<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 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/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 TUESDAY, MAY 6, 1997
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 San Diego
Hilton Beach & Tennis Resort, 1775 East Mission Bay Drive, San Diego,
California, on Tuesday, May 6, 1997 at 10:00 a.m. for the following purposes:
1. To elect nine Directors;
2. To consider and approve the change of the Corporation's state of
incorporation from California to Maryland through a merger of the
Corporation into a newly-formed Maryland subsidiary, and the conversion
of each outstanding share of common stock of the Corporation into a
corresponding share of common stock of the surviving Maryland
corporation. Approval of the Corporation's change of domicile will
constitute approval of all of the provisions set forth in the Articles of
Incorporation and Bylaws of the Maryland corporation and certain other
matters as described in the Proxy Statement attached hereto.
3. To consider and approve an amendment and restatement of the
Corporation's Stock Option Plan.
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 14, 1997 are entitled to notice of and to vote at
the Annual Meeting and any adjournment or postponement thereof.
March 31, 1997 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
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1997
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 San
Diego Hilton Beach & Tennis Resort, 1775 East Mission Bay Drive, San Diego,
California, on Tuesday, May 6, 1997 at 10:00 a.m., and any adjournment or
postponement thereof ("the Annual Meeting"). This Proxy Statement and the
accompanying Notice of Annual Meeting of Shareholders and Proxy Card are first
being mailed to shareholders on or about March 31, 1997.
As more fully described in this Proxy Statement, the shareholders will be
asked to consider and act upon (i) the election of nine Directors; (ii) approval
of the change of the Corporation's state of incorporation from California to
Maryland through a merger of the Corporation into a newly-formed Maryland
subsidiary, and the conversion of each outstanding share of common stock of the
Corporation into a corresponding share of common stock of the surviving Maryland
corporation; (iii) an amendment and restatement of the Corporation's Stock
Option Plan; and (iv) such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on March 14, 1997 are
entitled to notice of and to vote at such meeting. On such date, there were
17,096,452 shares of the Corporation's common stock, no par value per share (the
"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.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Annual Meeting is required for the election
of Directors. A majority of the total votes cast at the Annual Meeting is
required for each of the remaining proposals. Abstention and broker non-votes
are each included in the number of shares present at the Annual Meeting for
purposes of establishing a quorum. The vote of a majority of the outstanding
shares entitled to vote is required to approve the reincorporation of the
Corporation and the vote of a majority of the shares represented at the Annual
Meeting is required to approve the amendment and restatement of the Stock Option
Plan. Abstentions and broker non-votes will have the same effect as a vote
against these proposals.
A shareholder may revoke a proxy given with respect to the Annual 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 1
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.
1
<PAGE>
As no nominations other than those made by the Board of Directors were
received prior to December 31, 1996, 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 14, 1997, the current Directors and executive officers of
the Corporation in the aggregate had the right to vote 320,816 shares of the
Corporation's Common Stock, representing approximately 1.9% 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. The Board of Directors anticipates that each of the nominees for
Director will serve as a director if elected. However, if any person nominated
by the Board of Directors is unable to accept election, the proxies will be
voted for the election of such other person or persons as the Board of Directors
may recommend.
NOMINEES FOR DIRECTOR
The following persons are the nominees for election to the Board of
Directors:
MALIN BURNHAM, age 69, has been Chairman of the Board of Directors since
1986 and served as interim President and Chief Executive Officer from October
1994 to September 1995. Mr. Burnham is a private investor. He is also Chairman
of John Burnham & Company and of First National Bank (San Diego) and a Trustee
of The Burnham Institute.
JAMES D. HARPER, JR., age 63, a new candidate for Director, has been
President of JDH Realty Co. in Miami, Florida since 1982. He is also the
principal partner in AH Development, S.E. and AH HA Investments, S.E., both of
which are partnerships developing land in Puerto Rico. From 1971 until 1985, Mr.
Harper worked for Continental Illinois Corporation, serving as its Executive
Vice President in charge of all domestic and international real estate services
beginning in 1974. From 1969 until its acquisition by Continental Illinois
Corporation in 1971, Mr. Harper served as President and Chief Executive Officer
of Group Counselor's Inc., a privately held REIT management company.
JAMES D. KLINGBEIL, age 61, has been a Director since 1996. He is Chairman,
President and Chief Executive Officer of American Apartment Communities, Inc. 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.
J. DAVID MARTIN, age 41, became President, Chief Executive Officer and a
Director of the Corporation on 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 of which Mr. Martin still retains the
title of Chairman. Mr. Martin is a Trustee of Golden Gate University and a
member of the Policy Advisory Board for the Center for Real Estate and Urban
Economics at the University of California. He is a Director of the Bay Area
Council and a Director of the Bay Area Economic Forum. Mr. Martin is an officer
of the Golden Gate Chapter of the Young Presidents' Organization. He is also a
member of the Urban Land Institute, International Council of Shopping Centers
and the National Association of Real Estate Investment Trusts.
DONNE P. MOEN, age 61, has been a Director since 1996. He 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.
2
<PAGE>
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 63, 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.
PHILIP S. SCHLEIN, age 62, has been a Director since 1996. He 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 and a number of
private companies.
RICHARD R. TARTRE, age 58, has been a Director since 1986. Since January
1997, Mr. Tartre has been a Senior Vice President of MetLife, Chairman of
MetLife Securities Inc., and Chairman of MetLife General Agency Inc. Formerly he
had been President and Chief Executive Officer of Astra Management Corp., a
mutual fund management firm for one year. Prior to that, for more than five
years, he had served as Managing Director of Eden Financial Group Inc., a
national 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.
ROBIN WOLANER, age 42, a new candidate for Director, is a Director of
IFUSIONcom Corporation, a company involved in Internet multimedia programming,
and a Director of Medical SelfCare Inc., a health products marketing company.
Throughout much of 1996, Ms. Wolaner also served as Executive Vice President of
IFUSIONcom Corporation. From 1992 to 1995, she was President and Chief Executive
Officer of Sunset Publishing Corporation. In 1986, Ms. Wolaner founded The
Parenting Group, later serving as its President and Chief Executive Officer from
1990 to 1992. Ms. Wolaner also served as the Vice President in charge of
Development of Time Publishing Ventures from 1990 to 1992. She is a frequent
public speaker and has been an instructor at the Radcliffe Publishing Procedures
Course since 1982.
EXECUTIVE OFFICERS
The following persons are executive officers of the Corporation:
<TABLE>
<CAPTION>
NAME POSITIONS
- - ------------------------ -------------------------------------------------------------------
<S> <C>
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, Regional Operating Officer, San Diego
Region
James M. Kessler Executive Vice President, Regional Operating Officer, San Francisco
Region
James W. Gaube Executive Vice President, Regional Operating Officer, Pacific
Northwest Region
</TABLE>
Mr. Martin's biography is set forth above.
MR. PLATT, age 50, has been the Chief Financial Officer and Chief
Administrative Officer of the Corporation since 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
3
<PAGE>
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 51, has been a Vice President of the Corporation since 1986
and became Executive Vice President in 1992 and Chief Operating officer in 1993.
Mr. Rubin is a Certified Property Manager and a licensed real estate broker.
MR. KESSLER, age 44, has been Executive Vice President and Director of
Development of the Corporation since October 1, 1995. From 1990 until joining
the Corporation, 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.
MR. GAUBE, age 47, joined the Corporation February 1, 1997 as an Executive
Vice President. From June 1995 until joining the Corporation, Mr. Gaube served
as Senior Vice President of Real Estate, Design & Construction for Thrifty
Payless, Inc. From July 1994 through May 1995, Mr. Gaube served as Western
Regional Director of Real Estate for Home Depot and from 1986 through June 1994,
he served as Senior Vice President of Real Estate & Construction for Payless
Drug Stores Northwest, Inc. Beginning in 1966, Mr. Gaube enjoyed a twenty year
career at Safeway Stores, Inc. where he served as Regional Real Estate Director
prior to leaving.
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Corporation's
common stock by the nominees for Director of the Corporation, as of December 31,
1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP OF CLASS
- - ------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Malin Burnham...................................................... 335,090(1)(2) 1.8%
James D. Harper, Jr................................................ -- --
James D. Klingbeil................................................. 8,594 *
J. David Martin.................................................... 593,310(1)(3) 3.2%
Donne P. Moen...................................................... 4,775(1) *
Thomas A. Page..................................................... 9,801(1) *
Philip S. Schlein.................................................. 1,902 *
Richard R. Tartre.................................................. 87,110(1) *
Robin Wolaner...................................................... -- --
All Director nominees and executive officers of the Corporation as
a group 13 persons)............................................... 1,510,755(1)(3) 8.1%
</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, Martin 550,000, Page 15,000, Tartre 17,440,
all Director nominees and executive officers as a group 1,160,140.
4
<PAGE>
(2) Includes 8,857 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. Mr. Kessler, an executive officer, holds 9,213 of such
exchangeable limited partnership units.
BENEFICIAL OWNERSHIP OF NON-MANAGEMENT
Information known to the Corporation with respect to beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act")) of more than 5% of the Shares as of December 31, 1996 is as
follows. Such information is based upon filings received by the Corporation
under the Exchange Act.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME ND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- - ------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Morgan Stanley Group Inc.(1)....................................... 1,166,100 6.8%
1585 Broadway
New York, NY 10036
</TABLE>
- - ------------------------
(1) In a filing on Schedule 13G under the Exchange Act dated February 14, 1997,
Morgan Stanley Group Inc. and its wholly-owned subsidiary, Morgan Stanley
Asset Management Inc., reported that the former had shared voting and
dispositive power with respect to 228,300 and 1,166,100 of such Shares,
respectively and that the latter had shared voting and dispositive power
with respect to 222,000 and 1,159,800 of such Shares, respectively.
DIRECTORS' AND COMMITTEE MEETINGS
During 1996, the Board of Directors met nine times. Each of the Directors
attended at least 75% of the total number of Board meetings, with the exception
of Victor B. MacFarlane who missed three meetings. Each of the Directors
attended at least 75% of 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 from January 1, 1996 until
the 1996 Annual Meeting held on May 17, 1996, were Messrs. Thomas A. Page
(Chairman), Richard R. Tartre and Henry Rasmussen, Jr., who retired from the
Board of Directors as of the Annual Meeting. The members of this committee for
the remainder of 1996 were Messrs. Donne P. Moen (Chairman), Philip L. Gildred,
Jr., and Richard R. 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, 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 1996, one before and one after the Annual Meeting.
COMPENSATION COMMITTEE. The members of this committee from January 1, 1996
until the 1996 Annual Meeting held on May 17, 1996, were Messrs. Robert J. Lauer
(Chairman), Henry Rasmussen, Jr., neither of whom stood for reelection, Philip
L. Gildred, Jr. and Richard R. Tartre. The members of this committee for the
remainder of 1996 were Messrs. Thomas A. Page (Chairman), James D. Klingbeil,
and Philip S. Schlein. This committee held one meeting, in December 1996. See
"Report of the Compensation Committee" for additional information.
5
<PAGE>
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,
1996, all Section 16(a) filing requirements applicable to such persons were
satisfied, with the exception of Mr. Klingbeil's inadvertent failure to file a
Form 4 in a timely fashion with respect to one purchase of Common Stock.
EXECUTIVE COMPENSATION
DIRECTORS
During 1996, the Corporation paid Directors Burnham, Gildred, Lauer, Page,
Rasmussen and Tartre a retainer fee of $6000 each, plus $750 for each board or
committee meeting attended and $500 for each telephonic meeting, for their
services as Directors up until the date of the 1996 Annual Meeting of
Shareholders held on May 17, 1996 (the "1996 Annual Meeting"). In addition, the
Directors who chaired the Audit Committee and the Compensation Committee
received $1000 in cash. Thereafter, pursuant to a change in the Corporation's
Stock Option Plan approved at the 1996 Annual Meeting, the Corporation granted,
in lieu of all retainer and meeting fees, to each Director with the exception of
Mr. Martin, 375 Director Restricted Shares on June 30, 1996, 750 Director
Restricted Shares on September 30, 1996, and 750 Director Restricted Shares on
December 31, 1996. Mr. Martin receives no compensation for his services as a
Director in addition to his compensation as President and Chief Executive
Officer.
EXECUTIVE OFFICERS
Compensation paid to each person serving as Chief Executive Officer and each
other officer whose total compensation for 1996 was $100,000 or more is
summarized in the following table. Also see below under "Report of the
Compensation Committee."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- AWARDS
OTHER ----------------------------
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (# SHARES) COMPENSATION
- - -------------------------------------------- --------- --------- --------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. David Martin(1).......................... 1996 $ 250,000 $ -0- (2) 300,000 $ -0-
President/CEO 1995 $ 62,500 $ -0- (2) 250,000 $ -0-
Daniel B. Platt(1).......................... 1996 $ 200,000 $ -0- (2) 125,000 $ 2,000(3)
Executive VP/CFO 1995 $ 50,000 $ -0- (2) 175,000 $ -0-
Michael L. Rubin............................ 1996 $ 175,000 $ -0- (2) -0- $ 3,500(3)
Executive VP/COO 1995 $ 175,000 $ 28,000 (2) -0- $ 3,500(3)
1994 $ 160,000 $ 25,000 (2) -0- $ 3,200(3)
James M. Kessler(1)......................... 1996 $ 175,000 $ -0- (2) 30,000 $ 1,750(3)
Executive VP 1995 $ 47,500 $ -0- (2) 30,000 $ -0-
Ira Schwartz................................ 1996 $ 103,904 $ -0- (2) -0- $ 1,929(3)
Senior VP 1995 $ 85,000 $ 13,600 (2) 6,000 $ 1,700(3)
1994 $ 64,583 $ 11,000 (2) -0- $ 1,550(3)
</TABLE>
- - ------------------------
(1) Messrs. Martin, Platt and Kessler joined the Corporation effective October
1, 1995.
6
<PAGE>
(2) Other annual compensation, if any, constituted less than 10% of such
person's salary and bonus.
(3) Corporation's matching contributions to employee's 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
Options granted to any of the officers listed in the Summary Compensation
Table above during 1996 are summarized in the following table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE PER EXPIRATION GRANT DATE
NAME (# SHARES) YEAR SHARE(1) DATE PRESENT VALUE(5)
- - --------------------------------------------- ----------- ------------- ----------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
J. David Martin.............................. 300,000(2) 60% $ 12.50 12/5/2006 $ --
President/CEO
Daniel B. Platt.............................. 125,000(2) 25% $ 12.50 12/5/2006 $ --
Executive VP/CFO
Michael L. Rubin............................. 17,500(3) 3% $ 12.50 1/2/2006 $ --
Executive VP/COO
James M. Kessler............................. 30,000(2) 6% $ 12.50 12/5/2006 $ --
Executive VP
Ira Schwartz................................. 6,000(4) 1% $ 12.50 1/2/2006 $ --
Senior VP
</TABLE>
- - ------------------------
(1) Exceeds the closing market price of the common stock on the respective grant
dates.
(2) These options are nonqualified stock options, one third of which will vest
on December 5, 1997, a third of which will vest on December 5, 1998, and a
third of which will vest on December 5, 1999.
(3) These options are incentive stock options, 5,834 of which were fully vested
as of May 17, 1996, 5,833 of which will fully vest on January 2, 1997, and
5,833 of which will fully vest on January 2, 1998.
(4) These options are incentive stock options, 2,000 of which were fully vested
as of May 17, 1996, 2,000 of which will fully vest on January 2, 1997, and
2,000 of which will fully vest on January 2, 1998.
(5) The option values presented are based on the Black-Scholes option-pricing
model adapted for use in valuing stock options. The Black-Scholes model
relies on several key assumptions to estimate the present value of options,
including the volatility of and dividend yield on the security underlying
the option, a risk-free rate of return on the date of grant, and the term of
the option. In calculating the grant date present values set forth in the
table, the Black-Scholes option-pricing model used the following
weighted-average assumptions: 8.0% dividend yield, expected volatility of
24%, risk-free rate of return of 6.14%, forfeiture rate of 0%, and expected
lives of 5 years. There is no assurance that these assumptions will prove to
be true in the future. Consequently, the grant date present values set forth
in the table are only theoretical values and may not accurately determine
present value. The actual value, if any, that may be realized by each
individual will depend on the market price of Common Stock on the date of
exercise.
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 1996 and unexercised options at the end of the year.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNEXERCISED UNEXERCISED
OPTIONS AT OPTIONS AT
FY-END FY-END
(#) ($)
VALUE ----------------- --------------------
SHARES ACQUIRE REALIZED EXERCISE/ EXERCISE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
-------------------------- ------------------- ----------- ----------------- --------------------
<S> <C> <C> <C> <C>
J. David Martin............................. -0- -0- 250,000/300,000 $531,250/$750,000
President/CEO
Daniel B. Platt............................. -0- -0- 175,000/125,000 $371,875/$312,500
Executive VP/CFO
Michael L. Rubin............................ -0- -0- 39,534/11,666 $ 14,585/$29,165
Executive VP/COO
James M. Kessler............................ -0- -0- 30,000/30,000 $ 63,750/$75,000
Executive VP
Ira Schwartz................................ -0- -0- 3,000/4,000 $ 5,000/$10,000
Senior VP
</TABLE>
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The current Compensation Committee of the Board of Directors consists of
three members, all of whom are independent directors of other companies. Two
members of the Committee have extensive experience as directors and chief
executive officers of public companies or major operating divisions of public
companies and the third has extensive experience as a director and chief
executive officer of a private company.
The Compensation Committee was encouraged by the full Board of Directors to
continue the initiative established by the Corporation's new senior management
in late 1995 in re-examining, with the assistance of consultants and
specialists, all of the Corporation's practices and procedures. Accordingly,
during 1996 the Compensation Committee worked with the Corporation's
compensation consultant with the goal of assessing the competitiveness of the
Corporation's compensation and benefits program and of enhancing the program and
maintaining its competitiveness by incorporating incentive-based compensation
strategies.
The compensation consultant's report, which reviewed industry background and
appropriate comparatives, provided recommendations regarding both compensation
structure in general and specific compensation for various positions. The
consultant's final report was received in November 1996, and based on this
report and the consultant's presentation at a meeting of the Compensation
Committee in December 1996, the Committee concluded that the total compensation
for the Chief Executive Officer and the other executive officers should be
consistent with a subset of the REIT industry that reflects similar business
characteristics as the Corporation. The Committee decided that it would address
any inconsistency with this subset over a reasonable period of time, taking into
consideration corporate results, officer performance assessment and value
received by the Corporation's shareholders.
At the December 1996 meeting, the Committee adopted several principles to
guide it in establishing executive compensation. In an effort to align employee
and owner interests in the Corporation, the Committee decided that executive
compensation should be heavily weighted toward incentives. While viewing the
years 1996 and 1997 as transition years in which incentive targets will likely
remain general and subjective, the Committee decided that progress should be
made toward more discretely measurable targets. The implementation of the
incentives will take the form of largely stock-based incentives with respect to
employees at the officer level and largely cash-based incentives below the
officer level.
Recognizing that the REIT industry is undergoing significant change, the
Committee decided that the compensation policy and the structure of compensation
should be closely monitored to assure that the Corporation's compensation
program remains competitive and consistent with the industry. To assist in
achieving this objective, the Committee decided to continue to retain the
consultant to provide recommendations as to reasonable comparatives and
compensation components and levels on an ongoing basis. .
SALARY AND BONUS
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 received a base salary at the
annual rate of $250,000 in 1995. Mr. Martin's salary was continued at the same
annual rate of $250,000 throughout 1996. At its meeting in December 1996, after
considering the data furnished by the consultant and evaluating the performance
of Mr. Martin, the Committee voted to increase Mr. Martin's base annual salary
to $350,000 effective April 1, 1997.
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Mr. Platt also joined the Corporation on October 1, 1995 as Chief Financial
Officer and an Executive Vice President, at a base annual salary of $200,000.
Mr. Platt's salary remained at this level throughout 1996. At its December 1996
meeting, the Committee voted to increase Mr. Platt's base salary to $250,000
effective April 1, 1997. Mr. Rubin, the Chief Operations Officer and an
Executive Vice President, and Mr. Kessler, an Executive Vice President who also
had joined the Corporation on October 1, 1995, each entered 1996 with a base
salary of $175,000 which remained level throughout the year. At its December
1996 meeting, the Committee decided to continue the salaries of Messrs. Rubin
and Kessler at this level for 1997.
Supplemental or bonus compensation is awarded to the Chief Executive Officer
and the executive officers of the Corporation at the discretion of the
Committee. Recognizing that 1996 was a transition year, the Committee decided
that it would not be appropriate to grant cash bonuses to any of the executive
officers for 1996. In lieu of a cash bonus and in keeping with its policy of
providing incentive-based compensation, the Committee voted to grant certain
stock options as described below. See also "Option Grants in Last Fiscal Year."
STOCK OPTIONS
The Committee believes that the Chief Executive Officer and the other
executive officers should have the opportunity to acquire a significant equity
interest in the Corporation, and that options to acquire increased stakes in the
Corporation are an appropriate component of an overall compensation program. As
noted above, at its meeting in December 1996, the Committee reiterated its
compensation philosophy of aligning employee and owner interests. Incorporating
this philosophy with the desire to provide compensation consistent with officer
compensation of other REITs with similar business characteristics, the Committee
granted Mr. Martin an option for 300,000 shares, Mr. Platt an option for 125,000
shares, and Mr. Kessler an option for 30,000 shares, all exercisable at $12.50
per share, the then current value of the Corporation's stock on the New York
Stock Exchange. The Committee noted that Mr. Rubin and certain other
long-standing employees of the Corporation had been granted stock options
earlier in the year by the prior committee. See "Option Grants in Last Fiscal
Year."
COMMITTEE MEMBERSHIP AND INDEPENDENCE
No member of the Committee was or is an officer or employee of the
Corporation. Mr. Lauer, who served as the Chairman of the prior committee until
the 1996 Annual Meeting, is a principal of the accounting firm of Lauer &
Georgatos, which provides tax planning and tax return preparation services to
the Corporation. In 1996, the Corporation paid fees and related disbursements to
Lauer & Georgatos totaling $20,493, all of which was for such tax services.
Thomas A. Page, Chairman
James D. Klingbeil
Philip S. Schlein
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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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BPP NAREIT/EQUITY S&P 500
<S> <C> <C> <C>
Dec-91 100.00 100.00 100.00
Dec-92 115.96 114.59 107.87
Dec-93 133.56 137.11 118.43
Dec-94 107.18 141.46 119.97
Dec-95 88.33 163.06 164.88
Dec-96 145.94 220.56 202.74
</TABLE>
PROPOSAL 2
APPROVAL OF THE REINCORPORATION OF THE CORPORATION
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Corporation's state of incorporation from California to Maryland (the
"Reincorporation"). The primary purpose of the proposed change in domicile is to
avoid the applicability of certain provisions under the California General
Corporation Law (the "CGCL") which restrict the Corporation's ability to make
distributions to its shareholders and could potentially prevent the Corporation
from making distributions in an amount necessary to qualify as a REIT under the
Code. The CGCL permits a corporation to make a distribution to its shareholders
only if (i) its retained earnings immediately prior to payment of the
distribution are at least equal to the amount of the distribution, or (ii)
generally, its total assets (determined on the basis of their depreciated
historical cost in accordance with generally accepted accounting principles
("GAAP") and exclusive of certain intangible assets) are equal to at least 1
times its total liabilities (excluding certain deferred items) immediately after
giving effect to the distribution. Although the Corporation currently satisfies
this requirement under the CGCL, the Board of Directors has proposed the
Reincorporation because there can be no assurance that the Corporation will
continue to be able to satisfy this requirement in the future and also make
distributions in an amount necessary to maintain its REIT status. As a Maryland
corporation, the Corporation may make distributions if, after giving effect to
the distribution, the Corporation would be able to pay its indebtedness as it
becomes due in the usual course of business and its total assets would at least
equal its total liabilities.
The Board of Directors also considered a second factor in determining that
the Reincorporation is in the best interests of the Corporation's shareholders.
Maryland is the state of incorporation for many corporations that qualify as
REITs. As such, the Corporation believes that Maryland law offers more certainty
as to the rights and obligations of the Corporation, and its directors, officers
and shareholders and, as a result of the Reincorporation, the Corporation
expects greater predictability with respect to these matters.
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In addition to eliminating the applicability of California's restrictions on
distributions to shareholders and affording the Corporation greater
predictability with respect to its corporate affairs, the Reincorporation will
bring about a number of other changes. Such changes are described below under
the heading "Comparison of Rights of Shareholders of the Corporation and
Stockholders of the Maryland Corporation."
In the event that the Reincorporation is not approved, the Corporation will
continue to operate as a California corporation and will continue to be subject
to California's restrictions on distributions to shareholders.
MERGER OF THE CORPORATION INTO A NEWLY FORMED MARYLAND SUBSIDIARY
The proposed Reincorporation will be accomplished by merging the Corporation
into a newly formed Maryland subsidiary of the Corporation (the "Maryland
Corporation"), pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), a copy of which is attached as Appendix A to this Proxy Statement.
The Maryland Corporation has been incorporated in Maryland specifically for the
purpose of implementing the Reincorporation and has conducted no business and
has no material assets or liabilities. After completion of the merger, the
Corporation will cease to exist under California law and the Maryland
Corporation will continue to operate the business of the Corporation under the
name Burnham Pacific Properties, Inc. Under the Merger Agreement, each
outstanding share of the Corporation's no par value Common Stock will be
automatically converted into one share of the Maryland Corporation's common
stock, $.01 par value per share (the "Maryland Common Stock"), at the effective
time of the merger. The Maryland Corporation's principal executive offices will
continue to be located at 610 West Ash Street, San Diego, California 92101. The
Reincorporation will not result in any change in the Corporation's business,
assets or liabilities and will not result in any relocation of management or
other employees. Shareholders of the Corporation will have no dissenters' rights
of appraisal with respect to the Reincorporation proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the Reincorporation proposal is in the
best interests of the Corporation and its shareholders and therefore recommends
that shareholders vote FOR approval of the proposal. A vote FOR the
Reincorporation proposal will constitute approval of (i) the change in the
Corporation's state of incorporation through a merger of the Corporation into
the Maryland Corporation, (ii) the Articles of Amendment and Restatement of the
Maryland Corporation in substantially the form set forth in Appendix B hereto
(the "Maryland Articles"), (iii) the Bylaws of the Maryland Corporation in
substantially the form set forth in Appendix C hereto (the "Maryland Bylaws"),
(iv) the assumption of the Corporation's employee benefit plans and stock option
plans, including the Stock Option Plan (or Stock Option and Incentive Plan, if
Proposal 3 is approved by the shareholders at the Annual Meeting), by the
Maryland Corporation, and (v) all other aspects of the Reincorporation proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL 2.
CERTAIN CONSEQUENCES OF THE MERGER
The following discussion summarizes certain terms of the Merger Agreement
and certain consequences of the merger. This description is qualified in its
entirety by reference to the Merger Agreement, the Maryland Articles and the
Maryland Bylaws, copies of which are attached to this Proxy Statement as
Appendices A, B and C, respectively.
EFFECTIVE TIME. The merger will take effect on the later of the time at
which the Merger Agreement and appropriate certificates are filed with the
Secretary of State of the State of California and the time at
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which Articles of Merger are filed with the State Department of Assessments and
Taxation of Maryland, which filings are anticipated to be made substantially
concurrently as soon as practicable after the Reincorporation proposal is
approved by the shareholders of the Corporation (such time will be referred to
herein as the "Effective Time"). At the Effective Time, the separate corporate
existence of the Corporation will cease and shareholders of the Corporation will
become shareholders of the Maryland Corporation.
MANAGEMENT AFTER THE MERGER. The current officers of the Corporation will
be the officers of the Maryland Corporation. Immediately after the Effective
Time, members of the Board of Directors of the Maryland Corporation (the
"Maryland Board of Directors") will be composed of the then current members of
the Board of Directors of the Corporation. The current members of the Board of
Directors will continue to hold office as directors of the Maryland Corporation
for the same terms for which they would otherwise have served as directors of
the Corporation.
CONVERSION OF COMMON STOCK. As a result of the Reincorporation, each
outstanding share of Common Stock of the Corporation will automatically be
converted into one share of Maryland Common Stock. Other than changes due to the
differences between California and Maryland law (see "Comparison of Rights of
Shareholders of the Corporation and Stockholders of the Maryland Corporation"),
there will be no changes in the rights, preferences and privileges of holders of
the Common Stock as a result of the Reincorporation. EACH OUTSTANDING
CERTIFICATE CURRENTLY REPRESENTING SHARES OF THE CORPORATION'S COMMON STOCK
WILL, AFTER THE MERGER, REPRESENT THE SAME NUMBER OF SHARES OF MARYLAND COMMON
STOCK. ACCORDINGLY, IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE CORPORATION
TO EXCHANGE THEIR EXISTING COMMON STOCK CERTIFICATES FOR MARYLAND COMMON STOCK
CERTIFICATES. The Maryland Common Stock will continue to be listed, without
interruption, on the NYSE under the same symbol ("BPP") as the Corporation's
Common Stock prior to the merger.
CAPITALIZATION OF THE MARYLAND CORPORATION. After the Reincorporation, the
authorized capitalization of the Maryland Corporation will consist of 75,000,000
authorized shares of $.01 par value Maryland Common Stock, and 5,000,000
authorized shares of $.01 par value preferred stock, of which no shares will be
issued and outstanding. The capitalization of the Corporation consists of
40,000,000 authorized shares of no par value Common Stock, of which there were
17,096,452 shares issued and outstanding on March 14, 1997, and 5,000,000
authorized shares of no par value preferred stock, of which no shares are issued
and outstanding. As is the case with the Corporation, the authorized but
unissued shares of the Maryland Common Stock and preferred stock of the Maryland
Corporation will be available for issue from time to time without further action
or authorization by the stockholders (except as required by law or by the rules
of any stock exchange on which the Maryland Corporation's securities may be
listed) for such corporate purposes as may be determined by the Board of
Directors. In this regard, the terms of any preferred stock to be authorized,
including dividend rates, conversion prices, voting rights, redemption prices,
and similar matters, will be determined by the Maryland Board of Directors. The
authorized capital of the Maryland Corporation will also include 20,000,000
shares of Excess Stock of $.01 par value, of which no shares will be issued and
outstanding. Shares of Excess Stock will be issued only upon exchange for Common
Stock or for preferred stock upon a holder thereof reaching the "Ownership
Limit" described under "Limit on Ownership; Excess Stock"' below. The Board of
Directors of the Maryland Corporation will have authority to reclassify the
aggregate 100,000,000 shares of capital stock among the authorized classes of
stock referred to above.
EMPLOYEE BENEFIT PLANS. Each of the Corporation's employee benefit plans,
including the Burnham Pacific Properties, Inc. Stock Option Plan (or Stock
Option and Incentive Plan, if Proposal 3 is approved by the shareholders at the
Meeting) (the "Stock Option Plan") will be continued by the Maryland Corporation
following the Reincorporation. Approval of the proposed Reincorporation will
constitute approval of the adoption and assumption of the Stock Option Plan by
the Maryland Corporation. In
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addition to the assumption by the Maryland Corporation of all options
outstanding under the Stock Option Plan, any and all other outstanding options
and other rights to acquire shares of Common Stock of the Corporation will be
converted into options or rights to acquire shares of Maryland Common Stock.
FRANCHISE TAX. After the Reincorporation, the Maryland Corporation will
continue to be subject to California's annual franchise tax because it conducts
business in California. However, as a Maryland corporation, the Maryland
Corporation will not be subject to any annual franchise taxes or other similar
taxes in Maryland other than a nominal personal property tax filing fee,
provided that the Maryland Corporation does not acquire property or otherwise
conduct business in Maryland and that Maryland does not alter its current laws.
FEDERAL INCOME TAX CONSEQUENCES. The Reincorporation is intended to be tax
free under the Code. Accordingly, no gain or loss will be recognized by the
holders of shares of the Corporation's Common Stock as a result of the
Reincorporation, and no gain or loss will be recognized by the Corporation or
the Maryland Corporation. Each former holder of shares of the Corporation's
Common Stock will have the same basis in the Maryland Common Stock received by
such holder pursuant to the Reincorporation as such holder has in the shares of
the Corporation's Common Stock held by such holder at the Effective Time. Each
stockholder's holding period with respect to the Maryland Common Stock will
include the period during which such holder held the shares of Common Stock,
provided the latter were held by such holder as a capital asset at the Effective
Time. The Corporation has not obtained a ruling from the Internal Revenue
Service with respect to the consequences of the Reincorporation.
The foregoing is only a summary of certain federal tax consequences.
Shareholders should consult their own tax advisers regarding the federal tax
consequences of the Reincorporation as well as any consequences under the laws
of any other jurisdiction.
SHAREHOLDERS' RIGHTS. Certain differences in shareholder rights exist under
the CGCL and Maryland General Corporation Law (the "MGCL"). For example, under
both the MGCL and the CGCL, shareholders have the right to call a special
meeting of shareholders; however, the MGCL requires that the request for a
special meeting be made by holders of a greater percentage of stock having the
right to vote (25% of all the votes entitled to be cast at the meeting unless,
as in the case of the Maryland Corporation, the bylaws provide for a greater
number not in excess of a majority of all such votes) than the percentage
required (10%) under the CGCL. Although not specifically governed by either the
CGCL or the MGCL, the Corporation's Bylaws and the Maryland Articles each
contain provisions designed to limit the ownership of shares by any one holder
to shares representing 9.8% of the value of all outstanding shares of the
Corporation or the Maryland Corporation as the case may be. See "Comparison of
Rights of Shareholders of the Corporation and Stockholders of the Maryland
Corporation" for a more complete discussion of the consequential effects of
these and other differences between the rights of shareholders under the CGCL
and the MGCL.
ACCOUNTING TREATMENT OF THE MERGER. For financial reporting purposes, as
well as for federal income tax purposes, the Maryland Corporation will be deemed
to be a continuation of the Corporation. Accordingly, all assets and liabilities
of the Corporation will be transferred to the Maryland Corporation at their
value on the Corporation's books at the Effective Time.
DISSENTERS' RIGHTS
California law provides that shareholders of a California corporation do not
have dissenters' rights where the corporation enters into a reorganization
transaction such that the corporation, or its shareholders immediately before
the reorganization, or both, shall own equity securities of the surviving
corporation possessing more than five-sixths of the voting power of the
surviving corporation. Consequently, no dissenters' rights will be available to
the Corporation's shareholders with respect to the Reincorporation.
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APPROVAL REQUIRED FOR REINCORPORATION
Consistent with the CGCL, the affirmative vote of a majority of the
outstanding shares of Common Stock of the Corporation entitled to vote on the
proposal is required for approval of the Reincorporation. The Reincorporation
may be abandoned or the Merger Agreement may be amended, either before or after
shareholder approval has been obtained, if in the opinion of the Board of
Directors circumstances arise that make such action advisable; however, no
amendment may be made to the Merger Agreement if it would have a material
adverse effect upon the rights of the Corporation's shareholders unless it has
been approved by the shareholders.
Because a majority of all outstanding shares entitled to vote is required,
an abstention from voting or a broker non-vote on this Proposal will have the
same effect as a vote against the Proposal.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF THE CORPORATION AND STOCKHOLDERS OF THE
MARYLAND CORPORATION
The Corporation is organized as a corporation under the laws of the State of
California and the Maryland Corporation is organized as a corporation under the
laws of the State of Maryland. As a California corporation, the Corporation is
subject to the CGCL, a general corporation statute dealing with a wide variety
of matters, including election, tenure, duties and liabilities of directors and
officers; dividends and other distributions; rights of shareholders; and
extraordinary actions, such as amendments to the articles of incorporation,
mergers, sales of all or substantially all of the Corporation's assets and
dissolution. The Corporation also is governed by its Articles of Incorporation,
as amended (the "California Articles"), and its Amended and Restated Bylaws (the
"California Bylaws"), which have been adopted pursuant to the CGCL. As a
Maryland corporation, the Maryland Corporation will be governed by the MGCL, a
general corporation statute covering substantially the same matters as are
covered by the CGCL, and by the Maryland Articles and the Maryland Bylaws. A
number of differences between the CGCL and the MGCL and among these various
documents are summarized below. The CGCL refers to "shareholders" and the MGCL
refers to "stockholders." The use of either term in this Proxy Statement refers
to the holders of capital stock of the Corporation or the Maryland Corporation
as the case may be.
The discussion of the comparative rights of the shareholders of the
Corporation and the stockholders of the Maryland Corporation set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to the CGCL and the MGCL and also to the California Articles,
California Bylaws, Maryland Articles and Maryland Bylaws. Copies of the Maryland
Articles and of the Maryland Bylaws are attached as Appendices B and C to this
Proxy Statement.
DIVIDENDS AND OTHER DISTRIBUTIONS. Under the CGCL, a corporation may only
make a distribution to shareholders if (i) its retained earnings immediately
prior to payment of the distribution are at least equal to the amount of the
distribution, or (ii) generally, its total assets (determined on the basis of
their depreciated historical cost in accordance with generally accepted
accounting principles ("GAAP") and exclusive of certain intangible assets and
certain other charges and expenses) are equal to 1 times its total liabilities
(excluding certain deferred items) immediately after giving effect to the
distribution and its current assets are at least equal to its current
liabilities (or, in certain circumstances, at least equal to 1 times its current
liabilities) immediately after giving effect to the distribution. The CGCL also
prohibits a California corporation from making any distribution to shareholders
if the corporation is or, as a result thereof, would be likely to be unable to
meet its liabilities as they mature. Moreover, the CGCL imposes certain further
limitations on distributions on Common Stock if capital stock with a preference
on distributions of assets upon liquidation is outstanding. The MGCL allows the
payment of dividends and other distributions unless, after giving effect to the
distribution, (i) the corporation would not be able to pay its indebtedness as
it becomes due in the ordinary course of business or (ii) the corporation's
total assets would be less than the sum of the corporation's liabilities plus,
unless the charter provides otherwise,
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the amount that would be needed upon dissolution to satisfy the preferential
rights of those stockholders whose preferential rights upon dissolution are
superior to those receiving the distribution.
The Corporation has historically paid quarterly cash dividends since its
incorporation in 1986 and the Maryland Corporation intends to continue to do so.
Like most REITs whose assets consist principally of real property, the
Corporation's distributions have reflected the amount of cash available for
distribution from property operations or from "funds from operations" rather
than from "retained earnings." ("Funds from operations," as currently defined by
the National Association of Real Estate Investment Trusts and as followed by the
Corporation, represents net income (computed in accordance with GAAP), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization of real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures.) Non-cash charges for
depreciation affect net income and consequently retained earnings, but not funds
from operations or cash available for distribution. The Corporation's quarterly
distributions over the past 10 years have exceeded its GAAP net income over the
period and resulted in negative "retained earnings" on the Corporation's balance
sheet, with the result that the Corporation's legal ability under the CGCL to
make distributions depends upon the book value of its assets exceeding 1 times
its liabilities. Such "book value" is also determined in accordance with GAAP,
which means that such book value cannot exceed the historic acquisition cost of
its properties less mandatory charges for depreciation since acquisition, and
accordingly may be significantly less than the actual fair value of the assets
at the time that distributions are made.
While the Corporation believes, based on certain assumptions regarding the
Corporation's future operations and the value of the Corporation's assets, that
the differences between California and Maryland law regarding dividends or
distributions is not likely to materially affect its payment of dividends in the
near future, there can be no assurance that the Corporation will continue to be
able to satisfy both the CGCL standard for dividends and other distributions and
the Code requirement that the Corporation make certain distributions in order to
maintain its REIT status. The MGCL provision regarding distributions is
therefore more favorable to the Corporation in the context of its continuing
ability to make distributions to its stockholders, including distributions
required to retain its qualification as a REIT.
LIMITATION OF LIABILITY. Pursuant to the CGCL and the California Articles,
the liability of directors of the Corporation to the Corporation or to any
shareholder of the Corporation for money damages for breach of fiduciary duty
has been eliminated except (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of the law, (ii) for acts or
omissions that a director believes to be contrary to the best interests of the
Corporation or its shareholders or that involve the absence of good faith on the
part of the director, (iii) for any transaction from which a director derived an
improper personal benefit, (iv) for acts or omissions that show a reckless
disregard for the director's duty to the Corporation or its shareholders in
circumstances in which the director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of serious injury
to the Corporation or its shareholders, (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Corporation or its shareholders, (vi) for violations
of the CGCL requirements governing Corporation contracts in which the director
has a material interest, or (vii) for corporate actions for which the director
and the Corporation are jointly and severally liable. In general, the liability
of officers may not be eliminated or limited under California law.
Pursuant to the MGCL and the Maryland Articles, the liability of directors
and officers to the Maryland Corporation or to any stockholder of the Maryland
Corporation for money damages will be eliminated, except for (i) actual receipt
of an improper personal benefit in money, property or services or (ii) active
and deliberate dishonesty established by a final judgment as being material to
the cause of action. Maryland law therefore permits the limitation of directors'
and officers' liability in a broader range of circumstances than does California
law. As a result, the directors and officers of the Maryland Corporation may not
be liable for certain actions for which they might have otherwise been liable
under California law.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS. Maryland and California have
similar laws regarding the indemnification by a corporation of its officers,
directors, employees, and other agents. The Bylaws of both the Corporation and
the Maryland Corporation authorize the Corporation and the Maryland Corporation
to indemnify, and advance expenses to, their respective present and former
directors, officers and employees to the maximum extent permitted by the CGCL or
the MGCL, as applicable. Under the MGCL, a corporation may indemnify its present
and former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and was committed in bad faith or was the result of
active and deliberate dishonesty, (b) the director or officer actually received
an improper personal benefit in money, property or services, or (c) in the case
of any criminal proceeding, the director or officer has reasonable cause to
believe that the act or omission was unlawful. The MGCL also permits the
Maryland Corporation to advance expenses to a director or officer, provided
that, as a condition to advancing expenses, the Maryland Corporation obtains (i)
a written affirmation by the director or officer of his or her good faith belief
that he or she has met the standard of conduct necessary for indemnification by
the Maryland Corporation as authorized by the MGCL and (ii) a written statement
by or on behalf of the director or officer to repay the amount paid or
reimbursed by the Maryland Corporation if it shall ultimately be determined that
the applicable standard of conduct was not met. Under the MGCL, rights to
indemnification and expenses are non-exclusive, in that they need not be limited
to those expressly provided by statute. As a result, the Maryland Corporation is
permitted to indemnify and advance expenses to its directors, officers,
employees and other agents pursuant to an express contract, bylaw provision,
shareholder vote or otherwise.
The CGCL contains provisions authorizing corporations to indemnify officers
and directors in substantially the same circumstances as the MGCL. However, no
indemnification is permitted under the CGCL for the actions for which liability
for money damages may not be limited, as described above under "Limitation of
Liability." California law permits indemnification in derivative actions except
that indemnification may only be made with court approval (i) when a person is
adjudged liable to the corporation in the performance of that person's duty to
the corporation and its shareholders or (ii) when a threatened or pending action
is settled or otherwise disposed of without court approval. The MGCL permits
indemnification in derivative actions, even if ultimately disposed of through a
settlement, however indemnification is prohibited if the person seeking
indemnification has been found liable to the corporation in a proceeding brought
by or in the right of the corporation. In addition, the MGCL provides that a
person adjudged liable on the basis that a personal benefit was improperly
received may not be indemnified by the corporation unless otherwise ordered by a
court. Under the CGCL, the termination of any proceeding by conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that such person is prohibited from being indemnified. In contrast,
under Maryland law, a termination of a proceeding by conviction or upon a plea
of nolo contendere or its equivalent creates a rebuttable presumption that such
person is not entitled to indemnification.
The CGCL, the MGCL and the Bylaws of both the Corporation and the Maryland
Corporation permit indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act. The Board
of Directors has been advised that, in the opinion of the SEC, indemnification
for liabilities arising under the Securities Act or the Exchange Act is contrary
to public policy and is therefore unenforceable, absent a decision to the
contrary by a court of appropriate jurisdiction.
REMOVAL OF DIRECTORS. Under the CGCL and the California Bylaws, any or all
directors may be removed with or without cause if the removal is approved by a
majority of the outstanding shares entitled to vote, except that no director may
be removed (unless the entire board is removed) when the votes cast against
removal would be sufficient to elect the director if voted cumulatively at an
election at which the
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same total number of votes were cast and the entire number of directors
authorized at the time of the most recent election were then being elected. The
CGCL also provides that the superior court of the proper county may, at the
request of shareholders holding at least 10% of the number of outstanding shares
of any class, remove from office any director in case of fraudulent or dishonest
acts or gross abuse of authority or discretion with reference to the corporation
and may bar from reelection any director so removed for a period prescribed by
the court.
The MGCL provides that the stockholders of a corporation may remove any
director, with or without cause, by the affirmative vote of a majority of all
the votes entitled to be cast for the election of directors, unless the charter
of the corporation provides otherwise. The MGCL further states that if the
stockholders of any class or series are entitled separately to elect one or more
directors, a director elected by a class or series may not be removed without
cause except by the affirmative vote of a majority of all of the votes of that
class or series, unless the charter of the corporation provides otherwise. The
Maryland Articles provide that directors may be removed only for cause following
a hearing. In contrast to California law, the MGCL does not provide for the
removal of directors by a court upon petition of shareholders.
VACANCIES ON THE BOARD OF DIRECTORS. The CGCL provides that vacancies on
the board of directors may be filled by the approval of the board of directors
or, if the number of directors then in office is less than a quorum, by (i) the
unanimous written consent of the directors then in office, (ii) the affirmative
vote of a majority of the directors then in office at a meeting held pursuant to
notice or waivers of notice complying with the CGCL, or (iii) a sole remaining
director, unless the articles or bylaws of a corporation state otherwise and
except for a vacancy created by the removal of a director. The California Bylaws
contain a similar provision, except that vacancies created by the removal of a
director may also be filled in this manner. Under the CGCL and the California
Bylaws, holders of a majority of the outstanding shares entitled to vote may
elect a director at any time to fill any vacancy not filled by the directors. In
addition, under the CGCL, if at the time of filling any vacancy on the Board of
Directors or a newly created directorship, the directors then in office who have
been elected by the shareholders shall constitute less than a majority of the
whole Board of Directors, the superior court may, upon application of any
shareholder or shareholders holding at least 5% of the total number of
outstanding shares having the right to vote for such directors, summarily order
a special meeting of shareholders to be held to elect the entire Board of
Directors.
Under the MGCL and the Maryland Bylaws, stockholders of the Maryland
Corporation may elect a successor to fill a vacancy on the Maryland Board of
Directors which results from the removal of any director, subject to certain
voting provisions if a director was elected by one class of stock. Any vacancy
occurring in the Maryland Board of Directors for any reason other than an
increase in the number of directors may be filled by a majority of the remaining
directors, whether or not such number of Directors is sufficient to constitute a
quorum. For vacancies due to an increase in the number of members of the
Maryland Board of Directors, a majority of the entire Maryland Board of
Directors may fill any such vacancies. In contrast to the CGCL, neither the MGCL
nor the Maryland Bylaws have a provision authorizing the Maryland courts to fill
vacancies on a Maryland corporation's board of directors. Thus, in circumstances
where a majority of the number of board seats are vacant, the stockholders of a
Maryland corporation may not petition the courts to fill such vacancies and
consequently may have less control over the timing and selection of the new
directors.
SPECIAL MEETINGS OF SHAREHOLDERS. The CGCL and the California Bylaws
provide that a special meeting of shareholders may be called by the Board of
Directors, the Chairman of the Board, the President, or by the holders of shares
entitled to cast not less than 10% of the votes at the meeting. Under the MGCL
and the Maryland Bylaws, a special meeting of stockholders may be called by the
Chairman of the Board, the President or a majority of the Board of Directors and
shall be called by the Secretary of the Maryland Corporation at the request in
writing of shareholders entitled to cast a majority of all the votes entitled to
be cast at the meeting. The MGCL and the Maryland Bylaws also provide, however,
that unless requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at such meeting, a
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special meeting need not be called to consider any matter which is substantially
the same as a matter voted on at any special meeting of the stockholders held
during the preceding 12 months. Thus, the stockholders' right to call a special
meeting under Maryland law is more limited than under California law.
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS. The CGCL provides that, unless
otherwise provided in the articles of incorporation of a California corporation,
any action that may be taken at a shareholder meeting may be taken without a
meeting, without prior notice and without a vote, upon the written consent of
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a shareholder
meeting at which all shares entitled to vote were present and voted. The MGCL
provides that any action that may be taken at a stockholder meeting may be taken
without a meeting only if a unanimous written consent setting forth the matter
is signed by each stockholder entitled to vote on the matter.
Notwithstanding that the MGCL and the CGCL permit the use of written
consents, the rules of the New York Stock Exchange ("NYSE") generally prohibit
listed companies from using written consents in lieu of meetings. Thus, the
Corporation and, if the Reincorporation is consummated, the Maryland Corporation
are effectively prohibited from using a written consent in lieu of a meeting.
INSPECTION OF BOOKS AND RECORDS. Under the CGCL, upon written demand for
any purpose reasonably related to the shareholder's interest as a shareholder,
any shareholder of the Corporation may inspect and copy the accounting books and
records and the minutes of proceedings of the shareholders, the board and
committees of the board. A shareholder or shareholders (i) who hold at least 5%
of the outstanding voting shares of the corporation or (ii) who hold at least 1%
of those voting shares and have filed a Schedule 14A with the Securities and
Exchange Commission shall have an absolute right to inspect and copy the record
of shareholders. These rights apply both to any California corporation and any
foreign corporation that keeps such records in California or has its principal
executive office in California. Thus, the inspection rights provided by the CGCL
will be applicable to the Maryland Corporation after the Reincorporation.
The MGCL provides a right to inspect and copy a corporation's books of
account and stock ledger to individuals who have been stockholders for more than
six months and own at least 5% or more of any class of a Maryland corporation's
outstanding voting shares. In addition, any stockholder of a Maryland
corporation has the right to inspect certain corporate records and to request
that the corporation provide a sworn statement showing all stock and securities
issued and all consideration received by the corporation within the preceding 12
months.
AMENDMENTS TO BYLAWS AND ARTICLES. Under the CGCL, a corporation's bylaws
may be adopted, amended or repealed by approval of the shareholders or by the
board of directors; however, the shareholders may never be divested of the power
to adopt, amend or repeal the bylaws. In addition, the CGCL provides that a
bylaw changing a fixed number of directors or the maximum or minimum number of
directors may only be adopted by the holders of a majority of the shares
entitled to vote. The California Bylaws provide that no amendment thereto may be
made unless approved by the vote of the holders of a majority of the voting
securities outstanding.
Under the MGCL, the power to adopt, alter and repeal the bylaws is vested in
the stockholders except to the extent that the charter or bylaws vest such power
in the board of directors. The Maryland Articles and Bylaws provide that the
Maryland Board of Directors shall have the power to adopt, amend or repeal the
Maryland Bylaws, provided that any such action may only be taken by the
affirmative vote of no less than two-thirds of all directors at the time.
Alternatively, the Maryland Articles and Bylaws provide that the Maryland Bylaws
may be adopted, amended or repealed by the affirmative vote of a majority of
both the Maryland Board of Directors and the stockholders of the Maryland
Corporation.
Under California law, the articles of incorporation may be amended only if
such amendment is approved by the board of directors and by the holders of a
majority of the outstanding shares of stock
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entitled to vote on the matter. Under Maryland law, an amendment to the articles
of incorporation must be approved by the board of directors and the holders of
two-thirds of the shares entitled to vote on such matter unless such articles
provide for a different vote not less than a majority of such shares so entitled
to vote; the Maryland Articles provide that they may be amended by the holders
of a majority of the shares entitled to vote on such matter.
SHAREHOLDER VOTING RIGHTS. Under the CGCL, the articles of incorporation
and bylaws of California corporations may include supermajority voting
provisions. These provisions, however, must be renewed every two years and may
not require a vote in excess of 66 %. In contrast, under the MGCL, the articles
of incorporation of a Maryland corporation may include supermajority voting
provisions without restrictions. The Maryland Articles currently do not contain
any supermajority voting provisions.
California law provides for cumulative voting in the election of directors
(which permits holders of less than a majority of the voting securities of a
corporation to cumulate their votes and elect a director or directors in certain
situations) but permits for the elimination thereof in the case of a listed
corporation (which is defined as a corporation that has shares listed on the
NYSE or other national securities exchanges). The California Bylaws specifically
provide for cumulative voting. Under the MGCL, cumulative voting is not
available unless so provided in the corporation's articles of incorporation. The
Maryland Articles do not provide for cumulative voting. As a result, holders of
a majority of the shares of Maryland Common Stock will generally be entitled to
elect all of the directors of the Maryland Corporation.
With certain exceptions, the CGCL requires that mergers, reorganizations,
certain sales of assets and similar transactions be approved by the holders of a
majority of each class of shares outstanding. In contrast, the MGCL requires,
with certain exceptions, that the holders of two-thirds of all shares entitled
to vote on the matter must approve mergers, consolidations, share exchanges and
transfers of assets unless the charter provides for a different number not less
than a majority; the Maryland Articles provide that such matters may be approved
by the holders of a majority of shares entitled to vote on the matter.
LIMIT ON SHARE OWNERSHIP; "EXCESS STOCK." Both the California Bylaws and
the Maryland Articles contain provisions limiting the ownership of shares which
are intended to ensure that the Corporation and the Maryland Corporation meet
the requirement of the Code for qualification as a REIT. Among other things,
these provisions are intended to meet the requirement of the Code that, at no
time during the second half of any taxable year, may five or fewer individuals
(defined in the Code to include certain entities) own more than 50% in value of
the outstanding capital stock.
The California Bylaws provide that no person shall at any time directly or
indirectly acquire ownership of more than 9.8% of the outstanding shares of the
Corporation. Shares owned by persons in excess of that amount are deemed "Excess
Shares." For purposes of determining indirect ownership, the constructive
ownership provisions applicable under Section 544(a) of the Code attribute
ownership of stock owned by a corporation, partnership, estate or trust
proportionately to its shareholders, partners or beneficiaries, attribute
ownership of stock owned by family members to other members of the same family,
treat stock for which a person has an option as actually owned by that person,
and set forth rules as to when stock constructively owned by a person is
considered to be actually owned by such person. Accordingly, shares owned by a
person who actually owns less than 9.8% of those outstanding may nevertheless be
Excess Shares where one or more of the foregoing relationships exists.
The California Bylaws provide that the Corporation may redeem any shares
that are Excess Shares and that from the date of notice of redemption, the
shares called for redemption cease to be outstanding with the sole right of the
holder thereafter being the right to payment by the Corporation of the
redemption price. The redemption price would be the average closing sales price
on the New York Stock Exchange during the 30-day period ending on the business
day prior to the redemption date. Such Bylaws further provide that unless the
Directors determine that it is in the interest of the Corporation to make
earlier payment, the redemption price shall be payable only upon liquidation of
the Corporation. The payment shall not exceed the amount which is the sum of the
per-share distributions designated as
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(i) liquidating distributions, and (ii) return of capital distributions declared
with respect to unredeemed shares subsequent to the redemption date (i.e., the
amount per share that a shareholder whose shares are not redeemed would receive
upon liquidation of the Corporation). However, if the person from whom the
Excess Shares were redeemed sells a like number of shares within 30 days of the
redemption date, the Corporation shall rescind the redemption of the Excess
Shares unless counsel to the Corporation is of the opinion that such rescission
would jeopardize the Corporation's tax status as a REIT. In that event, in lieu
of rescission, the Corporation shall make immediate payment for the shares. The
California Bylaws also authorize the Corporation to refuse to effect the
transfer of any shares which would result in a person holding Excess Shares, and
also provide that any purported acquisition of shares that would result in the
disqualification of the Corporation as a REIT shall be null and void.
The Maryland Articles also limit any holder from owning, or being deemed to
own after applying the constructive ownership provisions of the Code described
above, shares of stock of the Maryland Corporation having a value that is more
than 9.8% (the "Ownership Limit") of the value of all outstanding stock of the
Maryland Corporation. Under the Maryland Articles, any transfer of stock or any
security convertible into stock that would create direct or indirect ownership
of stock in excess of the Ownership Limit (a "prohibited transfer") shall be
null and void, and the intended transferee will acquire no rights to the stock.
Shares of stock owned, or deemed to be owned, or transferred to a stockholder in
excess of the Ownership Limit will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to an unaffiliated
trustee to be named by the Board of Directors of the Maryland Corporation for
the exclusive benefit (except to the extent described below) of one or more
charitable beneficiaries designated from time to time by the Maryland
Corporation. The Excess Stock held in trust will be considered as issued and
outstanding shares of stock of the Maryland Corporation, will be entitled to
receive distributions declared by the Maryland Corporation and may be voted by
the trustee for the exclusive benefit of the charitable beneficiary. Any
dividend or distribution paid to a purported transferee of Excess Stock prior to
the discovery by the Maryland Corporation that stock has been transferred in a
prohibited transfer shall be repaid to the Maryland Corporation upon demand and
thereupon paid over by the Maryland Corporation to the trustee. Any votes of
holders of shares of stock purported to have been cast by a purported transferee
prior to such discovery of a prohibited transfer will be retroactively deemed
not to have been cast subject to applicable law and may be recast by the trustee
for the benefit of the charitable beneficiary, but said retroactive
nullification or recast of the vote of the relevant shares of stock shall not
adversely affect the rights of any person (other than the purported transferee)
who has relied in good faith upon the effectiveness of the matter that was the
subject of the stockholder action as to which such votes were cast.
Excess Stock is not transferable. Subject to the redemption rights of the
Maryland Corporation, discussed below, the trustee of the trust may, however,
sell and transfer the interest in the trust to a transferee in whose hands the
interest in the trust representing Excess Stock would not be an interest in
Excess Stock, and upon such sale the shares of Excess Stock represented by the
sold interest shall be automatically exchanged for shares of stock of the class
that was originally exchanged into such Excess Stock. Upon such sale, the
trustee shall distribute to the purported transferee only so much of the sales
proceeds as is not more than the price paid by the purported transferee in the
prohibited transfer that resulted in the exchange of Excess Stock for the stock
purported to have been transferred (or, if the purported transferee received
such stock by gift, devise or otherwise without giving value for such stock,
only an amount that does not exceed the market price for such stock, as
determined in the manner set forth in the Maryland Articles, at the time of the
prohibited transfer), and the trustee shall distribute all remaining proceeds
from such sale to the charitable beneficiary.
In addition to the foregoing transfer restrictions, the Maryland Corporation
will have the right, for a period of 90 days during the time any Excess Stock is
held by the trustee, to purchase all or any portion of the Excess Stock from the
trustee for the lesser of the price paid for the stock by the original purported
transferee (or, if the purported transferee received such stock by gift, devise
or otherwise without giving
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value for such stock, the market price of the stock as determined in the manner
set forth in the Maryland Articles at the time of such prohibited transfer) or
the market price (as so determined) of the stock on the date the Maryland
Corporation exercises its right to purchase. Upon any such purchase by the
Maryland Corporation, the trustee shall distribute the purchase price to the
original purported transferee. The 90-day period begins on the date on which the
Maryland Corporation receives written notice of the prohibited transfer or other
event resulting in the exchange of stock for Excess Stock.
Both the California Bylaws and the Maryland Articles authorize the Board of
Directors to permit a transfer which would otherwise be prohibited if the Board
is satisfied that such transfer will not jeopardize the Corporation's or the
Maryland Corporation's status as a REIT. Both also provide that the provisions
relating to Excess Shares or the Ownership Limit shall not apply to shares of
capital stock acquired pursuant to an all cash tender offer for all outstanding
shares of capital stock in conformity with applicable laws where not less than
two-thirds of the outstanding shares of capital stock (not including securities
held by the tender offeror and/or its affiliates and associates) are tendered
and accepted pursuant to such tender offer and, in the case of the Maryland
Corporation, where the tender offeror commits in such tender offer, if the offer
is accepted by the holders of two-thirds of the outstanding stock, promptly
after the tender offeror's purchase of the tendered stock to give any
non-tendering stockholders a reasonable opportunity to "put" their capital stock
to the tender offeror at a price not less than that paid pursuant to the tender
offer.
BUSINESS COMBINATION STATUTE. Under the MGCL, certain "business
combinations" (including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares (an "Interested
Maryland Stockholder") or an affiliate thereof are prohibited for five years
following the date on which the Interested Maryland Stockholder becomes an
Interested Maryland Stockholder. Thereafter, the MGCL provides that any such
business combination must be recommended by the board of directors of such
corporation and approved by the affirmative vote of at least (a) 80% of the
votes entitled to be cast by holders of outstanding voting shares of the
corporation and (b) two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of the corporation other than shares held by the
Interested Maryland Stockholder with whom the business combination is to be
effected, unless, among other things, the corporation's stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Maryland Stockholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Maryland Stockholder becomes an Interested Maryland Stockholder.
Pursuant to the authority granted under the MGCL, the Board of Directors
will adopt a resolution providing that the "business combination" provisions of
the MGCL shall not apply to the Maryland Corporation. This resolution will only
be revoked if the Maryland Board of Directors determines that such revocation is
in the best interests of the Maryland Corporation and its stockholders.
California law does not include a business combination statute, however, the
CGCL requires delivery of a fairness opinion in connection with some business
combination transactions between a corporation and an interested party (an
"Interested Party"). The CGCL defines "Interested Party" to include (i) a person
who directly or indirectly controls the corporation that is the subject of the
proposed combination, (ii) is directly or indirectly controlled by an officer or
director of the subject corporation or (iii) is an entity in which a material
financial interest is held by any director or executive officer of the subject
corporation.
CONTROL SHARE ACQUISITIONS STATUTE. The MGCL contains an additional
provision which eliminates the voting rights of "control shares" in certain
circumstances. The MGCL provides that a person (the "acquiror") who makes a bona
fide offer to acquire or acquires "control shares" of a Maryland corporation
must obtain the approval of the holders of two-thirds of the shares entitled to
vote on the matter
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(excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation) in order to vote the control shares that the
acquiror acquires. "Control shares" are voting shares of stock which, if
aggregated with all other shares of stock previously acquired by such person,
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
of all voting power. Control shares do not include shares that the acquiror is
then entitled to vote as a result of having previously obtained stockholder
approval.
The MGCL permits Maryland corporations to elect not to be governed by the
control share acquisition statute by including a provision in their bylaws to
opt out of the application of this statute. The Maryland Corporation has opted
not to be governed by the provisions of this statute at this time and has
included a provision to such effect in the Maryland Bylaws. The Maryland Board
of Directors may, without stockholder approval, vote to amend the Maryland
Bylaws to eliminate such provision which would result in the Maryland
Corporation being governed by the control share acquisition statute. The
Maryland Bylaws will only be amended by the Maryland Board of Directors in the
future to eliminate this provision if the Maryland Board of Directors determines
that it is in the best interests of the stockholders to do so.
Unlike Maryland, California does not have a control share acquisition
statute.
RIGHTS OF DISSENTING SHAREHOLDERS. The CGCL eliminates dissenters' rights
for shares listed on any national securities exchange unless demands for payment
are filed with respect to five 5% or more of the outstanding shares of that
class of shares. Appraisal rights are unavailable under the CGCL, however, where
the corporation enters into a reorganization transaction such that the
corporation or its shareholders immediately prior to the reorganization, or
both, will own equity securities of the surviving corporation constituting more
than five-sixths of the voting power of the surviving corporation (as will be
the case in the Reincorporation). Appraisal or dissenters' rights are,
therefore, not available to shareholders of the Corporation with respect to the
Reincorporation.
The MGCL eliminates dissenters' rights for shares listed on a national
securities exchange and, unlike the CGCL, does not provide an exception where
holders of 5% or more of the outstanding shares make a demand for payment. Thus,
Maryland law eliminates dissenters' rights in some circumstances in which such
rights would be available under the CGCL.
INTERESTED DIRECTOR TRANSACTIONS. Under both California and Maryland law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable solely because of such
interest provided that certain conditions, such as obtaining certain required
approvals and fulfilling the requirements of good faith and full disclosure, are
met. Under California and Maryland law, (i) either the shareholders or the board
of directors must approve any contract or transaction after full disclosure of
the material facts (and in the case of board approval in California, the
contract or transaction must also be "just and reasonable") or (ii) the contract
or transaction must have been just and reasonable or fair and reasonable, as
applicable, at the time it was authorized or approved. California law has a more
stringent requirement than Maryland law in circumstances where board approval is
sought with respect to an interested director transaction because the contract
or transaction must be just and reasonable and must be approved by a majority
vote of a quorum of the directors, without counting the vote of any interested
directors (except that interested directors may be counted for purposes of
establishing a quorum). Under the MGCL, if board approval is sought, there is no
requirement that the contract or transaction be fair and reasonable and the
approval for the contract or transaction may be obtained by a majority vote of
the disinterested directors (even though less than a majority of a quorum). The
Maryland Board of Directors, therefore, may be able to approve certain
transactions under Maryland law that the Corporation's Board of Directors would
not be able to approve under California law because more than a majority of a
quorum of directors are interested directors.
The CGCL also provides that any loan or guarantee to or for the benefit of a
director or officer of the corporation or its parent requires the approval of
the shareholders unless such loan or guaranty is pursuant
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to a plan that has been approved by the holders of a majority of the outstanding
shares. However, under the CGCL, the bylaws of a corporation with more than 100
shareholders may authorize the board of directors alone to approve loans or
guaranties to directors and officers. The California Bylaws do not currently
contain such a provision allowing the directors to approve such loans or
guaranties.
In contrast, under the MGCL, a corporation may make loans to or guarantee
the obligations of its officers and employees if, in the judgment of the board
of directors, such loan or guaranty may reasonably be expected to benefit the
corporation.
DISSOLUTION OF THE CORPORATION AND THE MARYLAND CORPORATION. Under the
CGCL, a corporation may be dissolved (i) by a vote of holders of 50% or more of
the shares entitled to vote or (ii) by approval of the board of directors, if an
order for relief has been entered under Chapter 7 of the federal bankruptcy law,
the corporation has disposed of its assets and has not conducted any business
for a period of five years or the corporation has no outstanding shares. Under
the MGCL, a corporation may be dissolved with approval of the holders of
two-thirds of all shares entitled to vote, unless the charter of the corporation
provides for a different vote not less than a majority; the Maryland Articles
provide that such matter may be approved by the holders of a majority of shares
entitled to vote on the matter.
PROPOSAL 3
AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN
The Board of Directors has unanimously approved a proposal to amend and
restate the Burnham Pacific Properties, Inc. Stock Option Plan (the "Plan"), as
described below.
BACKGROUND OF THE EXISTING PLAN
In 1987, shareholders of the Corporation initially approved the Plan, which
at that time provided for the grant of options for up to 1,000,000 shares of
Common Stock to officers and employees of the Corporation. Since that time the
Plan has been amended from time to time, most recently at the 1996 Annual
Meeting of Shareholders, when the shareholders approved amendments recommended
by the Board of Directors to increase the total number of shares for which
options may be granted under the Plan from 1,000,000 to 1,800,000 shares and
authorizing the quarterly grant of up to 1,000 shares of Common Stock to each
non-employee Director ("Independent Director") in lieu of any stock options or
cash retainer or meeting fees for services as such Director. The Plan is
administered by the Compensation Committee of the Board of Directors, no member
of which is an employee of the Corporation. While the Board of Directors has
authority to amend the Plan, amendments which change specified substantive
provisions require approval of the shareholders to be effective.
The Plan as currently in effect provides for the granting of options to
officers, other employees, Directors and consultants of the Corporation, which
options may be either "incentive stock options" as defined by the Internal
Revenue Code ("Incentive Options"), or options that do not so qualify
("Nonqualified Options"). Incentive Options may be granted only to employees of
the Corporation, and the purchase price for each Incentive Option may not be
less than the fair market value of the Common Stock on the date the Incentive
Option is granted ("Fair Market Value"), which, unless otherwise determined by
the Committee in any particular case, is defined to be the average closing price
of Common Stock as reported on the New York Stock Exchange for the ten trading
days immediately preceding the date of grant. No option, whether an Incentive
Option or Nonqualified Option, may be exercised at a date which is later than
the earliest of (i) the tenth anniversary of the date on which the option was
granted, (ii) the 90th day after termination of the optionee's employment by or
rendering of services to the Corporation for any reason other than the death of
the optionee, or (iii) the first anniversary of the date of the optionee's
death. Subject to certain other limitations contained in the Plan, the terms of
each option grant are in other respects generally determined by the Committee in
its discretion.
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As amended in 1996, the Plan authorizes the quarterly grant to each
Independent Director of the Corporation of up to 1,000 shares ("Director
Restricted Shares") in lieu of any cash retainer or meeting fees to such
Independent Director (but not in lieu of out-of-pocket expenses incurred in
performing his or her duties as such or in lieu of any cash compensation that
the Board of Directors determines appropriate for services as a Board or
Committee chairman or for services to the Corporation other than as a Director)
and in lieu of any stock options which might otherwise be issued to such
Independent Director. For 1996 and subsequently, the Board of Directors has
determined that the number of Director Restricted Shares to be issued each
quarter shall be 750 shares, rather than the 1,000 share maximum provided in the
Plan. Except upon an Independent Director's ceasing to serve as a Director, the
Independent Director is restricted from disposing of any Director Restricted
Shares during the first year after their grant, more than one-third of such
Director Restricted Shares during the second year following their grant or more
than two-thirds of such Director Restricted Shares during the third year
following their grant.
PROPOSED AMENDMENT AND RESTATEMENT OF THE PLAN
Except for the provision with respect to the grant of Director Restricted
Shares to Independent Directors just described, the Plan as currently in effect
does not provide for any other stock-based grants to officers, employees,
Directors or consultants of the Corporation. In January 1997, the Board of
Directors determined that it would be desirable to provide flexibility for the
Corporation to provide stock-based compensation to its officers, employees and
consultants in forms that go beyond the grant of the Incentive Options,
Nonqualified Options and Director Restricted Shares that are currently
authorized under the Plan. Accordingly, the Board of Directors has proposed an
amendment and restatement of the Plan, subject to shareholder approval, that
would (i) authorize the grant under the Plan of restricted stock awards and
unrestricted stock awards, performance share limits, dividend equivalent rights,
stock appreciation rights and other types of stock-based awards; (ii) to change
the name of the Plan to the "Burnham Pacific Properties, Inc. Stock Option and
Incentive Plan" in order to reflect these expanded types of grants; and (iii) to
clarify that awards under the Plan may be made to employees, officers, Directors
and consultants to subsidiaries of the Corporation as well as of the Corporation
itself, and (iv) to make certain other clarifying and conforming amendments.
Although the amendment and restatement of the Plan would authorize a number
of additional types of stock-based awards, the number of shares for which awards
of all types may be made under the amended Plan would NOT be increased beyond
the 1,800,000 shares of Common Stock currently authorized.
The following description of certain features of the Plan as amended and
restated is intended to be a summary only. The summary is qualified in its
entirety by the full text of the amended and restated Plan, which is attached
here to as Appendix D.
1. OTHER STOCK-BASED AWARDS.
RESTRICTED STOCK. The Committee may award shares of Common Stock to
officers, other employees and consultants, subject to such conditions and
restrictions as the Committee may determine ("Restricted Stock"). These
conditions and restrictions may include the achievement of certain performance
goals and/ or continued employment with the Corporation through a specified
restricted period. The purchase price, if any, of shares of Restricted Stock
will be determined by the Committee. If the performance goals or other
restrictions are not attained, the grantees will forfeit their awards of
Restricted Stock. The Director Restricted Shares already authorized in the
existing Plan are examples of Restricted Stock.
UNRESTRICTED STOCK. The Committee may also grant any such persons shares of
Common Stock which are free from any restrictions under the Plan ("Unrestricted
Stock"). Unrestricted Stock may be issued in recognition of past services or
other valid consideration, and may be issued in lieu of cash compensation.
PERFORMANCE SHARE AWARDS. The Committee may also grant performance share
awards to employees or other key persons entitling the recipient to receive
shares or cash upon the achievement of such
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individual or Corporation performance goals and upon satisfaction of such other
conditions as the Committee shall determine ("Performance Share Award").
DIVIDEND EQUIVALENT RIGHTS. The Committee may grant dividend equivalent
rights that entitle the recipient to receive dividends that would be paid if the
grantee had held specified shares ("Dividend Equivalent Rights"). Dividend
Equivalent Rights may be granted as a component of another award or as a
freestanding award. Dividend equivalents credited under the Plan may be paid
currently in cash or may be deemed to be reinvested in additional shares which
may thereafter accrue additional equivalents. In certain instances, a person
awarded Unrestricted Stock may elect to defer receipt of the shares, in
accordance with such rules and procedures as may from time to time be
established by the Committee. During the period of deferral, Dividend Equivalent
Rights may be paid with respect to the shares whose receipt has been deferred.
STOCK APPRECIATION RIGHTS. The Committee may award stock appreciation
rights ("SARs") either as a freestanding award or in tandem with an Incentive
Option or Nonqualified Option. Upon exercise of an SAR, the holder will be
entitled to receive an amount equal to the excess of the fair market value on
the date of exercise of one share over the exercise price per share specified in
the related Option (or, in the case of freestanding SAR, the price per share
specified in such right, which price may not be less than 85% of the fair market
value of the shares on the date of grant) times the number of shares with
respect to which the SAR is exercised. This amount may be paid in cash, in
shares, or a combination thereof, as determined by the Committee. If the SAR is
granted in tandem with an Option, exercise of the SAR cancels the related Option
to the extent of such exercise.
2. CHANGE OF CONTROL PROVISIONS.
The amended and restated Plan provides that in the event of a "Change of
Control"(as defined in the Plan) of the Corporation, SARs, as well as all
Incentive Options and Nonqualified Options as currently provided under the Plan,
shall automatically become fully exercisable, and all Restricted Stock and
Performance Share Awards shall automatically become fully vested. In addition,
at any time prior to or after a Change of Control, the Committee may accelerate
awards and waive conditions and restrictions on any awards to the extent it may
determine appropriate.
3. SHARE LIMIT.
The Plan is not being amended to increase the number of shares for which
awards may be granted subject to the Plan. The shares underlying options granted
to non-employee Directors, and any other stock awards under the Plan, must come
from the same pool of shares as are currently available for option grants under
the Plan, i.e.,an aggregate of 1,800,000 shares of Common Stock.
4. TAX ASPECTS OF THE AMENDMENTS.
The award of Unrestricted Stock to any officer, employee or consultant, or
the vesting of a Performance Share Award, or the exercise of any SAR, will be
treated as compensation to the grantee taxable at ordinary income rates, and
deductible as an ordinary expense of the Corporation, at the time of, and in the
amount equal to the then fair market value of, the shares awarded. Unless the
grantee elects to treat the value of shares subject to Restricted Stock awards
as ordinary income at the time of grant by filing an election under Section
83(b) of the Code, the grantee will be treated as receiving ordinary income in
an amount equal to the fair market value of the Shares at the time the
restrictions lapse. The Corporation will be entitled to a deduction in a
comparable amount at the time that the grantee is considered to receive ordinary
income.
RECOMMENDATION OF THE BOARD
The Board of Directors believes that it is in the best interest of the
Corporation to align the interests of the executive officers and other employees
of the Corporation more closely with those of the
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shareholders, in order to provide a greater incentive to such persons to
maximize shareholder value. Accordingly, if the proposed amendment and
restatement of the Plan is approved, it is likely that bonuses or other
incentive awards may be paid to officers and employees in stock or in restricted
stock that may vest upon certain defined performance goals or events being met.
The Board believes that the pool of shares already available for issuance upon
the exercise of Incentive Options and Nonqualified Options that the Committee
has authority to grant and as Director Restricted Shares should also be
available for such stock awards.
Accordingly, the Board believes the proposed amendments are in the best
interest of the Corporation and recommends that shareholders approve the
amendment and restatement of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3.
APPROVAL REQUIRED TO AMEND AND RESTATE THE PLAN
The amendment and restatement must be approved by the affirmative vote of
the holders of a majority of the shares present or represented at and entitled
to vote at the Annual Meeting. Abstentions and broker non-votes will accordingly
have the same effect as a vote against this Proposal.
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 interests in six retail
properties in the San Francisco Bay area (the "Martin Properties"). The Martin
Properties consisted of one completed retail center ("Richmond City Center"),
one center then under construction ("Marin City"), and four properties
("Hilltop", "1000 Van Ness", "Pleasant Hill" and "Palo Alto", collectively the
"Development Properties") for which the Martin Group affiliates owned
development rights. 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 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 after providing the
Corporation with an initial 10% annual return on its investment, and such equity
interest of the limited partners 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. In 1995, the partnership that acquired the completed Richmond City Center
property issued 41,878 limited partnership units to the Martin Group affiliates
to evidence their equity interests in such partnership.
During 1996, the Board of Directors, without Mr. Martin participating,
approved the acquisition, following completion of construction, of Marin City
and the commencement of construction of Hilltop and 1000 Van Ness. In March
1997, the Board of Directors, without Mr. Martin participating, approved
commencement of construction of Pleasant Hill subject to the satisfaction of
certain conditions. The Corporation expects that upon completion and
stabilization of each of these properties, the applicable partnerships will
issue partnership units to The Martin Group in accordance with the partnership
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agreements. Because none of Marin City or the Development Properties was
completed and stabilized in 1996, no partnership units were issued during that
year.
OTHER TRANSACTIONS
In July 1996, the Corporation purchased Ladera Shopping Center ("Ladera") in
Los Angeles through a limited liability company initially substantially
wholly-owned by the Corporation, which is intended ultimately to be 25% owned by
the Corporation and 75% owned by an institutional investor, California Urban
Investment Partners, LLC ("CUIP"). The Corporation has been advised that an
entity controlled by Victor B. MacFarlane, a Director of the Corporation, holds
an approximately 1 1/2% indirect ownership interest in, and is an advisor to,
CUIP. In December 1996, the Corporation purchased Margarita Plaza ("Margarita")
in Huntington, California with the understanding that CUIP would also acquire a
75% interest through the formation of another limited liability company. CUIP
funded its 75% acquisition of Margarita in February 1997, and the Corporation
expects CUIP to fund its 75% acquisition of Ladera by March 31, 1997, in each
case by CUIP's payment of 75% of the Corporation's investment in the respective
property. The respective limited liability companies owning Ladera and Margarita
have engaged the Corporation to manage the properties for a management fee
consistent with prevailing third party fees.
AUDITORS
The Corporation's financial statements for the year ended December 31, 1996
were audited by Deloitte & Touche LLP, which has audited the Corporation's books
and records since 1986. A representative of Deloitte & Touche LLP will be
present at the Annual Meeting, will be given the opportunity to make a statement
if he so desires and will 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 November 21, 1997.
OTHER MATTERS
All shareholders of record at the close of business on March 14, 1997, 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, 1996.
The expense of preparing, printing and mailing the Notice of Annual Meeting
of Shareholders 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.
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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 31, 1997
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APPENDIX INDEX
<TABLE>
<S> <C>
Appendix A: Agreement and Plan of Merger (the "Merger Agreement")..................... A-1
Appendix B: Articles of Amendment and Restatement (the "Maryland Articles")........... B-1
Appendix C: Bylaws (the "Maryland Bylaws")............................................ C-1
Appendix D: Stock Option and Incentive Plan, Amended and Restated as of May 6, 1996
(the "Plan")......................................................................... D-1
</TABLE>
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of , 1997,
between Burnham Pacific Properties, Inc., a California corporation (the
"Corporation"), and Burnham Pacific Properties, Inc., a Maryland corporation
(the "Maryland Corporation").
RECITALS
WHEREAS, the Board of Directors of the Corporation and the Board of
Directors of the Maryland Corporation each have determined that it is in the
best interests of their respective corporations and/or stockholders to effect
the merger provided for herein (the "Merger") upon the terms and subject to the
conditions set forth herein; and
NOW, THEREFORE, in consideration of the promises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto adopt the plan of merger encompassed by this Agreement and agree
as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), the Corporation shall be merged
with and into the Maryland Corporation, the stockholders of the Corporation will
become the stockholders of the Maryland Corporation and the separate corporate
existence of the Corporation shall thereupon cease (the "Merger"). The parties
intend that the Merger qualify as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. The Maryland
Corporation shall be the surviving entity in the Merger (sometimes hereinafter
referred to as the "Surviving Entity") and shall continue to be governed by the
laws of the State of Maryland and the separate existence of the Maryland
Corporation with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. The Merger shall have the effects
specified in the California General Corporation Law (the "CGCL") and the
Maryland General Corporation Law (the "MGCL"). The Maryland Corporation shall
assume and adopt in their entirety the Corporation's employee benefit plans and
stock option plans, including the Stock Option Plan (or Stock Option and
Incentive Plan, if Proposal 3 is approved by the stockholders at the 1997 Annual
Meeting).
1.2 CLOSING. The closing of the Merger (the "Closing") shall take place at
such place and time and/ or on such date as the Corporation and the Maryland
Corporation may agree.
1.3 EFFECTIVE TIME. Following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VI hereof,
the Corporation and the Maryland Corporation will, at such time as they deem
advisable, cause this Agreement to be filed, together with appropriate
certificates of each of the Corporation and the Maryland Corporation, with the
Secretary of State of California as provided in Section 1108 of the CGCL and the
Articles of Merger (the "Articles of Merger") to be filed with the State
Department of Assessments and Taxation of Maryland (the "SDAT") as provided in
Sections 3-107 and 3-109 of the MGCL. The Merger shall become effective at the
later of the time of the filing of the Agreement and appropriate certificates
with the Secretary of State of California and the time of the acceptance for
record of the Articles of Merger by the SDAT (the "Effective Time").
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ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Charter of the Maryland Corporation
shall be restated and amended to read as set forth in the Articles of Amendment
and Restatement set forth as Appendix B to the Proxy Statement for the 1997
Annual Meeting of Shareholders of the Corporation at the Effective Time until
further duly amended in accordance with the terms thereof and with the MGCL (the
"Articles of Incorporation").
2.2 THE BYLAWS. The Bylaws of the Maryland Corporation in effect at the
Effective Time shall continue to be the Bylaws as set forth in Appendix C to the
Proxy Statement for the 1997 Annual Meeting of Shareholders of the Corporation
until duly amended in accordance with the terms thereof and with the MGCL (the
"Bylaws").
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 DIRECTORS AND OFFICERS. The directors and officers of the Corporation
at the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Entity until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Articles of Incorporation and the
Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK
4.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any capital stock of
the Corporation:
(a) Each share of the common stock, no par value per share (a
"Corporation Share"), of the Corporation issued and outstanding immediately
prior to the Effective Time shall be automatically converted into one
validly issued, fully paid and nonassessable share of common stock, par
value $.01 per share (a "Maryland Corporation Share"), of the Maryland
Corporation. Each certificate (each, a "Certificate") representing any such
Corporation Shares shall thereafter represent the same number of Maryland
Corporation Shares. All Corporation Shares shall no longer be outstanding
and shall be canceled and retired and shall cease to exist. The common stock
of the Maryland Corporation will be listed, without interruption, on the
NYSE under the same symbol ("BPP") as the common stock of the Corporation
prior to the merger.
(b) Each Corporation Share held in the Corporation's treasury at the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, become an authorized but unissued Maryland
Corporation Share without payment of any consideration therefor.
(c) At the Effective Time, each Maryland Corporation Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Maryland Corporation or the
holder of such shares, become an authorized but unissued Maryland
Corporation Share without payment of any consideration therefor.
(d) Each option or other right to purchase or otherwise acquire
Corporation Shares pursuant to stock option or other stock-based plans of
the Corporation granted and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
the holder of such option or right, be converted into and become a right to
purchase or otherwise acquire the same
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number of Maryland Corporation Shares at the same price per share and upon
the same terms and subject to the same conditions as applicable to such
options or other rights immediately prior to the Effective Time.
ARTICLE V
CONDITIONS
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of the Maryland Corporation and the Corporation to
consummate the Merger are subject to the approval of this Agreement (i) by the
holders of a majority of the Corporation Shares, in accordance with applicable
law and the Corporation's Articles of Incorporation, as amended or restated, and
the Bylaws, as amended or restated, of the Corporation, and (ii) by the
Corporation as sole stockholder of the Maryland Corporation, in accordance with
applicable law and the Articles of Incorporation and the Bylaws of the Maryland
Corporation.
ARTICLE VI
TERMINATION
6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of the Corporation Shares, by the mutual consent
of the Board of Directors of the Corporation and the Board of Directors of the
Maryland Corporation.
6.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article VI, no
party thereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement.
ARTICLE VII
MISCELLANEOUS AND GENERAL
7.1 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of the
CGCL and the MGCL, at any time prior to the Effective Time, the parties hereto
may modify or amend this Agreement, by written agreement executed and delivered
by duly authorized officers of the respective parties; provided, however, that
after this Agreement has been approved by the stockholders of the Corporation
and the Maryland Corporation, this Agreement shall not be amended if such
amendment would have a material adverse effect on the stockholders of either the
Corporation or the Maryland Corporation, unless such amendment is approved by
such stockholders.
7.2 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
7.3 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
7.4 HEADINGS. The Article, Section and paragraph headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
7.5 STOCKHOLDER. The term "stockholder" in this Agreement shall mean
stockholder or shareholder.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first hereinabove
written.
<TABLE>
<S> <C>
BURNHAM PACIFIC PROPERTIES, INC.,
a California Corporation
Attest: By:
- - -------------------------------------------- --------------------------------------------
Nina Galloway, J. David Martin, PRESIDENT
CORPORATE SECRETARY
BURNHAM PACIFIC PROPERTIES, INC.,
a Maryland Corporation
Attest: By:
- - -------------------------------------------- --------------------------------------------
Nina Galloway, J. David Martin, PRESIDENT
CORPORATE SECRETARY
</TABLE>
A-4
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APPENDIX B
BURNHAM PACIFIC PROPERTIES, INC.
Articles of Amendment and Restatement
FIRST: Burnham Pacific Properties, Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its Charter as currently in effect
and as hereinafter amended.
SECOND: The following provisions are all the provisions of the Charter
currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR
The undersigned, David L. Bohan, whose address is Goodwin, Procter & Hoar
LLP, One Exchange Place, Boston, Massachusetts 02109, being at least 18 years of
age, does hereby form a corporation under the general laws of the State of
Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Burnham Pacific Properties, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage in any lawful
act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of these Articles, "REIT" means a real estate
investment trust under Sections 856 through 860 of the Code. Without limiting
the generality of this Article III, the purposes for which the Corporation is
formed include continuation of business heretofore conducted by Burnham Pacific
Properties, Inc., a California corporation being or to be merged into this
Corporation (the "Predecessor Corporation").
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The name of the resident agent of the Corporation in the State
of Maryland is The Corporation Trust Incorporated, the post address of which is
32 South Street, Baltimore, Maryland 21202. The resident agent is a Maryland
corporation.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 NUMBER OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. The
number of directors of the Corporation initially shall be
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nine, which number may be increased or decreased pursuant to the Bylaws, but
shall never be less than the minimum number required by the Maryland General
Corporation Law. The names of the directors who shall serve until the first
annual meeting of stockholders and until their successors are duly elected and
qualify are:
Malin Burnham
James D. Harper, Jr.
James D. Klingbeil
J. David Martin
Donne P. Moen
Thomas A. Page
Philip S. Schlein
Richard R. Tartre
Robin Wolaner
These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors occurring before the first annual meeting of stockholders
in the manner provided in the Bylaws.
Section 5.2 EXTRAORDINARY ACTIONS. Notwithstanding any provision of law
permitting or requiring any action to be taken or authorized by the affirmative
vote of the holders of a greater number of votes, any such action, including
without limitation, any merger, consolidation, share exchange, transfer of
assets, or dissolution of the Corporation, shall be effective and valid if such
action has been approved or recommended by the Board of Directors and is taken
or authorized by the affirmative vote of holders of shares entitled to cast a
majority of all the votes entitled to be cast on the matter.
Section 5.3 AUTHORIZATION BY BOARD OF STOCK ISSUANCE. The Board of
Directors may authorize the issuance from time to time of shares of stock of the
Corporation of any class or series, whether now or hereafter authorized, or
securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable (or without consideration in the case of a stock
split or stock dividend), subject to such restrictions or limitations, if any,
as may be set forth in the Charter or the Bylaws.
Section 5.4 PREEMPTIVE RIGHTS. Except as may be provided by the Board of
Directors in setting the terms of classified or reclassified shares of stock
pursuant to Section 6.4, no holder of shares of stock of the Corporation shall,
as such holder, have any preemptive right to purchase or subscribe for any
additional shares of stock of the Corporation or any other security of the
Corporation which it may issue or sell.
Section 5.5 INDEMNIFICATION. The Corporation shall have the power, to the
maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation or the Predecessor
Corporation or (b) any individual who, while a director of the Corporation or
the Predecessor Corporation and at the request of the Corporation or the
Predecessor Corporation, serves or has served as a director, officer, partner or
trustee of another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise from and against any claim or liability to
which such person may become subject or which such person may incur by reason of
his status as a present or former director or officer of the Corporation or the
Predecessor Corporation. The Corporation shall have the power, with the approval
of the Board of Directors, to provide such indemnification and advancement of
expenses to a person who served any other predecessor of the Corporation in any
of the capacities described in (a) or (b) above and to any employee or agent of
the Corporation or any other predecessor of the Corporation.
Section 5.6 DETERMINATIONS BY BOARD. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the Charter and in the
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absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Corporation and every holder of shares
of its stock: the amount of the net income of the Corporation for any period and
the amount of assets at any time legally available for the payment of dividends,
redemption of its stock or the payment of other distributions on its stock; the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; the amount, purpose, time of creation, increase
or decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the fair value, or any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Corporation; and any matters
relating to the acquisition, holding and disposition of any assets by the
Corporation.
Section 5.7 REIT QUALIFICATION. If the Corporation elects to qualify for
federal income tax treatment as a REIT, the Board of Directors shall use its
reasonable best efforts to take such actions as are necessary or appropriate to
preserve the status of the Corporation as a REIT; however, if the Board of
Directors determines that it is no longer in the best interests of the
Corporation to continue to be qualified as a REIT, the Board of Directors may
revoke or otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The Board of Directors also may determine that
compliance with any restriction or limitation on stock ownership and transfers
set forth in Article VII is no longer required for REIT qualification.
Section 5.8 REMOVAL OF DIRECTORS. Subject to the rights of holders of one
or more classes or series of Preferred Stock to elect one or more directors, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and then only by the affirmative vote of the holders of
a majority of the votes entitled to be cast in the election of directors. If the
stockholders of any class or series are entitled separately to elect one or more
directors, a director elected by such class or series may not be removed without
cause except by the affirmative vote of a majority of all of the votes of that
class or series. For the purpose of this paragraph, "cause" shall mean with
respect to any particular director a final judgment of a court of competent
jurisdiction holding that such director caused demonstrable, material harm to
the Corporation through bad faith or active and deliberate dishonesty.
ARTICLE VI
STOCK
Section 6.1 AUTHORIZED SHARES. The Corporation has authority to issue
75,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"),
5,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred
Stock") , and 20,000,000 shares of Excess Stock, $.01 par value per share
("Excess Stock"). The authorized but unissued shares of the Common Stock and
Preferred Stock of the Corporation will be available for issue from time to time
without further action or authorization by the stockholders (except as required
by law or by the rules of any stock exchange on which the Corporation's
securities may be listed) for such corporate purposes as may be determined by
the Board of Directors.
Section 6.2 COMMON STOCK. Subject to the provisions of Article VII, each
share of Common Stock shall entitle the holder thereof to one vote. The Board of
Directors may reclassify any unissued shares of Common Stock from time to time
in one or more classes or series of stock.
Section 6.3 PREFERRED STOCK AND EXCESS STOCK. The Board of Directors may
classify any unissued shares of Preferred Stock or Excess Stock and reclassify
any previously classified but unissued shares of Preferred Stock or Excess Stock
of any series from time to time, in one or more classes or series of stock.
Section 6.4 CLASSIFIED OR RECLASSIFIED SHARES. Prior to issuance of
classified or reclassified shares of any class or series, the Board of Directors
by resolution shall: (a) designate that class or series to
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distinguish it from all other classes and series of stock of the Corporation;
(b) specify the number of shares to be included in the class or series; (c) set
or change, subject to the provisions of Article VII and subject to the express
terms of any class or series of stock of the Corporation outstanding at the
time, the preferences, conversion or other rights, voting powers, restrictions,
dividend rights, limitations as to dividends or other distributions,
qualifications, terms and conditions of redemption for each class or series, and
similar matters; and (d) cause the Corporation to file articles supplementary
with the State Department of Assessments and Taxation of Maryland ("SDAT"). Any
of the terms of any class or series of stock set or changed pursuant to clause
(c) of this Section 6.4 may be made dependent upon facts or events ascertainable
outside the Charter (including determinations by the Board of Directors or other
facts or events within the control of the Corporation) and may vary among
holders thereof, provided that the manner in which such facts, events or
variations shall operate upon the terms of such class or series of stock is
clearly and expressly set forth in the articles supplementary filed with the
SDAT.
Section 6.5 CHARTER AND BYLAWS. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the Charter and
the Bylaws.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 DEFINITIONS. For the purpose of this Article VII, the
following terms shall have the following meanings:
OWNERSHIP LIMIT. The term "Ownership Limit" shall mean not more than
9.8% in value of the aggregate of the outstanding shares of Capital Stock.
The value of the outstanding shares of Capital Stock shall be determined by
the Board of Directors of the Corporation in good faith, which determination
shall be conclusive for all purposes hereof.
BENEFICIAL OWNERSHIP. The term "Beneficial Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the shares
of Capital Stock is held directly or indirectly (including by a nominee),
and shall include interests that would be treated as owned through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B)
of the Code. The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have the correlative meanings.
BUSINESS DAY. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
CAPITAL STOCK. The term "Capital Stock" shall mean all classes or
series of stock of the Corporation, including, without limitation, Common
Stock and Preferred Stock.
CHARITABLE BENEFICIARY. The term "Charitable Beneficiary" shall mean
one or more beneficiaries of the Trust as determined pursuant to Section
7.3.6, provided that each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of
the Code.
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CHARTER. The term "Charter" shall mean the Charter of the Corporation,
as that term is defined in the MGCL Section 1-101(e) or any successor
provision.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
COMMON STOCK OWNERSHIP LIMIT. The term "Common Stock Ownership Limit"
shall mean not more than 9.8% (in value or in number of shares, whichever is
more restrictive) of the aggregate of the outstanding shares of Common Stock
of the Corporation. The number and value of outstanding shares of Common
Stock of the Corporation shall be determined by the Board of Directors of
the Corporation in good faith, which determination shall be conclusive for
all purposes hereof.
CONSTRUCTIVE OWNERSHIP. The term "Constructive Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the shares
of Capital Stock is held directly or indirectly (including by a nominee),
and shall include interests that would be treated as owned through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5)
of the Code. The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
EXCEPTED HOLDER. The term "Excepted Holder" shall mean a stockholder of
the Corporation for whom an Excepted Holder Limit is created by these
Articles or by the Board of Directors pursuant to Section 7.2.7.
EXCEPTED HOLDER LIMIT. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Directors pursuant to Section
7.2.7, and subject to adjustment pursuant to Section 7.2.8, the percentage
limit established by the Board of Directors pursuant to Section 7.2.7.
EXCESS SHARES. The term "Excess Shares" shall mean issued and
outstanding shares of stock of the Corporation held in trust for the
exclusive benefit of one or more Charitable Beneficiaries by a Trustee to be
appointed by the Board of Directors of the Corporation.
INITIAL DATE. The term "Initial Date" shall mean the date upon which
the Articles of Amendment containing this Article VII are filed with the
SDAT.
MARKET PRICE. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding shares of Capital Stock, the
Closing Price for such Capital Stock on such date. The "Closing Price" on
any date shall mean the last sale price for such Capital Stock, regular way,
or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, for such Capital Stock, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the NYSE or, if such
Capital Stock is not listed or admitted to trading on the NYSE, as reported
on the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
such Capital Stock is listed or admitted to trading or, if such Capital
Stock is not listed or admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation
System or, if such system is no longer in use, the principal other automated
quotation system that may then be in use or, if such Capital Stock is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
Capital Stock selected by the Board of Directors of the Corporation or, in
the event that no trading price is available for such Capital Stock, the
fair market value of the Capital Stock, as determined in good faith by the
Board of Directors of the Corporation.
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MGCL. The term "MGCL" shall mean the Maryland General Corporation Law,
as amended from time to time.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
PERSON. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set
aside for or to be used exclusively for the purposes described in Section
642(c) of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity and also
includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and a group to which an
Excepted Holder Limit applies.
PROHIBITED OWNER. The term "Prohibited Owner" shall mean, with respect
to any purported Transfer, any Person who, but for the provisions of Section
7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock,
and if appropriate in the context, shall also mean any Person who would have
been the record owner of the shares that the Prohibited Owner would have so
owned.
REIT. The term "REIT" shall mean a real estate investment trust within
the meaning of Section 856 of the Code.
RESTRICTION TERMINATION DATE. The term "Restriction Termination Date"
shall mean the first day after the Initial Date on which the Corporation
determines pursuant to Section 5.7 of the Charter that it is no longer in
the best interests of the Corporation to attempt to, or continue to, qualify
as a REIT or that compliance with the restrictions and limitations on
Beneficial Ownership, Constructive Ownership and Transfers of shares of
Capital Stock set forth herein is no longer required in order for the
Corporation to qualify as a REIT.
TRANSFER. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise, bequest or other disposition, as well as any other
event that causes any Person to acquire Beneficial Ownership or Constructive
Ownership, or any agreement to take any such actions or cause any such
events, of Capital Stock or the right to vote or receive dividends on
Capital Stock, including (a) the granting or exercise of any option (or any
disposition of any option), (b) any disposition of any securities or rights
convertible into or exchangeable for Capital Stock or any interest in
Capital Stock or any exercise of any such conversion or exchange right and
(c) Transfers of interests in other entities that result in changes in
Beneficial or Constructive Ownership of Capital Stock; in each case, whether
voluntary or involuntary, whether owned of record, Constructively Owned or
Beneficially Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
TRUST. The term "Trust" shall mean any trust provided for in Section
7.3.1.
TRUSTEE. The term "Trustee" shall mean the Person unaffiliated with the
Corporation and a Prohibited Owner, that is appointed by the Board of
Directors of the Corporation to serve as trustee of the Trust.
Section 7.2 CAPITAL STOCK.
Section 7.2.1 OWNERSHIP LIMITATIONS. During the period commencing on
the Initial Date and prior to the Restriction Termination Date:
(a) BASIC RESTRICTIONS.
(i)(1) No Person, other than an Excepted Holder, shall
Beneficially Own or Constructively Own shares of Capital Stock in
excess of the Ownership Limit, (2) no Person, other
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than an Excepted Holder, shall Beneficially Own or Constructively Own
shares of Common Stock in excess of the Common Stock Ownership Limit
and (3) no Excepted Holder shall Beneficially Own or Constructively
Own shares of Capital Stock in excess of the Excepted Holder Limit
for such Excepted Holder.
(ii) No Person shall Beneficially or Constructively Own shares
of Capital Stock to the extent that such Beneficial or Constructive
Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code
(without regard to whether the ownership interest is held during the
last half of a taxable year), or otherwise failing to qualify as a
REIT (including, but not limited to, Beneficial or Constructive
Ownership that would result in the Corporation owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation
from such tenant would cause the Corporation to fail to satisfy any
of the gross income requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such Transfer is
the result of a transaction entered into through the facilities of
the NYSE or any other national securities exchange or automated
inter-dealer quotation system) that, if effective, would result in
the Capital Stock being beneficially owned by less than 100 Persons
(determined under the principles of Section 856(a)(5) of the Code)
shall be void AB INITIO, and the intended transferee shall acquire no
rights in such shares of Capital Stock.
(b) TRANSFER IN TRUST. If any Transfer of shares of Capital Stock
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE or any other national securities
exchange or automated inter-dealer quotation system) occurs which, if
effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Capital Stock in violation of Section
7.2.1(a)(i) or (ii),
(i) then that number of shares of the Capital Stock the
Beneficial or Constructive Ownership of which otherwise would cause
such Person to violate Section 7.2.1(a)(i) or (ii) (rounded to the
nearest whole share) will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to a
Trustee to be appointed by the Board of Directors of the Corporation
for the exclusive benefit (except to the extent described below) of
one or more Charitable Beneficiaries designated from time to time by
the Corporation, as described in Section 7.3, effective as of the
close of business on the Business Day prior to the date of such
Transfer, and such Person shall acquire no rights in such shares; or
(ii) if the transfer to the Trust described in clause (i) of
this sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that
number of shares of Capital Stock that otherwise would cause any
Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab
initio, and the intended transferee shall acquire no rights in such
shares of Capital Stock.
Section 7.2.2 REMEDIES FOR BREACH. If the Board of Directors of the
Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 7.2.1 or that a Person intends to acquire
or has attempted to acquire Beneficial or Constructive Ownership of any
shares of Capital Stock in violation of Section 7.2.1 (whether or not such
violation is intended), the Board of Directors or a committee thereof shall
take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer or other event, including, without limitation, causing
the Corporation to redeem shares, refusing to give effect to such Transfer
on the books of the Corporation or instituting proceedings to enjoin such
Transfer or other event; provided, however, that any Transfers or attempted
Transfers or
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other events in violation of Section 7.2.1 shall automatically result in the
exchange of the Capital Stock subject to the Transfer for shares of Excess
Stock that will be transferred, by operation of law, to the Trust described
above, and, where applicable, such Transfer (or other event) shall be void
ab initio as provided above irrespective of any action (or non-action) by
the Board of Directors or a committee thereof.
Section 7.2.3 NOTICE OF RESTRICTED TRANSFER. Any Person who acquires
or attempts or intends to acquire Beneficial Ownership or Constructive
Ownership of shares of Capital Stock that will or may violate Section
7.2.1(a), or any Person who would have owned shares of Capital Stock that
resulted in a transfer to the Trust pursuant to the provisions of Section
7.2.1(b) shall immediately give written notice to the Corporation of such
event, or in the case of such a proposed or attempted transaction, give at
least 15 days prior written notice, and shall provide to the Corporation
such other information as the Corporation may request in order to determine
the effect, if any, of such Transfer on the Corporation's status as a REIT.
Section 7.2.4 OWNERS REQUIRED TO PROVIDE INFORMATION. From the Initial
Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower percentage
as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of Capital Stock, within 30 days
after the end of each taxable year, shall give written notice to the
Corporation stating the name and address of such owner, the number of
shares of Capital Stock and other shares of the Capital Stock
Beneficially Owned and a description of the manner in which such shares
are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to
determine the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the
Ownership Limit.
(b) each Person who is a Beneficial or Constructive Owner of Capital
Stock and each Person (including the stockholder of record) who is
holding Capital Stock for a Beneficial or Constructive Owner shall
provide to the Corporation such information as the Corporation may
request, in good faith, in order to determine the Corporation's status as
a REIT and to comply with requirements of any taxing authority or
governmental authority or to determine such compliance.
Section 7.2.5 REMEDIES NOT LIMITED. Subject to Section 5.7 of the
Charter, nothing contained in this Section 7.2 shall limit the authority of
the Board of Directors of the Corporation to take such other action as it
deems necessary or advisable to protect the Corporation and the interests of
its stockholders in preserving the Corporation's status as a REIT.
Section 7.2.6 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3, or
any definition contained in Section 7.1, the Board of Directors of the
Corporation shall have the power to determine the application of the
provisions of this Section 7.2 or Section 7.3 with respect to any situation
based on the facts known to it, and the proper interpretation of any
definition of this Section 7.1. In the event Section 7.2 or 7.3 requires an
action by the Board of Directors and the Charter fails to provide specific
guidance with respect to such action, the Board of Directors shall have the
power to determine the action to be taken so long as such action is not
contrary to the provisions of Sections 7.1, 7.2 or 7.3.
Section 7.2.7 EXCEPTIONS.
(a) Subject to Section 7.2.1(a)(ii), the Board of Directors of the
Corporation, in its sole discretion, may exempt a Person from the
Ownership Limit and the Common Stock Ownership Limit, as the case may be,
and may establish or increase an Excepted Holder Limit for such Person
if:
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(i) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial or Constructive Ownership
of such shares of Capital Stock will violate Section 7.2.1(a)(ii);
(ii) such Person does not and represents that it will not own,
actually or Constructively, an interest in a tenant of the
Corporation (or a tenant of any entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or
Constructively, a 10% or greater interest (as set forth in Section
856(d)(2)(B) of the Code) in such tenant and the Board of Directors
obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact (for this purpose, a
tenant from whom the Corporation (or an entity owned or controlled by
the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the
Board of Directors of the Corporation, rent from such tenant would
not adversely affect the Corporation's ability to qualify as a REIT,
shall not be treated as a tenant of the Corporation);
(iii) the Board of Directors is satisfied that such exemption
from the Ownership Limit or establishment of an Excepted Holder Limit
will not jeopardize the Corporation's status as a REIT in any other
manner; and
(iv) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Sections 7.2.1
through 7.2.6) will result in such shares of Capital Stock being
automatically transferred to a Trust in accordance with Sections
7.2.1(b) and 7.3.
(b) Prior to granting any exception pursuant to Section 7.2.7(a), the
Board of Directors of the Corporation may require a ruling from the
Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole
discretion, as it may deem necessary or advisable in order to determine
or ensure the Corporation's status as a REIT. Notwithstanding the receipt
of any ruling or opinion, the Board of Directors may impose such
conditions or restrictions as it deems appropriate in connection with
granting such exception.
(c) Subject to Section 7.2.1(a)(ii), an underwriter which
participates in a public offering or a private placement of Capital Stock
(or securities convertible into or exchangeable for Capital Stock) may
Beneficially Own or Constructively Own shares of Capital Stock (or
securities convertible into or exchangeable for Capital Stock) in excess
of the Ownership Limit, the Common Stock Ownership Limit, or both such
limits, but only to the extent necessary to facilitate such public
offering or private placement.
(d) The foregoing provisions relating to Excess Shares or the
Ownership Limit shall not apply to shares of Capital Stock acquired
pursuant to an all-cash tender offer for all outstanding shares of
Capital Stock in conformity with applicable laws where not less than
two-thirds of the outstanding shares of Capital Stock (not including
securities held by the tender offeror and/or its affiliates and
associates) are tendered and accepted pursuant to such tender offer and
where the tender offeror commits in such tender offer, if the offer is
accepted by the holders of two-thirds of the outstanding stock, promptly
after the tender offeror's purchase of the tendered stock to give any
non-tendering stockholders a reasonable opportunity to "put" their shares
of stock to the tender offeror at a price not less than that paid
pursuant to the tender offer.
Section 7.2.8 INCREASE IN AGGREGATE STOCK OWNERSHIP AND COMMON STOCK
OWNERSHIP LIMITS. The Board of Directors may from time to time increase the
Ownership Limit and the Common Stock Ownership Limit.
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Section 7.2.9 LEGEND. Each certificate for shares of Capital Stock
shall bear substantially the following legend:
The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and Transfer
for the purpose of the Corporation's maintenance of its status as
a Real Estate Investment Trust under the Internal Revenue Code of
1986, as amended (the "Code"). Subject to certain further
restrictions and except as expressly provided in the Corporation's
Charter, (i) no Person may Beneficially or Constructively Own
shares of the Corporation's Common Stock in excess of 9.8% (in
value or number of shares) of the outstanding shares of Common
Stock of the Corporation unless such Person is an Excepted Holder
(in which case the Excepted Holder Limit shall be applicable);
(ii) no Person may Beneficially or Constructively Own shares of
Capital Stock of the Corporation in excess of 9.8% of the value of
the total outstanding shares of Capital Stock of the Corporation,
unless such Person is an Excepted Holder (in which case the
Excepted Holder Limit shall be applicable); (iii) no Person may
Beneficially or Constructively Own Capital Stock that would result
in the Corporation being "closely held" under Section 856(h) of
the Code or otherwise cause the Corporation to fail to qualify as
a REIT; and (iv) no Person may Transfer shares of Capital Stock if
such Transfer would result in the Capital Stock of the Corporation
being owned by fewer than 100 Persons. Any Person who Beneficially
or Constructively Owns or attempts to Beneficially or
Constructively Own shares of Capital Stock which causes or will
cause a Person to Beneficially or Constructively Own shares of
Capital Stock in excess or in violation of the above limitations
must immediately notify the Corporation. If any of the
restrictions on transfer or ownership are violated, the shares of
Capital Stock will automatically be exchanged for shares of Excess
Stock that will be transferred, by operation of law, to a Trustee
to be named by the Board of Directors of the Corporation for the
exclusive benefit of one or more Charitable Beneficiaries. In
addition, upon the occurrence of certain events, attempted
Transfers in violation of the restrictions described above may be
void AB INITIO. All capitalized terms in this legend have the
meanings defined in the Charter of the Corporation, as the same
may be amended from time to time, a copy of which, including the
restrictions on transfer and ownership, will be furnished to each
holder of Capital Stock of the Corporation on request and without
charge.
Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability contained in this Article VII to a stockholder on request and
without charge.
Section 7.3 TRANSFER OF CAPITAL STOCK IN TRUST.
Section 7.3.1 OWNERSHIP IN TRUST. Upon any purported Transfer or other
event described in Section 7.2.1(b) that would result in the exchange of
Capital Stock for Excess Shares that will be transferred to a Trust, such
Excess Shares shall be deemed to have been transferred to the Trustee as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective
as of the close of business on the Business Day prior to the purported
Transfer or other event that results in the transfer to the Trust pursuant
to Section 7.2.1(b). The Trustee shall be appointed by the Corporation and
shall be a Person unaffiliated with the Corporation and any Prohibited
Owner. Each Charitable Beneficiary shall be designated by the Corporation as
provided in Section 7.3.6.
Section 7.3.2 STATUS OF SHARES HELD BY THE TRUSTEE. Excess Shares held
by the Trustee shall be issued and outstanding shares of Capital Stock of
the Company. The Prohibited Owner shall have no rights in the shares held by
the Trustee. The Prohibited Owner shall not benefit economically from
ownership of any shares held in trust by the Trustee, shall have no rights
to dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.
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Section 7.3.3 DIVIDEND AND VOTING RIGHTS. The Trustee shall have all
voting rights and rights to dividends or other distributions with respect to
Excess Shares held in the Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Corporation that the shares
of Capital Stock have been transferred to the Trustee shall be repaid by the
recipient of such dividend or distribution to the Corporation upon demand
and thereupon paid over by the Corporation to the Trustee. Any dividend or
other distribution authorized but unpaid shall be paid when due to the
Trustee. Any dividend or distribution so paid to the Trustee shall be held
in trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to shares held in the Trust. Subject to Maryland
law, any votes of holders of shares of Capital Stock purported to have been
cast by the Prohibited Owner prior to such discovery of a prohibited
transfer will be retroactively deemed not to have been cast, and, effective
as of the date that the Excess Shares have been transferred to the Trustee,
the Trustee shall have the authority (at the Trustee's sole discretion) to
recast such vote in accordance with the desires of the Trustee acting for
the benefit of the Charitable Beneficiary; provided, however, that any said
retroactive nullification or recast of the vote of the relevant shares of
Capital Stock shall (i) not adversely affect the rights of any person (other
than the purported transferee) who has relied in good faith upon the
effectiveness of the matter that was the subject of the stockholder action
as to which such votes were originally cast and (ii) not be effective if the
Corporation has already taken irreversible corporate action. Notwithstanding
the provisions of this Article VII, until the Corporation has received
notification that shares of Capital Stock have been transferred into a
Trust, the Corporation shall be entitled to rely on its share transfer and
other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of
proxies and otherwise conducting votes of stockholders.
Section 7.3.4 SALE OF SHARES BY TRUSTEE. Subject to the Corporation's
purchase rights as described in Section 7.3.5, the Trustee of the Trust may
sell the shares held in the Trust to a person, designated by the Trustee,
whose ownership of the shares will not violate the ownership limitations set
forth in Section 7.2.1(a). Upon such sale, the Excess Shares representing
the sold interest shall be automatically exchanged for shares of Capital
Stock of the class that was originally exchanged into such Excess Shares,
the interest of the Charitable Beneficiary in the shares sold shall
terminate, and the Trustee shall distribute the net proceeds of the sale to
the Prohibited Owner and to the Charitable Beneficiary as provided in this
Section 7.3.4. The Prohibited Owner shall receive the lesser of (1) the
price paid by the Prohibited Owner for the shares or, if the Prohibited
Owner did not give value for the shares in connection with the event causing
the shares to be held in the Trust (E.G., in the case of a gift, devise or
other such transaction), the Market Price of the shares on the day of the
event causing the shares to be held in the Trust and (2) the price per share
received by the Trustee from the sale or other disposition of the shares
held in the Trust. Any net sales proceeds in excess of the amount payable to
the Prohibited Owner shall be immediately paid to the Charitable
Beneficiary. If, prior to the discovery by the Corporation that Excess
Shares have been transferred to the Trustee, such shares are sold by a
Prohibited Owner, then (i) such shares shall be deemed to have been sold on
behalf of the Trust and (ii) to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such
Prohibited Owner was entitled to receive pursuant to this Section 7.3.4,
such excess shall be paid to the Trustee upon demand.
Section 7.3.5 PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. The
Corporation, or its designee, shall have the right, for a period of 90 days
during the time any Excess Shares are held by the Trustee and beginning on
the date on which the Corporation receives written notice of the prohibited
transfer or other event resulting in the exchange of capital for Excess
Shares, to purchase all or any portion of the Excess Shares from the Trustee
at a price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the Trust (or, in the case of
a devise or gift, the Market Price at the time of such devise or gift) and
(ii) the Market Price on the date the Corporation, or its designee,
exercises its right to purchase. Upon such a sale to the Corporation,
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the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to
the Prohibited Owner.
Section 7.3.6 DESIGNATION OF CHARITABLE BENEFICIARIES. By written
notice to the Trustee, the Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Trust
such that (i) the shares of Capital Stock held in the Trust would not
violate the restrictions set forth in Section 7.2.1(a) in the hands of such
Charitable Beneficiary and (ii) each such organization must be described in
Section 501(c)(3) of the Code and contributions to each such organization
must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and
2522 of the Code.
Section 7.4 NYSE TRANSACTIONS. Nothing in this Article VII shall preclude
the settlement of any transaction entered into through the facilities of the
NYSE or any other national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction is so
permitted shall not negate the effect of any other provision of this Article VII
and any transferee in such a transaction and the shares so transferred shall be
subject to all of the provisions and limitations set forth in this Article VII.
Section 7.5 ENFORCEMENT. The Corporation is authorized specifically to
seek equitable relief, including injunctive relief, to enforce the provisions of
this Article VII.
Section 7.6 NON-WAIVER. No delay or failure on the part of the Corporation
or the Board of Directors in exercising any right hereunder shall operate as a
waiver of any right of the Corporation or the Board of Directors, as the case
may be, except to the extent specifically waived in writing.
ARTICLE VIII
AMENDMENTS
Section 8.1 CHARTER. The Corporation reserves the right from time to time
to make any amendment to its Charter, now or hereafter authorized by law,
including any amendment altering the terms or contract rights, as expressly set
forth in this Charter, of any shares of outstanding stock. All rights and powers
conferred by the Charter on stockholders, directors and officers are granted
subject to this reservation. An amendment to the Charter must be approved by the
board of directors and the affirmative vote of a majority of all the votes
entitled to be cast on the matter.
Section 8.2 BYLAWS. The Board of Directors shall have the power to adopt,
amend or repeal the Bylaws, provided that any such action may only be taken by
the affirmative vote of no less than two-thirds of all directors at the time.
Alternatively, the Bylaws may be adopted, amended or repealed by the affirmative
vote of a majority of the Board of Directors and of all the votes cast by
holders of shares of stock entitled to vote generally in the election of
directors.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers of a corporation, no
director or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal of this Article
IX, nor the adoption or amendment of any other provision of the Charter or
Bylaws inconsistent with this Article IX, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
THIRD: The amendment to and restatement of the Charter as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
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FOURTH: The current address of the principal office of the Corporation is
as set forth in Article IV of the foregoing amendment and restatement of the
Charter.
FIFTH: The name and address of the Corporation's current resident agent is
as set forth in Article IV of the foregoing amendment and restatement of the
Charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article V of the foregoing amendment and
restatement of the Charter.
SEVENTH: The undersigned President acknowledges these Articles of Amendment
and Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this day of , 1997.
ATTEST: BURNHAM PACIFIC PROPERTIES,
INC.
By: (SEAL)
Nina Galloway J. David Martin
CORPORATE SECRETARY PRESIDENT
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APPENDIX C
BURNHAM PACIFIC PROPERTIES, INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Burnham Pacific
Properties, Inc., a Maryland corporation (the "Corporation"), shall be located
at such place or places as the Board of Directors may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices
at such places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year.
Section 3. SPECIAL MEETINGS. The president, chief executive officer or
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast a
majority of all the votes entitled to be cast at such meeting. Such request
shall state the purpose of such meeting and the matters proposed to be acted on
at such meeting. The secretary shall inform such stockholders of the reasonably
estimated cost of preparing and mailing notice of the meeting and, upon payment
to the Corporation by such stockholders of such costs, the secretary shall give
notice to each stockholder entitled to notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the chairman of
the board, if there be one, shall conduct the meeting or, in the case of vacancy
in office or absence of the chairman of the board, one of the following officers
present shall conduct the meeting in the order stated: the vice chairman of the
board, if there be one, the president, the vice presidents in their order of
rank and seniority, or a chairman chosen by the stockholders entitled to cast a
majority of the votes which all
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stockholders present in person or by proxy are entitled to cast, shall act as
chairman, and the secretary, or, in his absence, an assistant secretary, or in
the absence of both the secretary and assistant secretaries, a person appointed
by the chairman shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in person
or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting of the stockholders, the
stockholders entitled to vote at such meeting, present in person or by proxy,
shall have the power to adjourn the meeting from time to time to a date not more
than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted; however, there shall be no cumulative voting and no share may cast more
than one vote for any one individual. A majority of the votes cast at a meeting
of stockholders duly called and at which a quorum is present shall be sufficient
to approve any other matter which may properly come before the meeting, unless
more than a majority of the votes cast is required by statute or by the charter
of the Corporation. Unless otherwise provided in the charter, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes entitled to be cast
by the shares of the stock owned of record by him either in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the secretary of the Corporation before or
at the time of the meeting. No proxy shall be valid after eleven months from the
date of its execution, unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Corporation
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the
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certification, the stockholder of record of the specified stock in place of the
stockholder who makes the certification.
Section 11. CONTROL SHARE ACQUISITIONS. Notwithstanding any other
provision of the charter of the Corporation or these Bylaws, Title 3, Subtitle 7
of the Corporations and Associations Article of the Annotated Code of Maryland
(or any successor statute) shall not apply to any acquisition by any person of
shares of stock of the Corporation. This section may be repealed, in whole or in
part, at any time, whether before or after an acquisition of control shares and,
upon such repeal, may, to the extent provided by any successor bylaw, apply to
any prior or subsequent control share acquisition.
Section 12. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be PRIMA
FACIE evidence thereof.
Section 13. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record both at the time of giving of notice provided for in this
Section 13(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 13(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of
this Section 13, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided however, that
in the event that the date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary date or if the
Corporation has not previously held an annual meeting, notice by the stockholder
to be timely must be so delivered not earlier than the close of business on the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. In no event shall the public announcement of a
postponement or adjournment of an annual meeting to a later date or time
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
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made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (y) the number of shares of each class of stock of
the Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
this Section 13 to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Section 13(a) shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 13(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 13(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 13 shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier than
the close of business on the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of a postponement or adjournment of a special meeting to a
later date or time commence a new time period for the giving of a stockholder's
notice as described above.
(c) GENERAL. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 13 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 13. The chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 13 and, if any proposed
nomination or business is not in compliance with this Section 13, to declare
that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 13, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, Business Wire or comparable business news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 13, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 13. Nothing in this Section 13 shall be deemed
to affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
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Section 14. VOTING BY BALLOT. Voting on any question or in any election
may be VIVA VOCE unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at
any special meeting called for that purpose, a majority of the entire Board of
Directors may establish, increase or decrease the number of directors, provided
that the number thereof shall never be less than the minimum number required by
the Maryland General Corporation Law, nor more than eleven, and further provided
that the tenure of office of a director shall not be affected by any decrease in
the number of directors.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board, president or by
a majority of the directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of Directors
shall be delivered personally or by telephone, facsimile transmission, United
States mail or courier to each director at his business or residence address or,
if such director has authorized the Corporation to notify him by electronic
mail, by electronic mail at the address provided by the director to the
Corporation. Notice by personal delivery, telephone, facsimile or electronic
transmission shall be given at least two days prior to the meeting. Notice by
mail shall be given at least five days prior to the meeting and shall be deemed
to be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. Telephone notice shall be deemed to be given when the
director is personally given such notice in a telephone call to which he is a
party. Facsimile transmission notice shall be deemed to be given upon completion
of the transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a quorum
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the charter of
the Corporation or these Bylaws, the vote of a majority of a particular group of
directors is required for action, a quorum must also include a majority of such
group. Notwithstanding the foregoing, approval by the Board of Directors of an
"interested director transaction," as set forth in Section 2-419 at the Maryland
General Corporation Law, or any successor provision thereof, may be obtained by
a majority vote of the disinterested directors, even if such majority is less
than a majority of a quorum.
The directors present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum.
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Section 7. VOTING. The action of the majority of the directors present at
a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by each director and
such written consent or a facsimile transmission thereof received by the
Corporation is filed with the minutes of proceedings of the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors cease to
be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Stockholders of the Corporation may elect a successor
to fill a vacancy on the Board of Directors which results from the removal of
any director, subject to any voting provisions that may exist from time to time
regarding directors elected by one class of stock. Any vacancy on the Board of
Directors for any cause other than an increase in the number of directors or the
removal of a director shall be filled by a majority of the remaining directors,
although such majority is less than a quorum. Any vacancy in the number of
directors created by an increase in the number of directors may be filled by a
majority vote of the entire Board of Directors. Any individual so elected as
director shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors but, by resolution of the Board of Directors,
may receive compensation, in the form of money, securities or other
consideration, per year and/or per meeting and/or per visit to real property or
other facilities owned or leased by the Corporation and for any service or
activity they performed or engaged in as directors. Directors may be reimbursed
for expenses of attendance, if any, at each annual, regular or special meeting
of the Board of Directors or of any committee thereof and for their expenses, if
any, in connection with each property visit and any other service or activity
they performed or engaged in as directors; but nothing herein contained shall be
construed to preclude any directors from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by any financial or other
advisers, accountants, appraisers or other experts or consultants selected by
the Board of Directors or officers of the Corporation, regardless of whether
such counsel or expert may also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
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ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one or more directors,
to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board of Directors. A majority
of the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or any
two members of any committee may fix the time and place of its meeting unless
the Board shall otherwise provide. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another director to act in the place of such
absent member. Each committee shall keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent or a facsimile transmission
thereof received by the Corporation is filed with the minutes of proceedings of
such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board, one or more vice presidents, a chief
operating officer, a chief administrative officer, a chief financial officer,
one or more assistant secretaries and one or more assistant treasurers. In
addition, the Board of Directors may from time to time appoint such other
officers with such titles, powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders and thereafter as the Board of Directors may
determine, except that the chief executive officer may appoint one or more vice
presidents, assistant secretaries, assistant treasurers or officers having other
titles descriptive of the functions to be performed by such officers. Each
officer shall hold office until his successor is elected and qualifies or until
his death, resignation or removal in the manner hereinafter provided. Any two or
more offices except president and vice president may be held by the same person.
In its discretion, the Board of Directors may leave unfilled any office except
that of president, treasurer and secretary. Election of an officer or agent
shall not of itself create contract rights between the Corporation and such
officer or agent.
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Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation. Such resignation shall be without prejudice to the
contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the Board
of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a
chief executive officer. In the absence of such designation, the chairman of the
board shall be the chief executive officer of the Corporation. The chief
executive officer shall have general responsibility for implementation of the
policies of the Corporation, as determined by the Board of Directors, and for
the management of the business and affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate a
chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF ADMINISTRATIVE OFFICER. The Board of Directors may
designate a chief administrative officer. The chief administrative officer shall
have the responsibilities and duties as set forth by the Board of Directors or
the chief executive officer.
Section 7. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a
chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 8. CHAIRMAN OF THE BOARD. The Board of Directors shall designate a
chairman of the board, and if none is so designated, the president shall serve
as the Chairman of the Board. The chairman of the board shall preside over the
meetings of the Board of Directors and of the stockholders at which he shall be
present. The chairman of the board shall perform such other duties as may be
assigned to him by the Board of Directors.
Section 9. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall be the chief operating
officer. He may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
Section 10. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform 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; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
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Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) unless a transfer agent has been appointed with
responsibility therefor, keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder and
have general charge of the share transfer books of the Corporation; and (e) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.
Section 12. TREASURER. The treasurer shall have the custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation, and in the absence of a designation of a treasurer by the Board of
Directors, the person designated as chief financial officer by the Board of
Directors shall be the treasurer of the Corporation.
The treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the president and Board of Directors, at the regular meetings of
the Board of Directors or whenever it may so require, an account of all his
transactions as treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Board of Directors. The assistant treasurers shall, if required
by the Board of Directors, give bonds for the faithful performance of their
duties in such sums and with such surety or sureties as shall be satisfactory to
the Board of Directors.
Section 14. OTHER OFFICERS. Officers having titles other than set forth
above shall perform such duties as shall be assigned to them by the Board of
Directors or the officer who appointed them or the officer to whom they report
as established in an organization chart approved by the Board of Directors or
the chief executive officer.
Section 15. SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer or
agent to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of the Corporation and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.
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Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or agent of the Corporation in
such manner as shall from time to time be determined by the Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors or one or
more officers authorized by the Board of Directors may designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of any such statement or summary, the certificate
may state that the Corporation will furnish a full statement of such information
to any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any share
of stock as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of the State of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of the
terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of
Directors may direct a new certificate to be issued in place of any certificate
previously issued by the Corporation alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing the issuance
of a new certificate,
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an officer designated by the Board of Directors may, in his discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or the owner's legal representative to advertise
the same in such manner as he shall require and/or to give bond, with sufficient
surety, to the Corporation to indemnify it against any loss or claim which may
arise as a result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board
of Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
determining stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not longer than 20
days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the directors, declaring
the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its principal
office or cause to be maintained at the office of its transfer agent, an
original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may
issue fractional stock or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution. In the absence of a
resolution to the contrary, the fiscal year shall be the calendar year.
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ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the stock
of the Corporation may be authorized and declared by the Board of Directors,
subject to the provisions of law and the charter of the Corporation. Dividends
and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Incorporated Maryland." The Board
of Directors may authorize one or more duplicate seals and provide for the
custody thereof. Any document requiring a seal or on which a seal appears shall
be deemed to be duly sealed by or on behalf of the Corporation notwithstanding
that the seal may be the seal of the Predecessor Corporation (as defined in
Article XII).
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to time,
the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation or Burnham Pacific Properties, Inc., a California corporation being
or to be merged into this Corporation (the "Predecessor Corporation"), and who
is made a party to the proceeding by reason of his service in that capacity or
(b) any individual who, while a director of the Corporation or the Predecessor
Corporation and at the request of the Corporation or the Predecessor
Corporation, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. The
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Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served any other
predecessor of the Corporation in any of the capacities described in (a) or (b)
above and to any employee or agent of the Corporation or any other predecessor
of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws, provided that any such action may only be taken by the affirmative vote
of no less than two-thirds of all directors at the time. Alternatively, the
Bylaws may be adopted, amended or repealed by the affirmative vote of a majority
of the Board of Directors and of all the votes cast by holders of shares of
stock entitled to vote generally in the election of directors.
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APPENDIX D
BURNHAM PACIFIC PROPERTIES, INC.
STOCK OPTION AND INCENTIVE PLAN
AMENDED AND RESTATED AS OF MAY 6, 1997
1. PURPOSE; DEFINED TERMS
(a) This Stock Option and Incentive Plan (the "Plan") is intended as
performance incentive for officers, Directors, employees and consultants of
Burnham Pacific Properties, Inc. (the "Corporation") and its Subsidiaries (as
hereinafter defined) to enable the persons to whom Options or other Awards are
granted (the "Optionees" or "Grantees") to acquire or increase a proprietary
interest in the success of the Corporation. The Corporation intends that this
purpose will be effected by the granting of "incentive stock options"
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and nonqualified stock options ("Nonqualified
Options"), and rights to receive restricted stock ("Restricted Stock Awards"),
unrestricted stock ("Unrestricted Stock Awards"), performance shares
("Performance Share Awards"), stock appreciation rights ("Stock Appreciation
Rights") and dividend equivalent rights ("Dividend Equivalent Rights").
(b) The undifferentiated terms "Option" and "Options" include both Incentive
Options and Nonqualified Options. The terms "Award" and "Awards" include
Options, Restricted Stock Awards, Unrestricted Stock Awards, Performance Share
Awards, Stock Appreciation Rights and Dividend Equivalent Rights. The term
"Subsidiaries" includes any corporation, partnership or other organization in
which the Corporation owns at the time of the grant of the Award fifty percent
or more of the economic interest in the equity of such organization.
2. AWARDS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be Incentive Options or Nonqualified
Options, but only options designated as Incentive Options by the Committee at
the time of their grant shall be deemed to be Incentive Options.
(b) The Plan shall be administered by the Compensation Committee of the
Board of Directors (the "Committee") of not less than two directors appointed by
the Board of Directors of the Corporation (the "Board"). None of the members of
the Committee shall be an officer or full-time employee of the Corporation. It
is the intention of the Corporation that each member of the Committee be a "Non-
Employee Director" within the meaning of Rule 16b-3 as promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder. The Board may from time to time remove members from or
add members to the Committee. Vacancies on the Committee shall be filled by the
Board. Action by the Committee shall require the affirmative vote of a majority
of all its members.
(c) Awards may be granted under this Plan to any person who is a Director,
officer or employee of the Corporation or a Subsidiary or renders services to
the Corporation or a Subsidiary, as determined by the Committee, or as otherwise
provided herein.
(d) Subject to the terms and conditions of the Plan, the Committee shall
have the power:
(i) To determine and authorize the Awards to be granted to eligible
persons under the Plan, to prescribe and amend the terms and provisions
(which need not be identical) of each Award granted under the Plan to such
persons;
(ii) To construe and interpret the Plan and Awards thereunder and to
establish, amend, and revoke rules and regulations for administration of the
Plan. In this connection, the Committee may correct any defect or supply any
omission, or reconcile any inconsistency in the Plan, or in any Award
agreement, in the manner and to the extent it shall deem necessary or
expedient to make the Plan
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fully effective. All decisions and determinations by the Committee in the
exercise of this power shall be final and binding upon the Corporation and
the Optionees and Grantees; and
(iii) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the
Corporation with respect to the Plan.
3. STOCK
(a) The stock subject to Awards that may be granted under the Plan shall be
shares of the Corporation's authorized but unissued no par common stock (the
"Common Stock"). The total number of shares of Common Stock that shall be
subject to Awards under this Plan shall not exceed 1,800,000 shares, subject to
adjustment as provided in Section 12 hereof; and the number of shares for which
Awards may be granted in any one calendar year to any one individual shall not
exceed 300,000.
(b) Whenever any outstanding Option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise in the case of Incentive
Options), the shares of Common Stock allocable to the unexercised portion of
such Option may again be the subject of Awards under the Plan. The shares of
Common Stock underlying any other Awards which are forfeited, canceled,
reacquired by the Corporation, satisfied without the issuance of shares or
otherwise terminated (other than by exercise) shall also be added back to the
shares available for issuance under the Plan.
(c) "Fair Market Value" of each share of Common Stock for purposes of the
Plan, unless otherwise determined by the Committee in any particular case, shall
mean the average closing price of the Common Stock as reported on the principal
stock exchange on which the Corporation's shares are listed for the ten trading
days immediately preceding the date of determination.
4. ELIGIBILITY
(a) Incentive Options may be granted only to employees of the Corporation or
its Subsidiaries. All other Awards may be granted to any person who is a
Director, officer or employee of the Corporation or a Subsidiary or who renders
services to the Corporation or a Subsidiary.
(b) No person shall be eligible to receive any Option under the Plan if, at
the date of grant such person beneficially owns in excess of 10% of the
outstanding Common Stock of the Corporation.
(c) No person shall be eligible to receive Incentive Options if the
aggregate Fair Market Value (determined as of the time the option is granted) of
the stock with respect to which such Incentive Options are exercisable for the
first time by such individual during any calendar year (under all plans of the
Corporation and any parent or subsidiary thereof as defined in Section 424 of
the Code) exceeds $100,000.
(d) Effective at the time of the election or re-election on or after the
Annual Meeting of Shareholders in 1996 to the Board of Directors of a Director
who is not an employee of the Corporation (an "Independent Director"), there
shall be issued to each Independent Director in lieu of any cash retainer or
meeting fees as a Director (but not in lieu of reimbursement of out-of-pocket
expenses incurred by an Independent Director in performing his or her duties as
such or in lieu of any cash compensation that the Board of Directors determines
appropriate for services as a Board or Committee Chairman or for services to the
Corporation other than as a Director) the number of shares of Common Stock of
the Corporation, at the times and subject to the restrictions and other terms
hereinafter set forth ("Director Restricted Shares").
(i) There shall be issued to each Independent Director as of the last
day of each calendar quarter such number of Director Restricted Shares not
in excess of 1,000 (the maximum number approved by the Stockholders at the
1996 Annual Meeting) as the Board of Directors may fix, the Board having
fixed on May 14, 1996 the number of Director Restricted Shares to be issued
to each Independent Director as of June 30, 1996 at 375 and the number of
Director Restricted Shares to be issued to each Independent Director as of
September 30, 1996 and as of the last day of each subsequent calendar
quarter at 750. The number of Director Restricted Shares to be issued to any
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Independent Director who serves for less than a full calendar quarter
commencing after June 30, 1996 shall be appropriately pro rated.
(ii) Director Restricted Shares shall be deemed to have been issued and
outstanding as of the last day of the applicable calendar quarter whether or
not any actual certificates are issued evidencing such Director Restricted
Shares; but, except upon the earlier termination of service as a Director of
the Director to whom Director Restricted Shares are issued, such Director
may not sell, transfer, assign, pledge or otherwise dispose of any Director
Restricted Shares during the first year after the date of their issuance,
more than one-third of the number of Director Restricted Shares during the
second year after the date of their issuance, or more than two-thirds of the
number of Director Restricted Shares during the third year after the date of
their issuance; and in no event may any Director Restricted Shares be sold,
transferred, pledged or otherwise disposed of in violation of any applicable
securities laws.
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall contain such provisions as the Committee shall
from time to time deem appropriate. Option agreements need not be identical, but
each option agreement by appropriate language shall include the substance of all
of the following provisions:
(a) EXPIRATION. Notwithstanding any other provision of the Plan or of
any option agreement, each Option shall expire on the date specified in the
option agreement, which date shall not be later than the earliest of (i) the
tenth anniversary of the date on which the Option was granted, (ii) the
ninetieth day after termination of the Optionee's employment by or rendering
of services to the Corporation for any reason other than the death of the
Optionee, or (iii) the first anniversary of the date of the Optionee's
death.
(b) MINIMUM SHARES EXERCISABLE. The minimum number of shares with
respect to which an Option may be exercised at any one time shall be 100
shares, or such lesser number as is subject to exercise under the Option at
the time.
(c) EXERCISE.
(i) Each Option shall be exercisable in such installments (which need
not be equal) and at such times as designated by the Committee. To the
extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than
the date the Option expires.
(ii) In the event of a Change of Control of the Corporation (as defined
in Section 15 all Options outstanding as of the date of such Change in
Control shall become vested and immediately exercisable.
(d) PURCHASE PRICE. The purchase price per share of Common Stock under
each Incentive Option shall not be less than the Fair Market Value of the
Common Stock on the date the Incentive Option is granted.
(e) RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose
to be the owner of any shares of Common Stock subject to any Option unless
and until (i) the Option shall have been exercised pursuant to the terms
thereof, (ii) the Corporation shall have issued and delivered the shares to
the Optionee, and (iii) the Optionee's name shall have been entered as a
shareholder of record on the books of the Corporation. Thereupon, the
Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Common Stock.
(f) TRANSFERABILITY. Options shall not be transferable by the Optionee
other than by will or the laws of descent and distribution. Options may be
exercised during the Optionee's lifetime only by the Optionee.
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6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any Option granted under the Plan may be exercised by the Optionee by
delivering to the Committee or any officer of the Corporation designated by the
Committee on any business day a written notice specifying the number of shares
of Common Stock the Optionee then desires to purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an Option shall be made either in (i) cash equal to the option price
for the number of shares specified in the Notice (the "Total Option Price"),
(ii) if authorized by the applicable option agreement, shares of Common Stock of
the Corporation having a Fair Market Value equal to the exercise price of the
Options being exercised, (iii) by tender of a recourse promissory note payable
to the Corporation in an amount equal to the exercise price of the shares of the
Common Stock purchased accompanied by a pledge agreement of said stock, or (iv)
any combination of the foregoing. Any promissory note tendered pursuant to
clause (iii) shall provide for an interest rate equal to the Corporation's
unsecured borrowing rate from time to time, all dividends on the shares pledged
to secure such note to be applied first to satisfy the interest charges and then
to reduce principal outstanding on the note with the repayment schedule and
maturity of such note otherwise being as authorized by the Committee.
7. RESTRICTED STOCK AWARDS
(a) A Restricted Stock Award is an Award entitling the recipient to acquire
shares of Common Stock, at par value or such other purchase price determined by
the Committee, subject to such restrictions and conditions as the Committee may
determine at the time of grant ("Restricted Stock"). Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives.
(b) Upon execution of a written instrument setting forth the Restricted
Stock Award and paying any applicable purchase price, a Grantee shall have the
rights of a stockholder with respect to the voting of the Restricted Stock,
subject to such conditions contained in the written instrument evidencing the
Restricted Stock Award. Unless the Committee shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the possession of
the Corporation until such Restricted Stock is vested as provided in Section
7(d) below.
(c) Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in
the written instrument evidencing the Restricted Stock Award. If a Grantee's
employment (or other business relationship) with the Corporation and its
Subsidiaries terminates for any reason, the Corporation shall have the right to
repurchase all shares of Restricted Stock with respect to which conditions have
not lapsed at their purchase price, from the Grantee or the Grantee's legal
representative.
(d) The Committee at the time of grant shall specify the date or dates
and/or the attainment of preestablished performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the
Corporation's right of repurchase or forfeiture shall lapse. Subsequent to such
date or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed "vested." Except
as may otherwise be provided by the Committee at any time, a Grantee's rights in
any shares of Restricted Stock that have not vested shall automatically
terminate upon the Grantee's termination of employment (or other business
relationship) with the Corporation and its Subsidiaries and such shares shall
either be forfeited or subject to the Corporation's right of repurchase as
provided in this Section 7.
(e) The written instrument evidencing the Restricted Stock Award may require
or permit the immediate payment, waiver, deferral or investment of dividends
paid on the Restricted Stock.
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(f) To the extent of any conflict between the provisions of Subsection 4(d)
of this Plan (relating to Director Restricted Shares) and the foregoing
provisions of this Section 7, the provisions of Subsection 4(d) shall prevail.
8. UNRESTRICTED STOCK AWARDS
(a) The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award, pursuant to
which the Grantee may receive shares of Common Stock free of any restrictions
under the Plan. An Unrestricted Stock Award may be granted or sold as described
in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such Grantee.
(b) The Committee may permit the Grantee of any Unrestricted Stock Award to
elect in advance to defer receipt of such Award in accordance with such rules
and procedures as may be established by the Committee for that purpose. The
Grantee of any deferred Unrestricted Stock Award shall be entitled to receive
Dividend Equivalent Rights on the deferred shares unless otherwise specified by
the Committee.
(c) The right to receive shares on a deferred basis may not be sold,
assigned transferred, pledged or otherwise encumbered, other than by will or the
laws of descent and distribution.
9. PERFORMANCE SHARE AWARDS
(a) NATURE OF PERFORMANCE SHARE AWARDS. A Performance Share Award is
an Award entitling the recipient to acquire shares of Common Stock upon the
attainment of specified performance goals. The Committee may make
Performance Share Awards independent of or in connection with the granting
of any other Award under the Plan. The Committee in its sole discretion
shall determine whether and to whom Performance Share Awards shall be made,
the performance goals applicable under each such Award, the periods during
which performance is to be measured, and all other limitations and
conditions applicable to the Performance Share Awards.
(b) RESTRICTIONS ON TRANSFER. Performance Share Awards and all rights
with respect to such Awards may not be sold, assigned, transferred, pledged
or otherwise encumbered, other than by will or the laws of descent and
distribution.
(c) RIGHTS AS A SHAREHOLDER. The Grantee of a Performance Share Award
shall have the rights of a shareholder only as to shares actually received
by the Grantee under the Plan and not with respect to shares subject to the
Award but not actually received by the Grantee. A Grantee shall be entitled
to receive a stock certificate evidencing the acquisition of shares under
the Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award
(or in a performance plan adopted by the Committee).
(d) TERMINATION. Except as may otherwise be provided by the Committee
at any time prior to termination of employment (or other business
relationship), a Grantee's rights in all Performance Share Awards shall
automatically terminate upon the Grantee's termination of employment (or
business relationship) with the Corporation and its Subsidiaries for any
reason.
(e) ACCELERATION, WAIVER, ETC. At any time prior to the Grantee's
termination of employment (or other business relationship), the Committee
may in its sole discretion accelerate, waive or, subject to Section 17
hereof, amend any or all of the goals, restrictions or conditions imposed
under any Performance Share Award.
10. STOCK APPRECIATION RIGHTS
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is
an Award entitling the recipient to receive an amount in cash or shares of
Common Stock or a combination thereof having a value equal to the excess of
the fair market value of a share, determined by reference to Subsection 3(c)
hereof, on the date of exercise over the exercise price per Stock
Appreciation Right set by the
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Committee at the time of grant, which price shall not be less than 85% of the
fair market value of the shares on the grant date (or over the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with an
Option) multiplied by the number of shares with respect to which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(b) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation rights may
be granted by the Committee in tandem with, or independently of, any Option
granted pursuant to the Plan. In the case of a Stock Appreciation Right
granted in tandem with a Nonqualified Option, such Stock Appreciation Right
may be granted either at or after the time of the grant of such Option. In
the case of a Stock Appreciation Right granted in tandem with an Incentive
Option, such Stock Appreciation Right may be grated only at the time of the
grant of the Option.
(c) TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock
Appreciation Rights shall be subject to such terms and conditions as shall
be determined from time to time by the Committee, subject to the following:
(i) Stock Appreciation Rights granted in tandem with an Option shall
be exercisable at such time or times and to the extent that the relation
Option shall be exercisable.
(ii) A Stock Appreciation Right or applicable portion thereof
granted in tandem with an Option shall terminate and no longer be
exercisable upon the termination of exercise of the relation Option. Upon
exercise of a Stock Appreciation Right, the applicable portion of any
relation Option shall be surrendered.
(iii) Stock Appreciation Rights granted in tandem with an Option
shall be transferable only when and to the extent that the underlying
Option would be transferable. Stock Appreciation Rights not granted in
tandem with a Option shall not be transferable otherwise than by will or
the laws of descent or distribution. All Stock Appreciation Rights shall
be exercisable during the Grantee's lifetime only by the Grantee or the
Grantee's legal representative.
11. DIVIDEND EQUIVALENT RIGHTS.
(a) DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent right is an
Award entitling the recipient Grantee to receive credits based on cash
dividends that would be paid on the shares of Common Stock specified in the
Dividend Equivalent Right (or other Award to which it relates) if such
shares were held by the Grantee. A Dividend Equivalent Right may be granted
hereunder as a component of another Award or as a freestanding Award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Common Stock, which may thereafter accrue additional equivalents.
Any such reinvestment shall be at fair market value of the shares,
determined by reference to Subsection 3(c) hereof, on the date of
reinvestment or, at the discretion of the Corporation, at such other price
as may then apply under any dividend reinvestment plan sponsored by the
Corporation. Dividend Equivalent Rights may be settled in cash or shares of
Common Stock or a combination thereof, in a single installment or
installments, at the discretion of the Corporation. A Dividend Equivalent
Right granted as a component of another Award may provide that such Dividend
Equivalent Right shall be settled upon exercise, settlement, or payment of,
or lapse of restrictions on, such other Award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different
from such other Award.
(b) INTEREST EQUIVALENTS. Any Award under the Plan that is settled in
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to
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such cash payment. Interest equivalents may be compounded and shall be paid
upon such terms and conditions as may be specified by the grant.
12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of Common Stock as a whole are increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities of the Corporation, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment shall be
made in the number and kind of shares subject to the Plan, and in the
number, kind, and per share exercise price of shares subject to outstanding
unexercised Options or other Awards or portions thereof granted prior to any
such change; but no such adjustments shall be made with respect to
outstanding unexercised Options or other Awards solely as a result of the
Corporation's issuance of additional shares of Common Stock or purchase of
outstanding shares of Common Stock in either case for fair consideration as
determined by the Board of Directors. In the event of any such adjustment in
an outstanding Award, the Optionee or Grantee thereafter shall have the
right to purchase the number of Shares under such Award at the per share
price, as so adjusted, which the Optionee or Grantee could purchase at the
total purchase price applicable to the Award immediately prior to such
adjustment.
(b) Adjustments under this Section 12 shall be determined by the
Committee and such determination shall be conclusive. The Committee shall
have the discretion and power in any such event to determine and to make
effective provision for acceleration of the time or times at which any
Option or portion thereof shall become exercisable. No fractional shares
shall be issued under the Plan on account of any adjustment specified above.
13. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Corporation, (ii) a
reorganization, merger, consolidation or other business combination in which the
Corporation is acquired by another entity or in which the Corporation is not the
surviving entity, or (iii) the sale of all or substantially all of the assets of
the Corporation to another entity, the Plan and the Awards issued hereunder
shall terminate upon the effectiveness of any such transaction or event, unless
provision is made in connection with such transaction for the assumption of
Awards theretofore granted, or the substitution for such Awards of new awards,
by the successor entity or parent thereof, with appropriate adjustment as to the
number and kind of shares and the per share exercise prices, as provided in
Section 12. In the event of such termination, all outstanding Options and Stock
Appreciation Rights shall be exercisable in full for at least fifteen days prior
to the date of such termination whether or not otherwise exercisable during such
period.
14. TAX WITHHOLDING
(a) Each Grantee (which term shall be deemed to include an Optionee)
shall, no later than the date as of which the value of any Award granted
hereunder or of any shares or other amounts received thereunder first
becomes includable in the gross income of the Grantee for federal income tax
purposes (the "Tax Date"), pay to the Corporation, or make arrangements
satisfactory to the Corporation regarding payment of, any federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income.
(b) A Grantee may elect to have such tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Corporation to
withhold from Shares to be issued pursuant to an Award a number of Shares
with an aggregate fair market value (determined in accordance with
Subsection 3(c) as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Corporation
shares owned by the Grantee with an aggregate fair market value (determined
in accordance with Subsection 3(c) as of the date the withholding is
effected) that would satisfy the withholding amount due.
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15. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 15:
(a) Each outstanding Option and Stock Appreciation Right shall
automatically become fully exercisable.
(b) All restrictions and conditions on each Restricted Stock Award,
Performance Share Award and Dividend Equivalent Right shall automatically
lapse and all Awards under the Plan shall be deemed fully vested.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Corporation, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Corporation or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act) directly or indirectly, of securities of the Corporation
representing 25% or more of either (A) the combined voting power of the
Corporation's then outstanding securities having the right to vote in an
election of the Board of Directors ("voting securities") or (B) the then
outstanding shares of Common Stock (in either such case other than as a
result of an acquisition of securities directly from the Corporation); or
(ii) persons who as of the effective date of the amendment and
restatement of the Plan, constitute the Corporation's Board of Directors
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a Director of the Corporation
subsequent to the Effective Date whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Directors shall, for purposes of this Plan, be considered an Incumbent
Director; or
(iii) the shareholders of the Corporation shall approve (A) any
consolidation or merger of the Corporation or any Subsidiary where the
shareholders of the Corporation, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or more
of the voting securities of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Corporation
or (C) any plan or proposal for the liquidation or dissolution of the
Corporation.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Corporation which, by reducing the number of
shares of Common Stock or other voting securities outstanding, increases (x) the
proportionate number of shares beneficially owned by any person to 25% or more
of the combined voting power of all then outstanding voting securities;
PROVIDED, HOWEVER, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
or other voting securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change of Control" shall be deemed to
have occurred for purposes of the forgoing clause (i).
16. AMENDMENT OF THE PLAN
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to the limitation that, except as provided
in Sections 5, 12 and 13 hereof, no amendment shall
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be effective unless approved by the shareholders of the Corporation in
accordance with applicable law and regulations at an annual or special meting
held within twelve months before or after the date of adoption of such
amendment, where such amendment will:
(a) increase the number of shares as to which Awards may be granted
under the Plan.
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change in substance Subsection 5(d) relating to the requirement that
the purchase price per share subject to each Incentive Option be not less
than the fair market value of the shares on the date such Incentive Option
is granted;
(d) increase the maximum term of Options provided for herein; or
(e) otherwise materially increase the benefits accruing to Grantees
under the Plan.
Except as provided in Section 5, 12 and 13 hereof, rights and obligations
under any Award granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Grantee.
17. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the Plan
to the shareholders of the Corporation for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of shares or stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
18. CONTINUANCE OF EMPLOYMENT
The Plan shall not impose any obligation on the Corporation to continue the
employment of any Grantee.
19. GOVERNMENT AND OTHER REGULATIONS GOVERNING LAW
(a) The obligations of the Corporation to sell and deliver shares of
Common Stock with respect to Awards granted under the Plan shall be subject
to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the
Committee.
(b) The Plan shall be governed by the law of the jurisdiction in which
the Corporation is incorporated, except to the extent that such law is
preempted by federal law.
20. CONVERSION OF INCENTIVE OPTIONS TO NONQUALIFIED OPTIONS
The fact that the holder of an Option, which at the time of grant was
designated or intended to be an Incentive Option, is not eligible for any reason
to take advantage of the provisions of Section 422 of the Code relating to
Incentive Options with respect to some or all of the shares of Common Stock
exercisable under said Option shall not adversely affect the right of the
Optionee to exercise the Option or to receive and hold such shares; and such
shares shall be deemed to be issued as if the original Option had been
designated a Nonqualified Option rather than an Incentive Option.
21. EFFECTIVE DATE OF PLAN AND AMENDMENTS
The Plan was originally adopted by the shareholders of the Corporation at a
Special Meeting on November 20, 1987; amended by the shareholders at the
Corporation's Annual Meeting held on May 2, 1989; amended further by the Board
of Directors on November 28, 1990; further amended and restated in its entirety
and approved by the shareholders at a Special Meeting held on January 27, 1992.
The Amended and Restated Plan so approved by the shareholders on January 27,
1992 was further amended
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and restated in its entirety by the Board of Directors effective as of July 26,
1993, and approved by the shareholders at the 1994 Annual Meeting of
Shareholders. The Board of Directors voted further to amend the Plan by
increasing the number of shares subject to the Plan by 800,000 to 1,800,000
shares and providing for the issuance of Director Restricted Shares to
Independent Directors in lieu of other compensation as provided in Subsection
4(d) in each case subject to approval by the shareholders which was voted at the
1996 Annual Meeting of Shareholders. In January 1997, the Board of Directors
voted further to amend the Plan to provide for stock based Awards other than
Options (Restricted Stock Awards, Performance Share Awards, Stock Appreciation
Rights and Dividend Equivalent Rights) and to restate the Plan as set forth
herein, subject to approval by the shareholders at the 1997 Annual Meeting of
Shareholders.
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<S> <C>
/X/ PLEASE MARK YOUR 6925
VOTES AS IN THIS
EXAMPLE.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
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FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of Nominees are: Malin Burnham, 2. To approve (i) the change
Directors. / / / / James D. Harper, Jr., of the Corporation's state / / / / / /
James D. Klingbeil, of Incorporation from
J. David Martin, California to Maryland
Donne P. Moen, Thomas through a merger of the
A. Page, Philip S. Schlein, Corporation into a newly
Richard R. Tartre and -formed Maryland subsidiary
and Robin Wolaner and (ii) the Maryland
Corporation's Articles of
Incorporation and Bylaws.
For, except vote withheld from
the following nominee(s): 3. To approve the amendment
CHECK HERE IF YOU PLAN and restatement of the / / / / / /
TO ATTEND THE MEETING / / Corporation's 1987 Stock
Option Plan as described
in the Proxy Statement.
--------------------------------
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The undersigned acknowledges receipt of the Corporation's 1996
Annual Report and the Notice of Annual Meeting of Sharholders
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 office. 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.
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SIGNATURE (S) DATE
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED
BURNHAM PACIFIC PROPERTIES, INC.
-----------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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<PAGE>
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PROXY
The undersigned hereby constitutes and appoints J. David Martin and Daniel B. Platt, BURNHAM PACIFIC
or either of them, with full power of substitution, attorneys and proxies of the PROPERTIES, INC.
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 PROXY FOR
vote if personally present at the Annual Meeting of Shareholders to be held at the San ANNUAL MEETING
Diego Hilton Beach & Tennis Resort, 1775 East Mission Bay Drive, San Diego, California, OF SHAREHOLDERS
on Tuesday, May 6, 1997 at 10:00 a.m., and at any adjournment or postponement thereof.
MAY 6, 1997
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 PROPOSALS 2 AND 3. 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 . SEE REVERSE
A SELF-ADDRESSED STAMPED ENVELOPE IS ENCLOSED. SIDE
-----------
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED
</TABLE>
