
exchanged for a share of common stock of the Corporation on a 1-for-1 basis as
described below. For the retail center currently under construction, the
relevant partnership will become effective only upon completion of construction
and stabilization of net operating income, at which time the partnership will
become responsible for mortgage indebtedness of approximately $19.2 million
secured by such retail center. Upon the closing of the acquisition of the
development rights for each of the Development Properties, the Corporation
became obligated to contribute funds to the partnership sufficient to reimburse
the Martin Group affiliates for their out-of-pocket costs with respect to the
relevant Development Property and thereafter to make further contributions to
the partnership to fund the completion of the Development Property. The Board
of Directors of the Corporation (exclusive of Mr. Martin) has authority to
determine not to proceed with the commencement of construction of a Development
Property under certain circumstances, in which case the Martin Group affiliates
would have the option to reacquire the Property at the Corporation's cost.
15
<PAGE>
The partnership agreements for the center currently under construction and
each of the Development Properties provide that upon completion of the relevant
property the annualized stabilized net operating income of the property will be
multiplied by 10 in order to arrive at the completed value of the property, the
cost of construction and other project costs will be deducted from such
completed value in order to "value" the equity interests of the limited partners
in the property, and such equity interest will be stated as a number of limited
partnership units determined by dividing such limited partners' equity by $16.
The actual value of such limited partnership units is intended to be the market
value of an equivalent number of shares of the Corporation's common stock,
inasmuch as each holder of limited partnership units will have the right to
"put" such units to the partnership at the then market value of an equivalent
number of Corporation shares. Upon the exercise of such "put," the Corporation
has the option of exchanging such units for Corporation shares on a 1-for 1
basis.
The maximum number of limited partnership units in all six Partnerships
that may be issued to the Martin Group affiliates for their prior interests in
all six Martin Properties, and therefore the maximum number of shares of
Corporation shares into which such units may be exchanged, is 1,915,000, which
number may be decreased (but not increased) if the cost of construction is
higher and/or the stabilized net operating income of the Properties is lower
than estimated. Martin Group affiliates, in addition to Mr. Martin, include
James M. Kessler, who was also appointed an executive officer of the Corporation
effective October 1, 1995.
The Corporation's Board of Directors asked Mr. Lauer to participate
actively on their behalf in the negotiations and due diligence with respect to
the transactions with the Martin Group. The Corporation paid Lauer & Georgatos,
of which Mr. Lauer is a principal, fees and related disbursements of $66,000 for
the services of Mr. Lauer in such capacity in addition to the regular
compensation paid to him as a Director and in addition to $34,000 paid to such
firm for tax services.
OTHER TRANSACTIONS
In April 1995, the Corporation entered into an agreement to contribute up
to $650,000 as an investor in a real estate advisor organized to provide
advisory services to investment vehicles acquiring real property located in the
Republic of Mexico. The Corporation's Chairman, Malin Burnham, and two other
unrelated individuals are the managers of, and individually own interests in,
the advisor. In November 1995, following the investment of $350,000 in the
advisor, and in conjunction with the Board of Directors' determination to
concentrate the Corporation's future activities on retail properties, the
Corporation terminated the contribution agreement and wrote off its investment
in the advisor.
The Corporation temporarily advanced the $200,000 purchase price for 16,000
shares of its common stock purchased during 1995 by each of three Directors,
Messrs. Burnham, Rasmussen and Tartre, at the then $12.50 per share fair market
value of such stock. Each of Messrs. Rasmussen and Tartre paid the Corporation
$100,000 of the purchase price shortly after their purchase and the balance of
the purchase price prior to year-end. At December 31, 1995, Mr. Burnham was
obligated to the Corporation for $197,000 for this advance which has
subsequently been fully repaid. Each Director paid the Corporation interest on
the outstanding advances to him at a rate equal to the Corporation's cost of
borrowing under its bank line of credit.
AUDITORS
The Corporation's financial statements for the year ended December 31, 1995
were audited by Deloitte & Touche LLP, which has audited the Corporation's books
and records since 1986.
16
<PAGE>
Representatives of Deloitte & Touche LLP 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 THE 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 of
Burnham Pacific Properties, Inc., 610 West Ash Street, Suite 1600, San Diego,
California 92101, no later than December 31, 1996.
OTHER MATTERS
All shareholders of record at the close of business on March 19, 1996, 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, 1995.
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. Officers or other employees of the Corporation may, without
additional compensation therefor, solicit proxies in person, by telephone,
facsimile or mail. 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 persons named as
proxies will vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
BURNHAM PACIFIC PROPERTIES, INC.
Nina Galloway,
Secretary
San Diego, California
March 29, 1996
17
<PAGE>
The undersigned hereby constitutes and appoints J. David Martin and Daniel
B. Platt, or either of them, 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 Red Lion Hotel, 7450 Hazard Center
Drive, San Diego, California on Friday, May 17, 1996 at 10:00 a.m., and at any
adjournment or postponement thereof.
The Board of Directors recommends a Vote FOR all of the matters proposed.
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 PROPOSAL 2. To vote in accordance with the
Board's recommendation, just sign the reverse side of this card, no box needs to
be checked.
IMPORTANT: PLEASE COMPLETE, SIGN AND
RETURN THIS PROXY PROMPTLY.
A SELF-ADDRESSED STAMPED ENVELOPE
IS ENCLOSED.
PROXY
BURNHAM PACIFIC
PROPERTIES, INC.
PROXY FOR
ANNUAL MEETING
OF SHAREHOLDERS
MAY 17, 1996
TRIANGLE DETACH ABOVE CARD, SIGN, DATE AND MAIL IN
POSTAGE PAID ENVELOPE PROVIDED TRIANGLE
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of FOR WITHHELD Nominees are: Malin Burnham, Philip L.
Directors. / / / / Gildred, Jr., James D. Klingbell, Victor
B. MacFarlane, J. David Martin, Donne P.
Moen, Thomas A. Page, Richard R. Tartre
and Philip S. Schlein
2. To approve the amendments to the FOR AGAINST ABSTAIN
Corporation's Amended and Restated 1987 / / / / / /
Stock Option Plan as described in the
enclosed Proxy Statement.
For, except vote withheld from the following nominee(s):
- - --------------------------------------------------------
CHECK HERE IF YOU
PLAN TO ATTEND THE / /
MEETING
The undersigned acknowledges receipt of the Corporation's 1995 Annual Report and
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.)
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.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SIGNATURE(S) DATE
TRIANGLE DETACH ABOVE CARD, SIGN, DATE AND MAIL IN
POSTAGE PAID ENVELOPE PROVIDED TRIANGLE
BURNHAM PACIFIC PROPERTIES, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
