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As filed with the Securities and Exchange Commission on April 9, 1999
REGISTRATION STATEMENT NO. 333-69957
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BURNHAM PACIFIC PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 33-0204162
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
610 WEST ASH STREET, SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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J. DAVID MARTIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DANIEL B. PLATT, CHIEF ADMINISTRATIVE OFFICER AND CHIEF FINANCIAL OFFICER
610 WEST ASH STREET, SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
WILLIAM B. KING, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion. Dated April 9, 1999.
PROSPECTUS
BURNHAM PACIFIC PROPERTIES, INC.
2,000,000 SHARES OF SERIES 1997-A CONVERTIBLE PREFERRED STOCK,
3,252,033 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
AND 574,483 OTHER SHARES OF COMMON STOCK
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This prospectus covers shares of our preferred stock and common stock
that we may issue to holders of preferred and common units, respectively, of
Burnham Pacific Operating Partnership, L.P. upon the holders' exercise of their
rights to have us redeem their units.
Our common stock trades on the New York Stock Exchange under the symbol
"BPP." The common and preferred stock are subject to restrictions on ownership
and transfer designed to assist us in maintaining our status as a real estate
investment trust for federal income tax purposes. See "Description of
Securities--Common stock--Restrictions on transfer."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT SEVERAL FACTORS YOU
SHOULD CONSIDER BEFORE EXCHANGING THE SECURITIES YOU HOLD FOR THE SECURITIES
COVERED BY THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is April , 1999.
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PROSPECTUS SUMMARY
THIS SUMMARY ONLY HIGHLIGHTS THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. AS THIS IS A
SUMMARY, IT MAY NOT CONTAIN ALL INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
READ THIS ENTIRE PROSPECTUS CAREFULLY BEFORE DECIDING WHETHER TO PURCHASE SHARES
OR TO REDEEM YOUR COMMON OR PREFERRED UNITS.
SOME IMPORTANT TERMS
ALTHOUGH BURNHAM PACIFIC PROPERTIES, INC., BURNHAM PACIFIC OPERATING
PARTNERSHIP, L.P. AND THEIR SUBSIDIARIES AND AFFILIATES ARE SEPARATE LEGAL
ENTITIES, FOR EASE OF REFERENCE, THE TERMS "WE," "US," AND "OUR" REFER TO THE
BUSINESS AND PROPERTIES OF ALL OF THESE ENTITIES, UNLESS THE CONTEXT INDICATES
OTHERWISE. FOR EASE OF REFERENCE AND CLARITY, WE SOMETIMES REFER TO BURNHAM
PACIFIC PROPERTIES, INC. AND ITS PREDECESSOR, SUBSIDIARIES AND AFFILIATES AS
"BURNHAM" AND BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P. AND ITS SUBSIDIARIES
AND AFFILIATES AS THE "OPERATING PARTNERSHIP."
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THE COMPANY
We are a real estate operating company that acquires, rehabilitates,
develops and manages retail properties. Our properties are primarily
neighborhood and community shopping centers located in major metropolitan areas.
We focus on shopping centers in areas with a limited supply of vacant land and
with established consumer shopping patterns, characteristics that help limit
competition. Until recently, our properties were located in the western region
of the United States. With our acquisition of several properties from AMB
Corporation, we now own properties throughout the United States. We own our
properties and conduct most of our business through the operating partnership.
Burnham is the sole general partner of the operating partnership and owns a
large majority of the economic interests in the operating partnership.
SECURITIES THAT MAY BE OFFERED
This prospectus relates to the offer and sale from time to time of the
following securities:
- up to 2,000,000 shares of preferred stock that Burnham may issue
upon redemption of preferred units of the operating partnership;
- up to 3,252,033 shares of common stock that Burnham may issue
upon conversion of the preferred stock, based upon the current
conversion rate of approximately 1.626 shares of common stock
for each share of preferred stock;
- up to an additional 574,483 shares of common stock that Burnham
may issue upon redemption of common units of the operating
partnership; and
- an indeterminate number of additional shares of common stock
that Burnham may issue as a result of provisions of the
preferred stock which entitle holders of preferred stock to
additional equity in Burnham if events occur that would
otherwise dilute their ownership interests.
We may issue the preferred stock that we are registering upon redemption
of preferred units that were previously issued by the operating partnership when
it acquired properties on December 31, 1997.
We may issue the shares of common stock that we are registering in
connection with:
- the conversion of shares of preferred stock, whether currently
outstanding or issuable upon redemption of preferred units; and
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- the redemption of common units issued by the operating
partnership as a part of the purchase price for a shopping
center also acquired on December 31, 1997.
We are registering the securities covered by this prospectus to satisfy
our obligations under registration rights agreements with holders of preferred
and common units.
Neither Burnham nor the operating partnership will receive any cash
proceeds from the issuance of any common stock or preferred stock offered under
this prospectus. With each issuance of common stock or preferred stock as a
result of a redemption of partnership units, however, Burnham's economic
interest in the operating partnership will increase.
TAX STATUS OF BURNHAM
Burnham has elected to qualify as a real estate investment trust,
commonly referred to as a "REIT," under Sections 856 through 860 of the Internal
Revenue Code of 1986, in each year since 1987. As long as we qualify for
taxation as a REIT, we generally will not be subject to federal income tax on
the portion of our ordinary income and capital gains that is currently
distributed to our stockholders. Even if we qualify for taxation as a REIT, we
may be required to pay state and local taxes on our income and property and
federal income and excise taxes on our undistributed income. See "Risk
Factors--We could incur unanticipated expenses if we fail to qualify as a REIT"
and "Federal Income Tax Considerations" for a more detailed explanation.
Our corporate office is located at 610 West Ash Street, Suite 1600,
San Diego, California 92101. Our telephone number is (619) 652-4700.
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RISK FACTORS
BECAUSE THIS PROSPECTUS COVERS SECURITIES THAT WE MAY ISSUE TO YOU AFTER
YOU HAVE DECIDED TO PRESENT YOUR PARTNERSHIP UNITS FOR REDEMPTION, WE POINT OUT
LIKELY CONSEQUENCES OF SUCH DECISION. IN ADDITION, THERE ARE RISKS INHERENT IN
BEING AN INVESTOR IN OUR BUSINESS TO WHICH YOU MAY ALREADY BE EXPOSED. WE HAVE
DESCRIBED THE MATERIAL RISK FACTORS THAT YOU SHOULD CONSIDER CAREFULLY, TOGETHER
WITH ALL OF THE INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, BEFORE MAKING YOUR DECISION TO REDEEM. THIS SECTION INCLUDES OR
REFERS TO FORWARD-LOOKING STATEMENTS. WE URGE YOU TO READ THE EXPLANATION OF THE
QUALIFICATIONS AND LIMITATIONS ON FORWARD-LOOKING STATEMENTS UNDER THE SECTION
"FORWARD LOOKING INFORMATION."
RISK FACTORS RELATING TO THE REDEMPTION OF PARTNERSHIP UNITS
PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS MAY DISCOURAGE ACQUISITION PROPOSALS.
CHARTER AND BYLAWS. Provisions contained in our charter and bylaws may
discourage third parties from making proposals to acquire us, even if some of
our stockholders consider the proposal to be in their best interest. These
provisions include the following:
- Our bylaws provide that a special meeting of stockholders may be
called by stockholders only when called by stockholders who hold
shares representing a majority of votes entitled to be cast at
the meeting. This provision could make it difficult for a
stockholder to call a meeting for the purpose of approving a
change of control without the support of the board of directors.
- Our charter authorizes the board of directors to reclassify
Burnham's authorized capital stock without approval of the
stockholders generally. This allows them to increase the number
of shares of preferred stock presently authorized by a large
amount and to establish the preferences and rights of any class
or series issued. As a result, the board of directors could
issue a class or series of preferred stock that would discourage
or delay a tender offer or change in control.
- Our charter generally limits any holder from acquiring more than
9.8% of the value of our capital stock or number of shares of
our outstanding common stock. This may limit the opportunity for
stockholders to receive a premium for their shares of common
stock that might otherwise exist if an investor were attempting
to assemble a block of shares in excess of 9.8% of the
outstanding shares of common stock or otherwise effect a change
in control.
- Our Articles Supplementary prohibit us from taking some actions,
including the merger or consolidation of Burnham or the
operating partnership, which would cause the valuation of our
common stock to fall to $15.375 per share or lower.
OPERATING PARTNERSHIP AGREEMENT. We conduct most of our business through
our operating partnership. We are the sole general partner of the operating
partnership and generally have exclusive management power over its business and
affairs. Furthermore, we may not be removed as general partner of the operating
partnership, with or without cause, by the holders of limited partnership units.
As a result of this structure, a third party may be deterred from making an
acquisition proposal that it might otherwise make.
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REDEEMING PARTNERSHIP UNITS WILL CREATE TAX LIABILITIES FOR YOU.
If you redeem your partnership units in exchange for either cash or
stock, your redemption will be treated as a sale for tax purposes. The
redemption will be fully taxable to you, and you will be taxed on an amount
equal to the sum of (a) the cash you receive or the value of the capital stock
you receive plus (b) the amount of any liabilities of the operating partnership
allocable to the exchanged partnership units at the time of the redemption or
exchange less (c) your adjusted basis in your partnership units. The amount of
gain recognized or even the tax liability resulting from that gain could exceed
the amount of cash and the value of stock you would receive in the redemption.
In addition, you may not be able to sell your stock in order to raise cash to
pay your tax liabilities associated with the redemption of partnership units as
a result of fluctuations in the market price of our common stock or the value of
our preferred stock or as a result of there being no organized public market for
preferred stock.
If we do not acquire the partnership units you tender for redemption in
exchange for our capital stock and the operating partnership redeems the
partnership units for cash, the tax consequences may differ. See "Description of
units and redemption of units of operating partnership -- Tax consequences of
redemption."
REDEEMING PARTNERSHIP UNITS MAY CAUSE YOUR ORIGINAL ACQUISITION OF PARTNERSHIP
UNITS TO BE SUBJECT TO TAX.
The original transaction in which you exchanged property for
partnership units may be treated as a taxable sale under the disguised sale
rules of the Internal Revenue Code if you redeem your partnership units.
Although there are several exceptions, the tax law generally provides that a
partner's contribution of property to a partnership and a simultaneous or
subsequent transfer of money or other consideration from the partnership to
the partner will be presumed to be a taxable sale if the two transactions
happen within a two-year time period. The presumption may be overcome if the
facts and circumstances clearly establish that the transfers are not a sale.
On the other hand, if two years have passed between the original contribution
of property and the transfer of money or other consideration, the
transactions will not be presumed to be a taxable sale unless the facts and
circumstances clearly establish that they should be. You should consult your
own tax advisor regarding your personal situation prior to tendering
partnership units for redemption and regarding any reporting requirements.
REDEEMING PARTNERSHIP UNITS WILL CHANGE YOUR INVESTMENT.
If you hold partnership units, you may redeem some or all of them for
cash. However, we may elect to give you common stock in exchange for your common
units or preferred stock in exchange for your preferred units instead of cash.
Your decision to redeem may not result in your receipt of cash, even if you
desire to receive cash, because it is our choice to give you stock instead. If
you receive cash, you will no longer have any interest in the operating
partnership except to the extent that you still retain some partnership units.
As a result, you will not benefit from any subsequent increases in our share
price and you will not receive any future distributions from us unless you
retain or acquire partnership units or additional shares of capital stock in the
future. If you receive capital stock, you will become a stockholder of Burnham
Pacific Properties, Inc. rather than a holder of partnership units in Burnham
Pacific Operating Partnership, L.P. and as such will have different economic and
corporate governance rights from those you had as a holder of partnership units.
IT MAY BE DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL OUR PREFERRED STOCK.
At the present time, there is no trading market for the preferred stock.
In addition, the limited number of shares of preferred stock, even if all of
them were issued, would likely inhibit the development of an organized public
market. A stockholder's ability to sell preferred stock will depend upon a
variety of
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factors including the amount available for sale, the terms under which they are
available to purchasers and the objectives of potential investors in Burnham.
IF BURNHAM'S OPERATING PARTNERSHIP FAILS TO MAKE DISTRIBUTIONS, BURNHAM MAY NOT
BE ABLE TO PAY DIVIDENDS ON ITS STOCK.
The operating partnership owns our properties and conducts our business.
Accordingly, we pay all of our dividends from distributions we receive from the
operating partnership. We receive distributions as both general partner and a
limited partner owning preferred units and common units of the operating
partnership. Although Burnham, as sole general partner of the operating
partnership, intends to cause the operating partnership to make distributions in
amounts sufficient to enable Burnham to pay dividends to the holders of its
capital stock, if the operating partnership fails to make distributions at any
time, Burnham's ability to pay dividends would be impaired.
THE REGISTRATION AND OTHER RIGHTS OF THE CAPITAL STOCK MAY LOWER THE MARKET
PRICE OF THE SHARES.
We have given holders of outstanding preferred stock of Burnham and
holders of preferred units and common units of the operating partnership
registration rights with respect to the following shares of capital stock that
are the subject of this prospectus:
- up to 2,000,000 shares of preferred stock which we may issue
upon redemption of preferred units;
- up to 3,252,033 shares of common stock which we may issue upon
conversion of the preferred stock; and
- up to 574,472 shares of common stock which we may issue upon
redemption of currently outstanding common units that were
issued in connection with an acquisition, plus an additional
undetermined number of additional common units that may be
issuable pursuant to an "earn-out" provision of another
acquisition but that are not being registered for sale under
this prospectus.
In addition, we have issued 2,800,000 preferred units to Westbrook
Burnham Holdings, L.L.C. and Westbrook Burnham Co. Holdings, L.L.C. in
connection with a financing transaction. These Westbrook entities have
registration rights with respect to the shares of our preferred stock and common
stock that may be issued in exchange of their preferred units, but those shares
are not being registered for sale under this prospectus. In addition, the
operating partnership has invested in other real estate partnerships and limited
liability companies and has issued common units to contributors of other
properties. The common units issued in exchange for those other properties are
not being registered for sale under this prospectus. Partners in those other
limited partnerships and limited liability companies and the holders of those
common units have the right to have their interests in the partnerships and
limited liability companies redeemed for cash or, at our option, for shares of
our common stock. These partners also have registration rights with respect to
the shares of our common stock that may be issued in exchange for their limited
partnership, limited liability company or operating partnership interests. All
of the registration rights discussed above could lower the market price for our
capital stock.
Holders of preferred stock also have rights of first offer to purchase
shares of our capital stock which we may offer in the future. These rights of
first offer could lower the market price for our capital stock.
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RISK FACTORS RELATING TO OUR BUSINESS AS A REAL ESTATE INVESTMENT TRUST
AS A REAL ESTATE COMPANY, OUR ABILITY TO GENERATE REVENUES AND PAY DISTRIBUTIONS
TO OUR STOCKHOLDERS IS AFFECTED BY THE RISKS INHERENT IN OWNING REAL PROPERTY
INVESTMENTS.
We derive most of our revenue from investments in real property. Real
property investments are subject to different types and degrees of risk that may
reduce the value of our assets and our ability to generate revenues. The factors
that may reduce our revenues, net income and cash available for distributions to
stockholders include the following:
- local conditions, such as an oversupply of space or a reduction
in demand for real estate in an area;
- competition from other available space;
- the ability of the owner to provide adequate maintenance;
- insurance and variable operating costs;
- government regulations;
- changes in interest rate levels;
- the availability of financing;
- potential liability due to changes in environmental and other
laws; and
- changes in the general economic climate.
WE MAY NOT BE ABLE TO SELL OUR ASSETS IF WE NEED TO DO SO.
Real estate investments are relatively illiquid, and therefore we may
not be able to sell one or more of our properties in order to respond promptly
to changes in economic or other conditions. In addition, the Internal Revenue
Code limits a REIT's ability to sell properties held for fewer than four years.
Our inability to sell one or more of our properties could harm our performance
and ultimately our ability to make distributions to our stockholders.
WE COULD HAVE FINANCIAL DIFFICULTIES AS A RESULT OF REGIONAL ECONOMIC PROBLEMS.
Until recently all of our properties were located in the western region
of the United States. Although with the acquisition of properties from AMB
Corporation we acquired properties throughout the United States, a substantial
portion of our properties continue to be located in the State of California,
primarily in the San Diego County, greater Los Angeles and San Francisco Bay
areas. Economic problems in these specific areas would harm us more than if our
properties were in diverse locations. The performance of the economy in each
locality affects occupancy, market rental rates and expenses and could lower our
revenues and the underlying values of our properties. Moreover, the financial
conditions of major local employers may have an impact on our revenues and the
value of some of our properties. If there is a downturn in the economy of the
western region in general or of any of these local economies, our results of
operations could suffer and we could be unable to make distributions to our
stockholders. In that regard, we have properties in areas that have been in the
past and could be in the future harmed by the following:
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- reductions in defense spending;
- conditions in the high technology industries; and
- natural disasters, including earthquakes and floods. See "--Our
insurance coverage is limited."
WE COULD HAVE FINANCIAL DIFFICULTIES AS A RESULT OF A DOWNTURN IN THE RETAIL
SEGMENT OF THE REAL ESTATE INDUSTRY.
Our current strategy is to acquire interests only in retail shopping
centers and other properties that are related to retail shopping centers. If
there is a downturn in the retail industry, we will be in a worse position to
make distributions to our stockholders than if we diversified our portfolio by
investing in other types of properties.
Our performance is linked to economic conditions in the market for
retail space generally. The market for retail space has been and could in the
future be harmed by:
- the volatile nature of the retail business;
- ongoing consolidation among retailing companies;
- overexpansion of chains in a general market area resulting in
competition among a tenant's own stores;
- weak financial condition of large major retailers;
- excess amount of retail space in some markets;
- increasing consumer purchases through catalogues or the
Internet; and
- changes in consumer preferences.
These conditions and similar ones may result in tenant failures or changes in
physical requirements, which we may have to accommodate to retain or attract
tenants. Moreover, because many anchor tenants have negotiating power to demand
the exclusive right to sell some types of products in a shopping center, they
could impair our ability to lease space to retailers of potentially competing
products. To the extent that these conditions impact the market rents for retail
space, we could experience a reduction of revenues, and resulting value, of our
properties.
WE COULD LOSE TENANTS OR INVESTMENT OPPORTUNITIES TO OUR COMPETITORS.
Many retail properties compete with our properties in attracting tenants
to lease space. Some of these properties are newer and better located or
designed and may offer lower expenses or be better capitalized than our
properties. We may find it difficult to lease space at our properties or at
newly developed or acquired properties and at rents currently charged as a
result of competitive commercial properties in a particular area. Additionally,
we compete for investment opportunities with entities that have greater
financial resources than ours. These entities may be able to accept more risk
than we can prudently manage. Competition may generally reduce the number of
suitable investment opportunities offered to us and increase the bargaining
power of property owners seeking to sell.
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WE COULD HAVE FINANCIAL PROBLEMS AS A RESULT OF OUR TENANTS' FINANCIAL
DIFFICULTY.
At any time, any of our tenants may seek the protection of the
bankruptcy laws. Under the bankruptcy laws, that tenant's lease could be
rejected and terminated, which would cause us to lose rental income. In
addition, a tenant from time to time may experience a downturn in its business
which may weaken its financial condition and result in its failure to make
rental payments when due. A tenant's failure to affirm its lease following
bankruptcy or a weakening of its financial condition could impair our results of
operations and ability to make distributions to our stockholders.
OUR ACQUISITION AND DEVELOPMENT OF REAL ESTATE COULD COST MORE THAN WE
ANTICIPATE.
We intend to acquire existing retail commercial properties to the extent
we can acquire these properties on acceptable terms. We could incur higher than
anticipated costs for improvements to these properties to conform them to
standards established for the intended market position. Once improved, the
properties may not perform as expected.
We also intend to pursue commercial property development projects.
Developing properties generally carries more risk than acquiring existing
properties. For example, development projects usually require governmental and
other approvals, which we may not be able to obtain. Furthermore, approvals
frequently require the improvement of public infrastructure or other activities
to mitigate the effects of the proposed development, which may cost more than we
anticipate. Our development activities will also entail other risks, including:
o that we will devote financial and management resources to
projects which may not come to fruition;
o that we will not complete a development project as scheduled;
o that we will incur higher construction costs than anticipated;
o that occupancy rates and rents at a completed project will be
less than anticipated; and
o that expenses at a completed development will be higher than
anticipated.
These risks may harm our results of operations and impair our ability to make
distributions to our stockholders.
Integrating the aforementioned acquisition and development properties
into our current systems and procedures presents a challenge to our management.
Failure to do so could cause us financial harm and impair our ability to make
distributions to our stockholders.
OUR OPERATIONS WOULD BE AFFECTED IF WE LOST KEY PERSONNEL.
We depend on the efforts of our executive officers, J. David Martin, our
President and Chief Executive Officer, Joseph Wm. Byrne, our Executive Vice
President and Chief Operating Officer, and Daniel B. Platt, our Executive Vice
President, Chief Financial Officer and Chief Administrative Officer. Loss of
their services could harm our operations. We have an employment agreement with
Mr. Martin. That agreement could be terminated by either party at will and, in
the event that Burnham sought to enforce any of its terms in the future, a court
may determine that it is unenforceable in whole or in part.
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OUR DEVELOPMENT OF PROPERTIES ACQUIRED FROM J. DAVID MARTIN, OUR CHIEF EXECUTIVE
OFFICER, COULD CREATE CONFLICTS OF INTEREST.
We are currently developing one property and are in the process of
leasing two prior development properties, which we acquired from entities
directly or indirectly controlled by Mr. Martin concurrently with his
appointment as President and Chief Executive Officer in 1995. Mr. Martin
personally has an interest in these development projects, and there could be a
conflict between his duty to act on behalf of Burnham and his personal interest.
Mr. Martin continues to own an equity interest in each of the
partnerships that own those properties. Burnham is the general partner of those
partnerships. Mr. Martin may receive additional equity in each partnership when
each of the development projects is completed and begins to generate rental
income. The amount of additional equity which Mr. Martin may receive will depend
upon factors that we cannot predict, including the actual cost of each project.
We have adopted procedures such as Mr. Martin's absence from discussions
of our board of directors that relate to the relevant properties. However,
conflicts of interest could arise despite our efforts to avoid them.
WE COULD INCUR UNANTICIPATED EXPENSES IF WE FAIL TO QUALIFY AS A REIT.
Burnham has elected to qualify as a real estate investment trust under
the Internal Revenue Code. We believe that since 1987 we have satisfied the REIT
qualification requirements. However, the IRS could challenge our REIT
qualification for taxable years still subject to audit. Moreover, we may fail to
qualify as a REIT in future years. Qualification as a REIT involves the
application of highly technical and complex Internal Revenue Code provisions for
which there are only limited judicial or administrative interpretations. For
example, in order to qualify as a REIT, we must derive at least 95% of our gross
income in any year from qualifying sources, and we must distribute annually to
stockholders 95% of our REIT taxable income, excluding net capital gains. In
addition, REIT qualification involves the determination of factual matters and
circumstances not entirely within our control.
Under its partnership agreement, the operating partnership is obligated
to make available to Burnham funds needed to pay Burnham's tax liabilities. If
we were to operate in a manner that prevented Burnham from qualifying as a REIT,
or if Burnham were to fail to qualify for any reason, a number of adverse
consequences would result. If in any taxable year we fail to qualify as a REIT,
we would not be allowed to deduct distributions to stockholders in computing our
taxable income. Furthermore, we would be subject to federal income tax on our
taxable income at regular corporate rates. Unless entitled to statutory relief,
we would also be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. As a result, the
funds available for distribution to our stockholders would be reduced for each
of the years involved. Although we currently intend to operate as a qualified
REIT, future economic, market, legal, tax or other considerations may impair our
REIT qualification or may cause our board of directors to revoke the REIT
election. See "Federal Income Tax Considerations."
WE COULD INCUR COSTS FROM ENVIRONMENTAL PROBLEMS EVEN THOUGH WE DID NOT CAUSE,
CONTRIBUTE TO OR KNOW ABOUT THEM.
Because we own, operate, manage and develop real estate, for liability
purposes we may be considered under the law to be an owner or operator of those
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances. As a result, we could have to pay removal or remediation
costs. Federal, state and local laws often impose liability regardless of
whether the owner or operator knew of, or was responsible for, the presence of
the hazardous or toxic substances. The presence
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of those substances, or the failure to properly remediate them, may impair the
owner's or operator's ability to sell or rent the property or to borrow using
the property as collateral. A person who arranges for the disposal or treatment
of hazardous or toxic substances may also be liable for the costs of removing or
remediating the substances at a disposal or treatment facility, whether or not
that person owns or operates the facility. Furthermore, environmental laws
impose liability for release of asbestos-containing materials into the air. If
we were ever held responsible for releasing asbestos-containing materials, third
parties could seek recovery from us for personal injuries. Thus, we might have
to pay other costs, including governmental fines and costs related to personal
injuries and property damage, resulting from the environmental condition of our
properties, regardless of whether we actually had knowledge of or contributed to
those conditions.
WE COULD ENCOUNTER PROBLEMS AS A RESULT OF USING DEBT TO FINANCE ACQUISITIONS.
We borrow money to pay for the acquisition, development and operation of
properties and for other general corporate purposes. By borrowing money, we
expose ourselves to several problems, including the following:
o inability to meet existing debt obligations;
o reduced access to additional debt; and
o loss of our property as a result of any default on existing
debt.
We currently have a line of credit facility that has both secured and
unsecured portions and another line of credit facility that is unsecured. We may
borrow up to $205 million under one credit facility of which $135 million is to
be secured by individual properties and $70 million is unsecured. This credit
facility bears interest at rates of LIBOR (London Inter-Bank Offer Rate) plus
1.4% for secured borrowings and LIBOR plus 1.5% for unsecured borrowings. We may
borrow up to $5 million under our other unsecured revolving credit facility.
This credit facility bears interest at the rate of either LIBOR plus 2.0% or the
prime lending rate. At December 31, 1998, approximately 35.3% of our total
outstanding debt was variable rate debt and most of it reprices on a monthly
basis. Although provisions contained in the credit facilities limit the amount
of additional indebtedness we may incur, we may incur indebtedness well beyond
our current level. Our charter and bylaws do not limit the amount of
indebtedness that we may incur.
Our credit facilities require that we comply with covenants relating to
our financial condition. In addition, we have pledged some of our properties as
collateral to secure loans, including borrowings made under one of our credit
facilities. We may not be able to meet our debt service obligations, including
as a result of higher interest rates affecting our variable rate debt, or to
comply with the terms of our debt instruments. As a result, our lenders may be
entitled to demand immediate repayment of the related indebtedness and to
commence foreclosure proceedings against the property securing the indebtedness.
Some of our debt is cross collateralized and cross defaulted. If we
default on a cross collateralized loan, the holder of the debt may be able to
foreclose not only on the properties which secure that loan but on other
properties as well. A default by Burnham on a cross defaulted loan will be
automatically deemed a default under other loans. Defaults on cross
collateralized and cross defaulted loans could cause us to lose some or all of
our assets and limit our ability to generate revenues and pay distributions to
our stockholders. Cross collateralization and cross default provisions create
the possibility that our inability to make payments on one loan may affect other
loans, including loans for which we are meeting our payment obligation.
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Furthermore, a downturn in the economy could make it difficult for us to
borrow money on favorable terms. If we were unable to borrow, we might need to
sell some of our assets at unfavorable prices to enable us to repay some of our
loans. We could encounter several problems, including:
o insufficient cash flow necessary to meet required payments of
principal and interest;
o an increase of variable interest rates on indebtedness; and
o the inability to refinance existing indebtedness on favorable
terms or at all.
Other than indebtedness under our credit facilities, our mortgage indebtedness
is generally nonrecourse to us. However, even with respect to nonrecourse
mortgage indebtedness, we could be obligated to pay our lenders for deficiencies
resulting, among other things, from fraud, misapplication of funds and
environmental liabilities.
Both of the credit facilities described above are scheduled to mature in
November 1999. We may be unable to repay our debt under these credit facilities
or refinance it on favorable terms. If we were unable to repay our debt, we may
need to liquidate one or more investments in properties at terms which may not
permit us to realize the maximum return on our investment.
OUR JOINT VENTURE ACTIVITY LIMITS OUR ABILITY TO CONTROL AND PROFIT FROM SOME OF
OUR INVESTMENTS.
We may from time to time acquire interests in joint ventures formed to
own or develop real property or interests in real property, including the
CalPERS and the CUIP joint ventures described below. We may acquire minority
interests in joint ventures and also may acquire interests as a passive investor
without rights to actively participate in management of the joint ventures.
Investments in joint ventures involve additional risks, including the
possibility:
o that the other participants may have economic or other business
interests or goals inconsistent with our interests;
o that we will be unable to direct the management and policies of
the joint ventures;
o that other participants may take action contrary to our
instructions or requests or our policies and objectives or that
could jeopardize our ability to maintain qualification as a
REIT; and
o that, if the other participants become bankrupt or suffer
financial difficulties, the other participants may not be able
to perform their undertakings with respect to the joint venture.
These investments may also result in impasse on decisions, such as a
sale, because no single entity has full control over the joint ventures. We
will, however, seek to maintain sufficient control of these joint ventures to
achieve our business objectives and to preserve our status as a REIT, although
we may not be successful in doing so. If we are not successful, our business and
operations will be impaired, and we may not be able to make distributions to our
stockholders. There is no limitation under our organizational documents as to
the amount of available funds that we may invest in joint ventures.
CALPERS. On August 31, 1998, we entered into a joint venture agreement
with the State of California Public Employees' Retirement System ("CalPERS").
The agreement contemplates generally that CalPERS will have an 80% interest and
the operating partnership will have a 20% interest in the joint venture. The
purpose of the joint venture is to serve as the vehicle through which we and
CalPERS expect to invest in neighborhood, community, promotional and specialty
retail centers in the western region of the
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United States. Although the operating partnership is the manager of the joint
venture, CalPERS is entitled to take some actions that may be inconsistent with
our interests. CalPERS is entitled to a priority return on its investment in the
joint venture before any return is paid to the operating partnership. The
priority return is equal to a 5.00% annual rate of return (adjusted for
inflation) plus a premium which could raise the priority return substantially.
Also, CalPERS may elect to convert its joint venture interest in one or more
properties held by the joint venture into shares of our common stock (up to an
aggregate of 9.8% of the number of outstanding shares of our common stock). In
addition, under the joint venture agreement, the operating partnership must:
o observe several policies established by CalPERS with respect to
its investments generally;
o consult regularly with CalPERS about its policies for real
estate investments;
o establish an annual business plan for the joint venture that is
subject to the approval of CalPERS;
o advise CalPERS concerning major developments; and
o obtain the approval of CalPERS before engaging in specified
major activities with respect to the properties owned by the
joint venture.
As of October 1, 1998, CalPERS made an initial contribution to this new
joint venture of five retail properties in Colorado, Texas and Oregon, valued at
approximately $80,000,000. CalPERS previously had been the sole owner under
arrangements with previous advisors. In addition, during the fourth quarter of
1998, the joint venture purchased interests in five additional retail shopping
centers for an aggregate purchase price of approximately $32,261,000. We intend
to contribute properties owned directly by our operating partnership as our
initial contribution. The joint venture agreement initially contemplated an
aggregate $400 million investment by CalPERS and $100 million investment by us
through the period ending December 31, 1999 and provided for up to $165 million
of leverage through mortgage or line of credit borrowings by the joint venture.
We have since agreed with CalPERS to increase the aggregate amount of
indebtedness that the joint venture might incur through the period ending
December 31, 1999 to approximately $450 million. Until Burnham and CalPERS have
satisfied their respective investment obligations to the joint venture, we must
offer qualifying investment opportunities to the joint venture before making the
investments for our own direct account. Moreover, there is a possibility that
the investment goals of the joint venture may not be satisfied or that we may
agree with CalPERS to expand those goals or to vary our respective 80/20%
participation in the joint venture.
CUIP. In addition, we have agreements with an institutional investor,
California Urban Investment Partners ("CUIP"), relating to our joint ownership
of two shopping center properties, Margarita Plaza and Ladera Center, each
acquired in 1996. Each property is owned by a separate limited liability
company, of which both CUIP and the operating partnership are managing members.
We own a 25% interest and CUIP owns a 75% interest in each joint venture. The
principal investor in CUIP is CalPERS.
BANKRUPTCY REMOTE ENTITIES MAY LIMIT OUR ABILITY TO AVAIL OURSELVES OF THE
PROTECTION OF BANKRUPTCY AND INSOLVENCY LAWS.
Many of Burnham's properties are held in subsidiaries that are
bankruptcy remote entities. When we refer to "bankruptcy remote entities," we
mean that these subsidiaries have governance provisions that prohibit or
restrict Burnham's ability to cause them to file proceedings under bankruptcy
and insolvency laws. In the event of a default by a bankruptcy remote subsidiary
of the subsidiary's obligations to its
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creditors, Burnham may not be able to use the protection of bankruptcy or
insolvency laws to keep creditors from realizing on collateral or collecting the
obligations owed by the subsidiary to the creditors.
OUR INSURANCE COVERAGE IS LIMITED AND MAY NOT COVER LOSSES THAT WE SUFFER.
We have comprehensive general liability coverage and umbrella liability
coverage on all of our properties. We believe that our properties are adequately
insured against liability claims and the cost of defending those claims. Our
coverage is subject to deductibles and subject to the limitations described
below on insurance for losses caused by earthquake or flood. Similarly, we
believe that our properties are adequately insured on a replacement cost basis,
subject to deductibles, against direct physical damage for costs incurred to
repair or rebuild each property, including loss of rental income during the
reconstruction period. Some types of extraordinary losses, however, either are
not insurable or are not economically insurable. Should any uninsured loss
occur, we could lose our investment in, and anticipated revenues from, a
property. An uninsured loss could harm our business and operations and our
ability to make distributions to our stockholders. Currently we also insure some
of our properties for loss caused by earthquake in the aggregate amount of $50
million, subject to deductibles, and six of our properties for loss caused by
flood. Because of the high cost of this type of insurance coverage and the wide
fluctuations in price and availability, we have determined that the risk of loss
due to earthquake and flood does not justify the cost to increase this coverage
any further under current market conditions. However, we could suffer material
harm if an earthquake, flood or other natural disaster occurs.
YEAR 2000 ISSUES MAY RESULT IN A DISRUPTION OF BURNHAM'S OPERATIONS AND THE
ABILITY OF BURNHAM'S TENANTS AND SUPPLIERS TO MEET THEIR OBLIGATIONS.
We continue to identify our Year 2000 issues. Currently, we are
approximately halfway through our evaluation process. Our approach to becoming
Year 2000 ready includes a standard set of methods and tools, including taking
inventory, renovating if necessary and testing. We do not believe that the costs
associated with becoming Year 2000 ready will exceed $250,000. The manufacturer
of the accounting software that we use has indicated that its software is
materially Year 2000 ready. A version of the software that is fully Year 2000
ready is currently available, and we plan to install it during the second
quarter of 1999. We believe that the hardware used to run our software is Year
2000 ready.
We are currently completing an inventory of the Year 2000 readiness
status of the computer hardware and software used to run the property operating
systems such as security, energy, elevator and safety systems at our properties.
Once this inventory is complete, we will test the time-sensitive systems that we
have been informed are Year 2000 ready. We will reprogram or replace the systems
found not to be Year 2000 ready.
Our ability to complete the Year 2000 modifications outlined above prior
to any anticipated impact on our operating systems is based on many assumptions
of future events and depends upon the ability of third party software and
hardware manufacturers to make necessary modifications to current versions of
their products, the availability of resources to install and test the modified
systems and other factors. Accordingly, these modifications may not be
successful.
Even if all of our own systems are Year 2000 ready, our business could
still be disrupted if our tenants, business partners, suppliers and other
parties are not ready. We are currently surveying material vendors and tenants
regarding the Year 2000 readiness status of their computer hardware and
software. We will review the results of this survey, assess the impact of the
results on our operations and take whatever action we deem necessary. Testing
may be required for several, but not all, third parties. Test strategies and
schedules will be unique to each situation once we understand the respective
requirements and readiness levels.
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Our business could be harmed if other entities, including the
governmental units and utility companies that provide services to our properties
and their respective tenants and customers fail to be Year 2000 ready. In
addition to our significant tenants, we are seeking to ascertain the Year 2000
readiness of:
o each utility company servicing each property; and
o each city, town, county or other governmental unit providing
police, fire, traffic control and other governmental services
relevant to the efficient operation of the property.
After we survey the Year 2000 readiness of other parties, we intend to
determine if we will need any contingency plans to deal with the non-readiness
of others. At the present time, we do not believe that Year 2000 non-readiness
of tenants is likely to have any significant effect on us and our operations.
However, if a major tenant of any of our properties is not Year 2000 ready, its
business could suffer, which in turn could result in:
o that tenant's inability to pay rent; and
o decrease in customer traffic and business of other tenants at
that property.
We do not anticipate that we will need contingency plans to deal with
tenant non-readiness. However, we recognize that we may need to develop
contingency plans to provide for the continued operation of one or more
individual properties whose suppliers of services necessary for the efficient
operation of the property may not be fully Year 2000 ready by January 1, 2000.
We believe that the most reasonable worst-case year 2000 scenario that may
affect our business would be a prolonged failure of a supplier of these
services, particularly utility services, that may harm operations of one or
several of our tenants.
RISK FACTORS RELATING TO THE PREFERENTIAL RIGHTS OF THE HOLDERS OF PREFERRED
STOCK TO WHICH THE HOLDERS OF COMMON STOCK ARE SUBJECT.
ANTI-DILUTION PROVISIONS OF THE PREFERRED STOCK MAY LEAD TO SUBSTANTIAL DILUTION
OF THE HOLDERS OF COMMON STOCK.
Each share of preferred stock is convertible, at the option of the
holder, into a number of shares of common stock determined by applying a formula
set forth in Burnham's Articles Supplementary that describe the rights of the
preferred stock. This formula may be adjusted in order to protect holders of
preferred stock against dilution of their ownership interest in Burnham. Any
adjustment of the conversion formula entitling holders of preferred stock to
more common stock than they otherwise would have received would dilute the
proportionate ownership, voting power and earnings per share of the holders of
common stock. This, in turn, could lower the market price of the shares offered
by this prospectus. See "Description of Securities--Preferred stock--Conversion
right."
HOLDERS OF THE PREFERRED STOCK MAY CAUSE BURNHAM TO TAKE ACTION DETRIMENTAL TO
THE HOLDERS OF COMMON STOCK.
The holders of shares of preferred stock have the right to vote on all
matters on which the holders of common stock are entitled to vote. For purposes
of determining voting results, their shares of preferred stock will be treated
as if they had been converted into common stock and as though part of the same
class of common stock. Upon conversion of all of the preferred stock outstanding
as of December 31, 1998 or which may be issued upon redemption of all of the
preferred units outstanding as of December 31, 1998 into shares of common stock,
the holders of preferred stock would hold approximately 18.8% of all
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outstanding shares of common stock, assuming that all of these shares of
preferred stock were fully convertible on that date. Consequently, if this
occurred, the holders of preferred stock would be the largest stockholders in
Burnham and could have much influence as the holders of common stock with
respect to the election of directors and the approval or disapproval of
important corporate actions. See "Description of Securities--Preferred stock"
for a description of the rights of the holders of preferred stock and the
holders of preferred units, and the obligations of Burnham in connection
therewith.
You should note that interests of the holders of the preferred stock do
not necessarily coincide with those of the holders of the common stock.
Therefore, actions by the holders of the preferred stock may conflict with and
will not necessarily be in the best interests of the holders of common stock.
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ABOUT THIS PROSPECTUS AND WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of the registration statement that we filed with
the Securities and Exchange Commission to register the shares of stock offered
in this offering. It does not repeat important information that you can find in
our registration statement or in the annual, quarterly and special reports,
proxy statements and other documents that we file with the Securities and
Exchange Commission. Our Securities and Exchange Commission file number is
001-09524.
We file annual, quarterly and special reports, proxy statements and
other information electronically with the Securities and Exchange Commission.
You may read and copy any document we file at the Securities and Exchange
Commission's public reference rooms at 450 Fifth Street, Mail Stop 1-2, N.W.,
Washington, D.C. 20549, or you may obtain them from the Securities and Exchange
Commission by mail at the prescribed rates. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms or on how to receive our filings by mail. Our SEC filings are
also available from the New York Stock Exchange, located at 20 Broad Street, New
York, New York 10005 and at the Securities and Exchange Commission's website at
http://www.sec.gov.
The Securities and Exchange Commission allows us to incorporate by
reference the information we file with it. Incorporation by reference means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is an important part of
this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and supersede this information. We
incorporate by reference the documents filed by Burnham that are listed below,
and any future filings made by us with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended:
o our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
o our proxy statement dated March 26, 1999 with respect to our
annual meeting of stockholders on May 11, 1999; and
o the description of our common stock contained or incorporated by
reference in our Registration Statement on Form 8-B filed on
June 2, 1997, including amendments thereto.
WE WILL PROVIDE, WITHOUT CHARGE, AT THE WRITTEN OR ORAL REQUEST OF
ANYONE TO WHOM THIS PROSPECTUS IS DELIVERED, COPIES OF THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, OTHER THAN AN EXHIBIT TO A FILING
UNLESS THAT EXHIBIT IS SPECIFICALLY INCORPORATED BY REFERENCE INTO THAT FILING.
YOU SHOULD DIRECT YOUR WRITTEN REQUESTS TO BURNHAM PACIFIC PROPERTIES, INC., 610
WEST ASH STREET, SUITE 1600, SAN DIEGO, CALIFORNIA 92101, ATTENTION: CHIEF
FINANCIAL OFFICER. YOU SHOULD DIRECT YOUR TELEPHONE REQUESTS TO (619) 652-4700.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. Any statement contained in this prospectus or in a
document incorporated by reference in this prospectus shall be deemed to be
modified or superseded to the extent that a statement contained in any of the
following modify or supersede the statement:
o this prospectus, with respect to a statement in a previously
filed document incorporated by reference herein;
o any applicable prospectus supplement; or
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o any other subsequently filed document that also is incorporated
by reference herein.
The statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus or any
accompanying prospectus supplement. Subject to the foregoing, all information
appearing in this prospectus and each accompanying prospectus supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
We are not making an offer of the securities offered by this prospectus
in any state where the offer is not permitted. You should not assume that the
information in this prospectus, in any prospectus supplement or in any document
incorporated by reference herein or in a prospectus supplement is accurate as of
any date other than the date on the front of those documents.
Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete; and, in each instance,
reference is made to the copy of the contract or document filed as an exhibit to
the registration statement or as an exhibit to another filing, each statement
being qualified in all respects by the reference and the exhibits and schedules
thereto.
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THE COMPANY
We are a real estate operating company which acquires, rehabilitates,
develops and manages retail properties. Burnham began operations through a
predecessor in 1963, became a real estate investment trust ("REIT") in 1987 and
today is one of the largest public owners and operators of non-mall retail
properties in the western region of the United States. Until recently, our
properties were located in the western region of the United States. With our
acquisition of several properties from AMB Corporation, we now own properties
throughout the United States. Our properties are primarily neighborhood and
community shopping centers located in major metropolitan areas. We focus on
shopping centers in areas with a limited supply of vacant land and with
established consumer shopping patterns. These characteristics help limit
potential future competition in a trade area. We also own four office and
industrial properties, which we consider non-strategic and which we may sell as
suitable opportunities arise. Title to our properties is held by or for the
benefit of the operating partnership or subsidiaries of the operating
partnership.
We own our properties and conduct most of our business through the
operating partnership, of which Burnham is the sole general partner. Burnham
owns a large majority of the economic interests in the operating partnership.
Other limited partners of the operating partnership have contributed interests
in properties to the operating partnership in exchange for limited partnership
units. Those transactions have enabled us to reduce the amount of cash paid for
the acquired properties while also providing the contributors the opportunity to
defer recognition of federal income taxes on their disposition of those
properties. Holders, other than Burnham, of partnership units issued on those
acquisitions generally have the right, after a specified period of time, to
cause the operating partnership to redeem their partnership units for cash. In
lieu of redemption for cash, Burnham may exchange a like number of shares of its
capital stock for the partnership units being redeemed.
The following are among the properties that we have acquired in which
units of the operating partnership were issued as part of the acquisition price:
o On December 31, 1997, we acquired Simi Valley Plaza shopping
center in Simi Valley, California from Simi Valley Plaza LLC.
The operating partnership issued 574,483 common units as part of
the payment for the acquisition.
o On December 31, 1997, we acquired a portfolio of 20 California
shopping centers from investment funds affiliated with Blackacre
Capital Group, L.P. and individuals affiliated with Highridge
Partners (collectively "Blackacre") pursuant to a contribution
agreement. For ease of reference, we later refer to that group
of properties as the "Golden State Properties Portfolio." The
operating partnership issued 2,000,000 preferred units to
members of Blackacre, and undertook to issue additional common
units and/or cash as a part of an earn-out provision in the
Golden State Properties Portfolio contribution agreement.
Burnham contributed additional funds to enable the operating
partnership to acquire these properties. These funds included
the proceeds from Burnham's issuance to Westbrook Burnham
Holdings, L.L.C. and Westbrook Burnham Co-Holdings, L.L.C. of
2,800,000 shares of preferred stock. Concurrently with Burnham's
issuance of these shares of preferred stock, the operating
partnership issued to Burnham 2,800,000 preferred units. The
distribution and other economic terms of such units mirror the
distribution and other economic terms of the preferred stock. As
a matter of convenience among themselves, the Westbrook entities
and Blackacre requested us to issue 10 of the 2,800,000 shares
of preferred stock in the name of Blackacre and 10 of the
2,000,000 preferred units in the name of the Westbrook entities.
See "Description of partnership units and redemption of partnership units of
operating partnership" for a description of the common units and preferred units
that were issued in those transactions.
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In August 1998, the operating partnership and the State of California
Public Employees' Retirement System ("CalPERS") entered into a joint venture
agreement for the acquisition of neighborhood, community, promotional and
specialty retail centers in the western region of the United States. The joint
venture agreement initially contemplated an aggregate $400 million investment by
CalPERS and $100 million investment by us through the period ending December 31,
1999 and provided for up to $165 million of leverage through mortgage or line of
credit borrowings by the joint venture. We have since agreed with CalPERS to
increase the aggregate amount of indebtedness that the joint venture might incur
through the period ending December 31, 1999 to approximately $450 million. Until
Burnham and CalPERS have satisfied their respective investment obligations to
the joint venture, we must offer qualifying investment opportunities to the
joint venture before making the investments for our own direct account.
Moreover, there is a possibility that the investment goals of the joint venture
may not be satisfied or that we may agree with CalPERS to expand those goals or
to vary our respective 80/20% participation in the joint venture. See "Risk
Factors--Our joint venture activity limits our ability to control and profit
from some of our investments."
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FORWARD LOOKING INFORMATION
Some of the statements made in the "Risk Factors" section or under the
caption "The Company" and elsewhere in this prospectus, or incorporated by
reference into this prospectus, are "forward-looking statements."
Forward-looking statements may include, without limitation, statements relating
to acquisitions, including financial information, and other business development
activities, future capital expenditures, financing sources and availability and
the effects of regulations, including environmental regulation, and competition.
When we use the words "anticipate," "assume," "believe," "estimate,"
"expect," "intend" and other similar expressions, they are generally
forward-looking statements. You should be cautious in interpreting and relying
on forward-looking statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond our control and
could materially change our actual results, performance or achievements.
Factors that could cause our actual results, performance or achievements
to differ materially from those expressed or implied by the forward-looking
statements include, but are not limited to, the following:
o we are subject to general risks affecting the real estate
industry, including the need to enter into new leases or renew
leases on favorable terms to generate rental revenues and
dependence on our tenants' financial condition;
o we may fail to identify, acquire, construct or develop
additional properties; we may develop properties that do not
generate desired returns; or we may fail to effectively
integrate acquisitions of properties or portfolios of
properties;
o financing may not be available or may not be available on
favorable terms;
o we need to make distributions to our stockholders for us to
qualify as a REIT, and if we need to borrow the funds to make
distributions, the borrowings may not be available on favorable
terms;
o we depend on the primary markets where our properties are
located, and these markets may be harmed by local economic and
market conditions that are beyond our control;
o we are subject to potential environmental liabilities;
o we are subject to complex regulations relating to our status as
a REIT and would be harmed if we failed to qualify as a REIT;
and
o market interest rates could harm the market prices for our
common stock and our performance and cash flow.
In general, we and our business are subject to the matters described in
the "Risk Factors" section of this prospectus.
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DESCRIPTION OF SECURITIES
THE DESCRIPTION OF BURNHAM'S CAPITAL STOCK SET FORTH BELOW DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
BURNHAM'S CHARTER AND BYLAWS, EACH AS AMENDED AND RESTATED, COPIES OF WHICH ARE
EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE
"ABOUT THIS PROSPECTUS AND WHERE YOU CAN FIND MORE INFORMATION."
GENERAL
Under its charter, Burnham has authority to issue up to 100 million
shares of stock, consisting of 75 million shares of common stock, five million
shares of preferred stock and 20 million shares of "excess stock," each with a
par value of $.01 per share. As of December 31, 1998, Burnham had 31,954,008
shares of common stock and 2,800,000 shares of preferred stock issued and
outstanding. In addition, as of December 31, 1998, the operating partnership had
2,800,000 preferred units and 1,785,474 common units outstanding not including
those held by Burnham. If presented to the operating partnership for redemption,
the partnership units held by persons other than Burnham may be exchanged for
shares of preferred stock or common stock, as the case may be, on a one-for-one
basis at the option of Burnham. This exchange is subject to the expiration of
"lock-out" periods specified in agreements relating to the issuance of those
partnership units and subject to adjustments to prevent dilution and limitations
imposed to protect Burnham's status as a REIT.
PREFERRED STOCK
As part of the financing for Burnham's acquisition of a portfolio of the
Golden State Properties Portfolio, which was completed on December 31, 1997,
Burnham issued 2,800,000 shares of its preferred stock to Westbrook Burnham
Holdings, L.L.C. and Westbrook Burnham Co-Holdings, L.L.C. in a privately
negotiated sale. The preferred stock is the only series of Burnham's preferred
stock that is outstanding as of the date of this prospectus. The preferred stock
ranks senior to the common stock with respect to dividend rights and
distributions upon liquidation, dissolution and winding up of Burnham. The
principal terms of the preferred stock are summarized below. This summary is not
complete and is qualified by the complete text of the Articles Supplementary to
Burnham's charter filed as an exhibit to Burnham's Report on Form 8-K dated
January 14, 1998, which is incorporated by reference herein.
STATED VALUE AND LIQUIDATION PREFERENCE
The preferred stock has a stated value of $25 per share. Upon the
distribution of assets on the liquidation, dissolution or winding up of Burnham,
each share of preferred stock is entitled to a payment equal to the stated value
plus any accrued and unpaid dividends prior to the payment of any amount with
respect to shares of the common stock.
Burnham will not make any payment to holders of common stock upon the
liquidation, dissolution or winding up of Burnham until the holders of preferred
stock have received their payment in full. If, upon liquidation, dissolution or
winding up, the assets of Burnham, or the proceeds thereof, are insufficient to
pay the holders of preferred stock the amounts owed to them, then Burnham's
assets, or the proceeds thereof, will be distributed pro rata to the holders of
shares of the preferred stock and any shares of stock which are on parity with
the preferred stock as to distributions on liquidation in accordance with their
respective holdings.
Neither a consolidation or merger of Burnham with another corporation,
nor a sale or transfer of all or any part of Burnham's assets for cash or
securities, will be considered a liquidation, dissolution or winding up of
Burnham.
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DIVIDENDS AND DISTRIBUTIONS
Each share of preferred stock is entitled to receive cumulative
quarterly cash dividends equal to the greater of (1) 2.00% of the per share
stated value and (2) the amount of dividends payable on the number of shares of
common stock into which the share of preferred stock is then convertible. The
dividends will accrue daily and will, to the extent not paid in full on the
applicable dividend payment date, together with accruals thereon, accrue at the
compounded quarterly rate of 2.00% from that date until payment is made, whether
or not Burnham has earnings or surplus.
Unless and until all accrued dividends have been paid on the preferred
stock through the most recent dividend payment date, Burnham may not:
o declare or pay any dividend, make any distribution other than
those payable solely in shares of common stock, or set aside any
funds or assets for payment or distribution with regard to any
common stock or any other stock junior to the preferred stock;
o redeem or purchase or set aside any funds or other assets for
the redemption or purchase of, any shares of stock ranking
junior to the preferred stock; or
o authorize, take or cause to be taken any action as general
partner of the operating partnership that will result in (A) the
declaration or payment by the operating partnership of any
distribution to its partners (other than distributions made
concurrently with distributions payable to Burnham in respect of
its partnership interest or preferred units in each case that
will be used by Burnham to fund the payment of dividends), or
set aside any funds or assets for payment of any distributions
(other than authorized distributions) or (B) the redemption or
purchase, or the setting aside of any funds or other assets for
the redemption or purchase of, any partnership interests in the
operating partnership.
While any shares of preferred stock are outstanding, Burnham may not pay
any dividend on any shares of any class or series of stock of Burnham which
ranks on a parity with the preferred stock as to payment of dividends unless at
least a proportionate payment is made with regard to all accrued dividends on
the preferred stock through the most recent preceding dividend payment date.
CONVERSION RIGHT
Each share of preferred stock is convertible into the number of shares
of common stock obtained by dividing the stated value per share by the
conversion price. As of December 31, 1998, each share of preferred stock was
convertible into approximately 1.626 shares of common stock. The conversion
price will be adjusted if Burnham:
o pays a dividend or makes a distribution on its common stock in
shares of its common stock;
o subdivides its outstanding common stock into a greater number of
shares;
o combines its outstanding common stock into a smaller number of
shares;
o issues rights or warrants to the holders of its common stock as
a class entitling them to purchase common stock at a price per
share less than the then conversion price; or
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o distributes to the holders of its common stock as a class any
shares of stock of Burnham, other than common stock or evidences
of indebtedness or assets other than those referred to in the
previous clause, to purchase any of its securities.
Furthermore, in the event (1) Burnham issues or sells common stock or
securities exercisable for or convertible into common stock at a purchase or
exercise price, as applicable, of less than $14.375 per share and (2) that
issuance would trigger a reduction in the conversion price of at least 1.0%
under the formula set forth in the Articles Supplementary, then the conversion
price will be reduced pursuant to a formula based upon the proportion of the
value of common stock issuable at less than the conversion price to the value of
all common stock to be outstanding following the issuance.
If, however, any shares of common stock are issued or issuable at or
less than $11.00 per share, then the conversion price will be fully reduced to
that lower price. This type of reduction in the conversion price would likely
dilute the ownership interests of the holders of common stock significantly as a
result of both the initial dilutive transaction and the impact of the
antidilution provisions of the preferred stock triggered by the transaction. The
conversion right is exercisable by a holder of preferred stock with respect to
25% of the shares held of record by that holder on and after each of December
31, 1998, March 31, 1999, June 30, 1999 and September 30, 1999. The conversion
may be exercisable at an earlier time in the event of a change of control or
other events set forth in the Articles Supplementary.
On and after January 1, 2003, Burnham may give notice of mandatory
conversion of all of the outstanding preferred stock if (1) the overall average
of the daily average prices, weighted by volume, of the common stock on the
twenty trading days immediately prior to the notice of mandatory conversion and
(2) the daily average prices, weighted by volume, of the common stock on the
trading day immediately prior to the notice of mandatory conversion and the
trading day immediately prior to the date of the intended conversion exceed the
conversion price. Following that notice, all outstanding shares will be
mandatorily converted into common stock. However, each holder of preferred stock
may, prior to the date established for mandatory conversion, instead cause
Burnham to redeem his or her preferred stock at its stated value plus an amount
equal to 105% of accrued dividends to the redemption date if the redemption date
is prior to December 31, 2003. That percentage of accrued dividends decreases by
1% each year thereafter, but does not fall below 100% after December 31, 2007.
VOTING RIGHTS
The holders of shares of preferred stock have the right to vote on all
matters on which the holders of common stock are entitled to vote, on an as
converted basis, with holders of shares of the common stock, as though part of
the same class as holders of common stock.
While any shares of preferred stock are outstanding, Burnham may not,
without approval of holders of at least a majority of the outstanding shares of
preferred stock voting separately as a class, take any of several actions
described in the Articles Supplementary that would, among other things:
o diminish the rights of the holders of preferred stock;
o result in Burnham's transfer of its general partnership interest
in the operating partnership;
o result in a merger or consolidation of assets that would result
in the common stock having a value of less than $15.375 per
share, or the termination of Burnham's qualification as a real
estate investment trust, or a change of control as defined in
Burnham's Articles Supplementary.
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The holders of the preferred stock have the right to submit a
recommendation to the nominating committee of the board of directors of a
candidate for election as a director at each annual meeting of stockholders.
This right will continue until the number of outstanding shares of preferred
stock is significantly reduced. In addition, if Burnham fails to pay the full
amount of the preferred stock preferential dividend for four consecutive
quarters or if Burnham does not fulfill some of its other obligations with
respect to the preferred stock, the holders of the preferred stock will have the
right, as a class, to elect two additional directors of Burnham, until those
defaults are cured. See "Risk Factors--Anti-dilution provisions of the preferred
stock may lead to substantial dilution of the holders of common stock."
If Burnham is entitled or requested to act in its capacity as a holder
of preferred units of the operating partnership, it will do so by voting or
otherwise acting with respect to all of its preferred units solely in accordance
with instructions received from a majority of the holders of preferred stock.
REGISTRATION RIGHTS
Burnham has entered into registration rights agreements with the holders
of preferred stock and preferred units. These agreements require Burnham, under
some circumstances, to register under the Securities Act shares of preferred
stock which are (a) currently issued and outstanding and (b) issuable upon
redemption of preferred units and shares of common stock issuable upon
conversion of preferred stock. These registration rights agreements give the
holders of the applicable securities both "demand" and "piggyback" registration
rights.
COMMON STOCK
DISTRIBUTION RIGHTS
Holders of common stock are entitled to receive distributions on their
shares if, as and when the board of directors authorizes and declares
distributions, subject to the provisions of Burnham's charter regarding excess
stock. A description of excess stock may be found below under the heading
"--Excess stock."
LIQUIDATION/DISSOLUTION RIGHTS
In a liquidation or dissolution of Burnham, each share of common stock
entitles its holder to share in any assets that remain after Burnham pays its
liabilities and any preferential distributions owed to the holders of preferred
stock and any other series of preferred stock issued in the future. Each holder
of common stock will receive a share of those assets based on the percentage of
shares of common stock which he or she holds.
VOTING RIGHTS
Subject to the provisions of Burnham's charter regarding excess stock,
each outstanding share of common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors. Except as otherwise required by law or except as provided with
respect to any other class or series of preferred stock issued in the future,
the holders of common stock and the holders of preferred stock possess exclusive
voting power. The holders of preferred stock have the right to vote on all
matters submitted to a vote of the holders of common stock on an "as-converted"
basis. There is no cumulative voting in the election of directors, which means
that the holders of a majority of the votes cast for directors can, subject to
the rights of holders of preferred stock, elect all of the directors then
standing for election.
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RESTRICTIONS ON TRANSFER
See "--Excess stock" below for a description of some of the provisions
in Burnham's charter designed to preserve Burnham's status as a qualified REIT.
These provisions limit the transfer of, and provide Burnham with a right to
redeem, shares of capital stock and that also provide for the conversion of that
stock into excess stock, in some circumstances.
OTHER TERMS
Subject to the provisions of Burnham's charter regarding excess stock,
all shares of common stock have equal dividend, distribution, liquidation and
other rights, which rights are, however, subject to preferential rights of
shares of preferred stock and any other series of preferred stock that may be
outstanding. Holders of shares of common stock have no preference, conversion,
sinking fund, redemption or exchange rights or preemptive rights. A conversion
feature gives a stockholder the option to convert his shares to a different
security, such as debt or preferred stock. A sinking fund or redemption right
gives a stockholder the right to redeem his shares for cash or other securities
at some point in the future. Sometimes a redemption right is paired with an
obligation of Burnham to create an account into which Burnham must deposit money
to fund redemption, much like a sinking fund. Preemptive rights are rights
granted to stockholders to subscribe for a percentage of any other securities we
offer in the future based on the percentage of shares owned.
REGISTRATION RIGHTS
Burnham has entered into registration rights agreements with holders of
common units. These agreements may require Burnham to register under the
Securities Act shares of common stock issuable upon redemption of the common
units and upon conversion of preferred stock. These registration rights
agreements give the holders of the applicable securities both "demand" and
"piggyback" registration rights.
INFORMATION
Burnham furnishes its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
EXTRAORDINARY TRANSACTIONS
Pursuant to Maryland law and Burnham's charter, Burnham generally cannot
dissolve, amend its charter, merge, sell most or all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of holders of shares entitled
to cast a majority of all the votes entitled to be cast. In addition, a number
of other provisions of Maryland law could significantly affect the shares of
common stock and the rights and obligations of its holders. See "--Maryland
law."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is First Chicago
Trust Company of New York, a division of EquiServe, 525 Washington Boulevard,
Jersey City, New Jersey 07303.
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POWER TO ISSUE ADDITIONAL SHARES OF STOCK
The charter grants the board of directors the power to authorize the
issuance of additional authorized but unissued shares of common stock and
preferred stock. The board of directors may also classify or reclassify unissued
shares of common stock or preferred stock or excess stock and authorize the
issuance of these classified or reclassified shares of stock. Under Maryland law
and the charter, the board of directors is required to fix the terms and
conditions for each class or series, subject to the provisions of the charter
regarding excess stock, prior to the issuance of the shares of each class or
series of stock. These terms and conditions include preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption.
This power provides the board of directors with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
needs of Burnham that might arise. Unless stockholder action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which Burnham's securities may be listed or traded, the additional classes or
series, as well as the common stock, will generally be available for issuance
without further action by stockholders. However, the issuance of additional
series of preferred stock with rights senior to the currently issued preferred
stock must be approved by the holders of the currently issued preferred stock.
Although the board of directors does not intend to do so at the present time, it
could authorize the issuance of a class or series that could delay, defer or
prevent a change of control or other transaction that holders of common stock
might believe to be in their best interests or in which holders of some, or a
majority of, the common stock might receive a premium for their shares over the
then-current market price.
EXCESS STOCK
GENERAL. As a protective measure, Burnham's charter provides for the
issuance of a separate class of stock, referred to as "excess stock," to people
who attempt to acquire stock in an amount that may endanger Burnham's REIT
qualification. The terms of excess stock and the conditions giving rise to its
issuance are described in more detail below.
OWNERSHIP LIMIT. To qualify as a REIT, Burnham must comply with several
complicated rules under the Internal Revenue Code.
Under these rules:
o no more than 50% in value of Burnham's outstanding capital stock
may be owned, directly or indirectly by five or fewer
"individuals" (which includes tax-exempt entities) during the
last half of its taxable year, and
o Burnham's capital stock must be beneficially owned by 100 or
more persons during at least 335 days of each taxable year.
In order to meet these requirements, Burnham's charter limits the amount
of its capital stock that any one party may hold. The charter prohibits any
holder from owning:
o more than 9.8% in value of Burnham's outstanding capital stock;
or
o more than 9.8% (in value or in number of shares, whichever is
more restrictive) of the outstanding shares of common stock,
including shares of common stock issuable upon conversion of any
other outstanding shares of capital stock of Burnham.
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The charter deems holders to own all stock that they (1) actually own,
(2) constructively own after applying the attribution rules specified in the
Internal Revenue Code and (3) have the right to acquire upon exercise of any
rights, options or warrants or conversion of any convertible securities. These
ownership limitations apply to natural persons, corporations, estates, trusts,
partnerships or other entities. The fact that affiliated entities, such as
separate mutual funds advised by the same investment adviser, may own more than
9.8% of the value of all outstanding capital stock in the aggregate will not of
itself result in the ownership limit being exceeded, even though that investment
advisor may be considered to be the beneficial owner of the stock for purposes
of Section 13(g) of the Exchange Act.
VIOLATION OF OWNERSHIP LIMIT. The charter provides that any attempted
transfer of capital stock is null and void if it would result in a violation of
the ownership limit or the disqualification of Burnham as a REIT. In the event
of an attempted transfer, the intended transferee will acquire no rights to the
capital stock. Instead, the stock will automatically be exchanged for shares of
excess stock, and these shares of excess stock will automatically be transferred
to a trustee for the benefit of one or more beneficiaries designated by Burnham,
except to the extent described below. The trustee must be unaffiliated with
Burnham and the intended transferee.
RIGHTS OF EXCESS STOCK. The excess stock held in trust will receive
distributions declared by Burnham and may be voted by the trustee for the
benefit of the beneficiary. The charter requires the intended transferee to
repay to Burnham any dividend or distribution that it receives prior to the
discovery that capital stock was transferred in violation of the ownership
limit. Burnham would then transfer the amount of the repayment to the trustee.
The charter also retroactively nullifies any votes cast by that person prior to
the discovery that a transfer of stock to him or her violated the ownership
limit. This provision will not harm the rights of any third party who relied in
good faith upon the vote and its consequences.
TRANSFERABILITY OF EXCESS STOCK. A stockholder generally may not
transfer excess stock. Subject to Burnham's redemption right described below,
the trustee may transfer the excess stock to a purchaser who could own those
shares without violating the ownership limit. When sold, the shares of excess
stock would automatically convert back into shares of the class or series of
capital stock or convertible security from which they were originally converted.
The person who attempted to acquire the shares but was not permitted to
do so would then receive from the proceeds of the sale, the lesser of (a) the
price paid by that prohibited owner for the shares and (b) the price per share
received by the trustee from the sale of the shares. If the prohibited owner
received the excess stock by gift, devise or otherwise without paying for it,
then he or she would receive the lesser of (a) the market price of the shares on
the day of the event causing the shares to be held in trust, as determined in
the manner set forth in the charter, and (b) the price per share received by the
trustee from the sale of the shares. Any remaining sales proceeds in excess of
the amount payable to the prohibited owner shall be immediately paid to the
charitable beneficiary.
REDEMPTION RIGHT. In addition to the transfer restrictions described
above, Burnham may purchase any portion of the excess stock from the trustee for
a period of 90 days after receiving written notice of the prohibited transfer or
other event resulting in the exchange of capital stock for excess stock. Upon
any purchase by Burnham, the trustee must distribute the sale proceeds to the
prohibited owner.
ADDITIONAL CHARTER PROVISIONS REGARDING THE OWNERSHIP LIMIT. The
ownership limit will not preclude settlement of transactions on a stock
exchange, but the provisions of the charter shall remain applicable to the
transferee and to any shares transferred. If the board of directors determines
that it is no longer in the best interests of Burnham to continue to qualify as
a REIT, then these restrictions on transferability and ownership will cease.
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Upon demand by Burnham, each stockholder and each proposed transferee of
capital stock must disclose any information about his or her stock ownership
necessary for Burnham to comply with provisions of the Internal Revenue Code
applicable to REITs or the requirements of any governmental agency.
EXCEPTIONS TO OWNERSHIP LIMIT. The board of directors may waive the
ownership limit if it determines that doing so will not jeopardize Burnham's
status as a REIT and would be in Burnham's best interest. Based upon
representations of Blackacre and the Westbrook entities that their agreements
with Burnham would not result in any individual, after applying the rules of the
Internal Revenue Code, owning more than 9.8% of the common stock or of the value
of all of the capital stock of Burnham, and on other representations and
agreements, the board of directors has partially waived the ownership limits for
those two entities.
The ownership limit does not apply to shares of capital stock acquired
for cash in a tender offer for all outstanding shares of capital stock if both
of the following conditions are met:
o At least two-thirds of the outstanding shares of capital stock
are tendered and accepted pursuant to the tender offer. The
securities held by the purchaser are not included in determining
whether the two-thirds threshold has been met.
o The purchaser commits, if the offer is accepted by holders of
two-thirds of the outstanding stock, to give any non-tendering
stockholders a reasonable opportunity to put their capital stock
to the purchaser at a price not less than that paid in the
tender offer.
MARYLAND LAW
MARYLAND BUSINESS COMBINATION STATUTE
Maryland law prohibits many transactions between a Maryland corporation
and any person or entity that owns 10% or more of the voting power of the
corporation's stock. This prohibition exists for five years after the person or
entity most recently became a ten percent owner. Thereafter, any business
combination must be approved by at least 80% of the votes entitled to be cast on
the matter. The person with whom the business combination is to be effected may
not vote on the transaction. Maryland law provides an exception to this rule
depending upon the amount paid to the stockholders and the form of payment.
These restrictions do not apply to transactions with a ten percent owner that
are approved by the board of directors of the corporation before that ten
percent owner becomes a ten percent owner.
Burnham's board of directors has adopted a resolution rendering these
provisions of Maryland law inapplicable to Burnham. However, the board of
directors may revoke their resolution if doing so is in the best interest of
Burnham and our stockholders.
MARYLAND CONTROL SHARE ACQUISITION STATUTE
Maryland law provides that control shares of a Maryland corporation have
no voting rights except to the extent approved by two-thirds of the votes
eligible to be cast on that matter by stockholders. When we use the term
"control shares," we mean voting shares that, once acquired, would entitle the
holder to exercise one-fifth more of the voting power in electing directors.
Control shares do not include shares the acquiring person may vote as a
result of having obtained stockholder approval.
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If voting rights are not approved at a stockholder meeting or if the
acquiring person does not otherwise comply with Maryland law, the corporation
may redeem any or all of the control shares for fair value. If voting rights are
approved and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights.
Burnham's bylaws contain a provision that exempts the acquisition of
Burnham's capital stock from these restrictions. However, the board of
directors, may repeal this exemption either before or after an acquisition of
control shares if it determines that doing so is in the best interest of our
stockholders. The board of directors may do this without stockholder approval.
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DESCRIPTION OF UNITS AND REDEMPTION OF UNITS OF OPERATING PARTNERSHIP
THE FOLLOWING DESCRIPTION OF THE OPERATING PARTNERSHIP AGREEMENT, AND OF
THE FIRST AMENDMENT THERETO THAT WAS ENTERED INTO CONCURRENTLY WITH THE
ACQUISITION OF THE GOLDEN STATE PROPERTIES PORTFOLIO ON DECEMBER 31, 1997, IS
QUALIFIED BY THE PROVISIONS OF THE OPERATING PARTNERSHIP AND OF THE FIRST
AMENDMENT FILED AS EXHIBITS TO BURNHAM'S REPORTS ON FORM 8-K DATED DECEMBER 16,
1997 AND JANUARY 14, 1998, RESPECTIVELY, AND OF SCHEDULE C TO THE FIRST
AMENDMENT FILED AS AN EXHIBIT TO BURNHAM'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1997. THOSE EXHIBITS ARE HEREBY INCORPORATED BY
REFERENCE HEREIN.
COMMON UNITS.
The operating partnership agreement provides that the operating
partnership will make distributions to holders of common units and to the
general partner in proportion to their respective partnership interests. Burnham
will hold as many common units as there are shares of common stock of Burnham
outstanding from time to time. Burnham, as general partner of the operating
partnership, contemplates making quarterly distributions to the holders of
common units concurrently with and in the same amounts as dividends paid by
Burnham on its common stock. This amount is currently at the quarterly rate of
$0.2625.
In addition, the operating partnership agreement provides that on
December 31 or June 30 following the first anniversary of the issuance of common
units, or earlier in the event of some types of transactions, holders of common
units may redeem each of their common units for cash equal to the market value
of a share of common stock. Burnham may assume the redemption obligation of the
operating partnership and pay the redemption in the form of registered shares of
its common stock.
PREFERRED UNITS.
Under the first amendment to the operating partnership agreement,
Burnham, as general partner of the operating partnership, established a series
of 4,800,000 preferred units of limited partnership interest designated as
"Series 1997-A Preferred Limited Partner Units" and issued 2,000,000 preferred
units to the contributors of the Golden State Properties Portfolio and 2,800,000
preferred units to Burnham. The economic rights of holders of preferred units,
with respect to distributions and liquidation, are identical to the rights of
holders of preferred stock. Distributions by the operating partnership with
respect to preferred units held by Burnham will provide the funds to enable
Burnham to make its distributions to the holders of the preferred stock. Holders
of preferred units, other than Burnham, may redeem each of their preferred units
for $25 in cash or the value of the amount of common stock into which a share of
preferred stock could be exchanged. In lieu of delivering cash, however, Burnham
may, at its option, choose to acquire preferred units by issuing shares of
preferred stock in exchange. If this occurs, the number of preferred units held
by Burnham will increase so that Burnham will always hold a number of preferred
units equal to the number of outstanding shares of preferred stock.
In general, the terms of the first amendment that define the economic
rights of holders of preferred units other than Burnham are largely identical to
the provisions of the Articles Supplementary that define the economic rights of
the holders of preferred stock. See "Description of Securities--Preferred stock"
above.
TAX CONSEQUENCES OF REDEMPTION.
The following discussion summarizes federal income tax considerations
that may be relevant to a unitholder who redeems its partnership units.
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TAX TREATMENT OF EXCHANGE OR REDEMPTION OF UNITS
Burnham may elect to purchase units presented to its operating
partnership for redemption. If Burnham so elects, the transaction will be
treated as a sale of partnership units by the unitholder to Burnham at the time
of the redemption. The sale will be fully taxable to the redeeming unitholder.
The determination of the amount and character of gain or loss is discussed
below. See "--Computation and character of gain or loss" below.
If Burnham does not elect to purchase a unitholder's partnership units
and the operating partnership redeems the partnership units for cash that
Burnham contributes to the operating partnership to effect the redemption, the
redemption likely would be treated for tax purposes as a sale of the partnership
units to Burnham in a fully taxable transaction. In that event, the tax
consequences would be the same as if Burnham elected to purchase the partnership
units directly, as described above.
If Burnham does not elect to purchase the partnership units and the
operating partnership redeems all of a unitholder's partnership units for cash
that is not contributed by Burnham to effect the redemption, the tax
consequences would likely be the same as described in the previous paragraph. If
the operating partnership redeems less than all of a unitholder's units,
however, the unitholder would not be permitted to recognize any loss occurring
on the transaction and would recognize taxable gain only to the extent that the
cash, plus the amount of any operating partnership liabilities allocable to the
redeemed partnership units, exceeded the unitholder's adjusted basis in all of
the unitholder's units immediately before the redemption. This result may differ
if the redemption is treated as a disguised sale. See "--Potential application
of the disguised sale regulations to a redemption of units" below.
If Burnham contributes cash to the operating partnership to effect a
partial redemption of a unitholder's units and the redemption is treated as a
redemption by the operating partnership rather than a sale to Burnham, the
income tax consequences to a unitholder would be the same as described in the
preceding paragraph.
COMPUTATION AND CHARACTER OF GAIN OR LOSS
The gain or loss from any transaction treated as a sale of units will be
based on the difference between the amount realized for tax purposes and the tax
basis in the units. See "--Basis of units" below. Upon the sale of partnership
units, the amount realized will be measured by the sum of the cash and fair
market value of the capital stock received plus the amount of any operating
partnership liabilities allocable to the partnership units sold. To the extent
that the cash or property received plus the allocable share of any operating
partnership liabilities exceeds the unitholder's basis for the partnership
units, the unitholder will recognize gain. The amount of gain recognized or even
the tax liability resulting from that gain could exceed the amount of cash
and/or the value of any capital stock received.
In general, any gain from a sale or other disposition of partnership
units will be treated as gain resulting from the sale or disposition of a
capital asset. To the extent, however, that the amount realized upon the sale of
a unit attributable to a unitholder's share of unrealized receivables of the
operating partnership, as defined in Section 751 of the Internal Revenue Code,
exceeds the basis attributed to those assets, the excess will be treated as
ordinary income. Unrealized receivables include, to the extent not previously
included in operating partnership income, any rights to payment for services
rendered or to be rendered. Unrealized receivables also include amounts that
would be subject to recapture as ordinary income if the operating partnership
had sold its assets at their fair market value at the time of the transfer of a
unit.
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BASIS OF UNITS
In general, a unitholder who acquired partnership units by contribution
of property and/or money to the operating partnership had an initial tax basis
in these partnership units equal to the sum of (a) the amount of money
contributed, (b) his or her adjusted tax basis in any other property contributed
in exchange for the partnership units and (c) his or her share of the operating
partnership's liabilities, less (d) the amount of any liabilities assumed by the
operating partnership and any money distributed in connection with the
acquisition of the partnership units. The initial basis of partnership units
acquired by other means would have been determined under the general rules of
the Internal Revenue Code, including the partnership provisions, governing the
determination of tax basis. Other rules, including the disguised sale rules
discussed below, also may affect initial basis. Unitholders should consult their
own tax advisors regarding their initial basis. A unitholder's initial basis in
partnership units generally is increased by his or her share of the (a)
operating partnership taxable and tax-exempt income and (b) increases in
liabilities of the operating partnership. Generally, a unitholder's basis in his
or her partnership units is decreased by his or her share of the (a) operating
partnership distributions, (b) decreases in liabilities of the operating
partnership, (c) losses of the operating partnership and (d) nondeductible
expenditures of the operating partnership that are not chargeable to his or her
capital account. A unitholder's basis in units cannot be less than zero.
POTENTIAL APPLICATION OF THE DISGUISED SALE REGULATIONS TO A REDEMPTION
OF UNITS
A redemption of partnership units originally issued in exchange for a
contribution of property to the operating partnership may cause the original
transfer of property to be treated as a disguised sale of property. Section 707
of the Internal Revenue Code and the Treasury Regulations thereunder generally
provide that, unless one of the prescribed exceptions is applicable, a partner's
contribution of property to a partnership and a simultaneous or subsequent
transfer of money or other consideration, including the assumption of a
liability, from the partnership to the partner will be presumed to be a sale of
the property by the partner to the partnership if the two transactions occur
within a two-year time period. This presumption may be overcome if the facts and
circumstances clearly establish that the transfers do not constitute a sale.
Nonetheless, if the transactions occur within a two-year period, the partner may
need to report them to the IRS. The disguised sale regulations also provide that
if two years have passed between the transfer of money or other consideration
and the contribution of property, the transactions will be presumed not to be a
sale unless the facts and circumstances clearly establish that the transfers
constitute a sale.
Accordingly, if a unitholder who received units in exchange for a
contribution of property to the operating partnership presents units for
redemption, the IRS could contend that the original contribution of property was
taxable as a disguised sale. Any gain recognized may be eligible for installment
reporting under Section 453 of the Internal Revenue Code, subject to
limitations. In addition, a portion of the proceeds received by a redeeming
unitholder could be characterized as original issue discount on a deferred
obligation. This original issue discount would be taxable as interest income
under Section 1272 of the Internal Revenue Code. Each unitholder should consult
its own tax advisors to determine whether redemption of its partnership units
could be subject to the disguised sale regulations.
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COMPARISON OF OWNERSHIP OF PARTNERSHIP UNITS AND COMMON STOCK
An investment in Burnham's preferred stock or common stock is generally
economically equivalent to an investment in preferred units or common units, as
the case may be, in the operating partnership. A holder of a share of capital
stock receives the same distribution that a holder of the equivalent class of
partnership units receives. Furthermore, stockholders and unitholders generally
share in the risks and rewards of ownership in the same enterprise. There are,
however, differences between ownership of partnership units and ownership of
capital stock, some of which may be material to investors.
The information below highlights a number of important differences
between the operating partnership and Burnham relating to, among other things,
form of organization, permitted investments, policies and restrictions,
management structure, compensation and fees, investor rights and federal income
taxation. The information also compares rights associated with being a partner
in the operating partnership and being a stockholder of Burnham, respectively.
These comparisons are summary in nature and intended to assist unitholders in
understanding how their investment will be changed if their partnership units
are acquired for capital stock.
THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
FORM OF ORGANIZATION AND ASSETS OWNED
The operating partnership is a Burnham is a Maryland corporation that
Delaware limited partnership has elected to be taxed as a REIT
and is the entity through which under the Internal Revenue Code and
Burnham conducts most of its intends to maintain its qualifications
business and owns most of its as a REIT. Burnham is the sole general
assets. The board of directors partner of the operating partnership
of Burnham manages the affairs and holds both preferred and common
of the operating partnership by limited partnership units in the
directing the affairs of Burnham. operating partnership. As
a result, Burnham has an indirect
investment in the properties and other
assets owned by the operating
partnership.
LENGTH OF INVESTMENT
The operating partnership has a Burnham has a perpetual term and intends
termination date of December 31, to continue its operations indefinitely.
2095, although it may be terminated
earlier under some circumstances.
NATURE OF INVESTMENT IN PREFERRED EQUITY AND DISTRIBUTION RIGHTS
The preferred units constitute The preferred stock constitutes an
equity interests entitling each equity interest in Burnham. Burnham is
holder to his or her pro rata entitled to receive any operating cash
share of the distributions made flow and capital cash flow remaining
to the preferred unitholders of after the holders of preferred units and
the operating partnership. In common units have been paid their
general, the preferred unitholders distributions. Each stockholder will be
will receive distributions on their entitled to his or her pro rata share of
preferred units equal to the any dividends or distributions paid with
dividend for the same period on a respect to preferred stock. The
share of preferred stock of Burnham. dividends payable to the holders of
preferred stock are
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THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
As a partnership, the operating cumulative and not fixed in amount, but
partnership is not subject to are only paid if, when and as declared
federal income taxation. In by the board of directors. In order to
determining their federal income qualify as a REIT, Burnham must
tax, partners of the operating distribute at least 95% of its taxable
partnership, including preferred income, excluding capital gains; and any
unitholders, must take into taxable income, including capital gains,
account their allocable share of not distributed will be subject to
partnership income, gain, deduction corporate income tax.
and loss, regardless of whether
distributed, and otherwise are
subject to the rules governing the
taxation of partnerships and
partners. By contrast, preferred
unitholders who receive preferred
stock upon exercise of their
redemption rights will be taxed
on these investments in accordance
with the rules governing REITs.
See "Federal Income Tax
Considerations."
NATURE OF INVESTMENT IN COMMON EQUITY AND DISTRIBUTION RIGHTS
The common units constitute equity The common stock constitutes an equity
interests entitling each common interest in Burnham. Burnham is entitled
unitholder to his or her pro rata to receive any operating cash flow and
share of the distributions made to capital cash flow remaining after the
the common unitholders of the holders of preferred units and common
operating partnership. In general, units have been paid their
the common unitholders will receive distributions. Each stockholder will be
distributions on their common units entitled to his or her pro rata share of
equal in amount to the dividend for any dividends or distributions paid with
the same period on a share of common respect to common stock after the
stock of Burnham. payment of dividends on outstanding
preferred stock. The dividends payable
As a partnership, the operating on common stock are not fixed in amount
partnership is not subject to and are only paid if, when and as
federal income taxation. In declared by the board of directors. In
determining their federal income order to qualify as a REIT, Burnham must
tax, partners of the operating distribute at least 95% of its taxable
partnership, including common income, excluding capital gains; and any
unitholders, must take into account taxable income, including capital gains,
their allocable share of partnership not distributed will be subject to
income, gain, deduction and loss, corporate income tax.
regardless of whether distributed,
and otherwise are subject to the
rules governing the taxation of
partnerships and partners. By
contrast, common unitholders who
receive
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THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
common stock upon exercise
of their redemption rights will be
taxed on their investment in
accordance with the rules governing
REITs. See "Federal Income Tax
Considerations."
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THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
ISSUANCE OF ADDITIONAL EQUITY
The operating partnership may issue The board of directors of Burnham may
additional partnership units, issue, in its discretion, additional
including partnership interests of equity securities consisting of common
different series or classes that may stock or any other series of capital
be senior to common units. However, stock so long as the total number of
the operating partnership may not shares issued does not exceed the
issue partnership interests senior to authorized number of shares of capital
or on parity with the preferred units stock set forth in Burnham's charter.
without consent of holders of at Burnham may not issue additional equity
least a majority of the preferred securities that would impair the rights
units. Subject to restrictions of the preferred stock without consent
that relate to the rights of of holders of at least a majority of the
preferred units, the relative preferred stock. The issuance of
rights, powers and duties of any additional equity securities may dilute
additional partnership units or the interests of existing stockholders.
other interests will be determined The operating partnership agreement
by Burnham in its sole discretion. contemplates that Burnham will
The operating partnership may issue contribute the proceeds of any
partnership interests to Burnham, as additional equity securities to the
long as Burnham issues a operating partnership. Each time Burnham
corresponding amount of stock, the issues additional shares of common
proceeds of which are contributed stock, the number of common units held
to the operating partnership. The by Burnham will increase so that Burnham
issuance of additional partnership will always hold the same number of
units or other similar partnership common units as there are shares of
interests may dilute the interests common stock outstanding. Similarly,
of the existing unitholders. there will be an increase in the number
of preferred units held by Burnham to
correspond with an increase in the
number of outstanding shares of
preferred stock.
LIQUIDITY OF COMMON EQUITY
Subject to some restrictions, a Burnham's common stock is freely
common unitholder may transfer all transferable subject to the requirements
or any portion of his or her common of the Securities Act. The common stock
units without the consent of the is listed on the New York Stock
general partner. However, the Exchange. The breadth and strength of
general partner's consent is this market will depend, among other
required where a transfer (1) things, upon the number of shares
would affect the treatment of outstanding, Burnham's financial status,
Burnham or the operating partnership the general interest in Burnham's and
under state or federal law other real estate investments and
or (2) would impose legal Burnham's dividend yield compared to
obligations on Burnham or the that of other debt and equity
operating partnership. securities.
Subject to conditions, including
the expiration of specified
lock-out periods, common
unitholders may redeem their
common units with the operating
partnership. Upon redemption, the
unitholder will receive, at
Burnham's election, either common
stock or its cash equivalent.
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THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
LIQUIDITY OF PREFERRED EQUITY
Subject to some restrictions, a Burnham's preferred stock is freely
preferred unitholder may transfer transferable subject to the requirements
all or any portion of his or her of the Securities Act. The preferred
preferred units without the consent stock is not listed on an exchange and
of the general partner. However, the is not publicly traded.
general partner's consent is required
where a transfer (1) would affect the On and after December 31, 1998, March
treatment of Burnham or the operating 31, 1999, June 30, 1999, and September
partnership under state or federal 30, 1999, each holder of shares of
law, particularly with respect to preferred stock may convert 25% of his
tax, partnership, and securities laws, or her preferred stock into shares of
or (2) would impose legal obligations common stock. Upon conversion, each
on Burnham or the operating holder of preferred stock will be
partnership. entitled to receive for each share of
preferred stock a number of shares of
Subject to conditions, including the common stock equal to the stated value
expiration of specified lock-out plus accrued and due dividends, divided
periods, preferred unitholders may by a conversion price of $15.375. This
redeem their common units with the conversion price is subject to
operating partnership. Upon antidilution adjustments.
redemption, the unitholder will
receive, at Burnham's election,
either preferred stock or cash equal
to the greater of the stated value
plus accrued and due dividends or the
value of shares of common stock into
which the preferred stock is
convertible.
PURPOSE AND PERMITTED INVESTMENTS
The operating partnership's purpose Under its charter, Burnham may engage in
is to conduct any business permitted any activity permitted under Maryland
by Delaware limited partnership law. law.
The operating partnership agreement
requires the business to be conducted Neither Burnham's charter nor its bylaws
in a manner that permits Burnham to impose any restrictions upon the types
be classified as a REIT for federal of investments made by Burnham.
income tax purposes and avoids any
federal income or excise tax
liability. Subject to the foregoing
limitation, the operating partnership
may invest or enter into partnerships,
joint ventures or similar
<PAGE>
THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
arrangements, own interests in any
other entity, lend operating
partnership funds, or reinvest the
operating partnership's cash flow
and net sale or refinancing proceeds.
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<PAGE>
THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
BORROWING POLICIES
The operating partnership has no Burnham is not restricted under its
restrictions on borrowings, except organizational documents from borrowing
that it may not enter into a money.
financing relationship with Burnham
or an affiliate of Burnham.
MANAGEMENT CONTROL
Burnham manages the business and The board of directors has exclusive
affairs of the operating partnership. control over Burnham's business and
No other unitholder of the operating affairs subject only to the restrictions
partnership may participate in the in its charter and bylaws. The
management of the operating stockholders of Burnham elect the board
partnership. The operating partnership of directors at each annual meeting of
agreement provides that Burnham shall stockholders. The policies adopted by
be reimbursed for all expenses the board of directors may be altered or
incurred by it relating to the eliminated without advice of the
management of the operating stockholders. Accordingly, except for
partnership. their vote in the elections of
Directors, stockholders have no control
over the ordinary business policies of
Burnham.
MANAGEMENT LIABILITY AND INDEMNIFICATION
The operating partnership agreement Maryland law requires Burnham to
generally provides that the general indemnify a director or officer who has
partner and any person acting on its been successful in the defense of any
behalf will not be liable to the proceeding to which he or she is made a
operating partnership or any party by reason of service as an officer
unitholder for any act or omission or director. Maryland law permits
within the scope of the general Burnham to indemnify present and former
partner's authorities unless: directors and officers against
judgments, penalties, fines, settlements
o the general partner acted in bad and reasonable expenses incurred by them
faith and in connection with any proceeding to
which they are made a party by reason of
o the act or omission was material their service, among other things, as an
to the matter giving rise to the officer or director, unless it is
liability. established that:
The operating partnership agreement o the act or omission of the director
also provides for the indemnification or officer was material to the
of the general partner and its matter giving rise to the
affiliates and any individual acting proceeding and (1) was committed in
on their behalf from any loss, damage, bad faith or (2) was the result of
claim or liability, including, but active and deliberate dishonesty;
not limited to, reasonable attorneys'
fees and expenses, incurred by them o the director or officer actually
by reason of any act performed by received an improper personal
them unless: benefit in money, property or
services; or
o the act or omission was committed
in bad faith or with deliberate
dishonesty;
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THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
o the person committing the act or o in the case of any criminal
omission received improper proceeding, the director or
benefit from the conduct; or officer had reasonable cause to
believe that the act or omission
o in the case of a criminal was unlawful.
proceeding, the person had reason
to believe the conduct was Burnham's charter and bylaws eliminate,
unlawful in accordance with the to the fullest extent permitted under
standards set forth above or in Maryland law, the personal liability of
enforcing the provisions of this a director or officer for monetary
indemnity. damages resulting from a breach of that
person's duty of care or other duties as
a director or officer. Furthermore,
Burnham and the operating partnership
have entered into individual
indemnification agreements with each
officer and director of Burnham
providing the maximum indemnification
permitted under Maryland law. The effect
of these agreements and the relevant
provisions of our charter and bylaws is
generally to eliminate the rights of
Burnham and its stockholders to recover
monetary damages against a director or
officer for breach of the fiduciary duty
of care, including breaches resulting
from negligent or grossly negligent
behavior. This does not limit or
eliminate the rights of Burnham or any
stockholder to seek non-monetary relief
such as an injunction or recision in the
event of a breach of a director's or
officer's duty of care nor does it alter
the liability of a director or officer
under federal securities laws.
ANTITAKEOVER PROVISIONS
Except in limited circumstances, the Burnham's charter and bylaws and
general partner has exclusive Maryland law contain provisions that may
management power over the business delay or discourage an unsolicited
and affairs of the operating proposal to acquire Burnham or remove
partnership. The general partner may incumbent management. See "Risk
not be removed by the unitholders Factors--Provisions of our
with or without cause. organizational documents may discourage
acquisition proposals."
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<PAGE>
THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
VOTING RIGHTS
Holders of common units may not elect The board of directors directs Burnham's
or remove Burnham as the general business and affairs. Stockholders elect
partner of the operating partnership. the board of directors at annual
Under the operating partnership meetings. All shares of common stock
agreement, Burnham as general partner have one vote per share. The charter
may take any action that it reasonably permits the board of directors to
believes to be in the best interests classify and issue preferred stock in
of its stockholders or complies with one or more series having voting power
the REIT requirements for Burnham. that may differ from that of the common
Burnham's ability to amend the stock; and holders of preferred stock
operating partnership agreement is have the right to vote on a fully
limited to the extent described below. converted basis with the holders of
common stock, as well as to vote as a
separate class on some specified
matters.
Stockholders of Burnham have the right
to vote, among other things, on a merger
or sale of most or all of Burnham's
assets, some amendments to the charter
and the dissolution of Burnham. Under
Maryland law and the charter, the sale
of most or all of the assets of Burnham
or any merger or consolidation of
Burnham requires the approval of the
board of directors and holders of a
majority of the outstanding shares of
stock entitled to vote on the matter.
Approval of the stockholders is not
required for the sale of less than
substantially all of Burnham's assets.
Under Maryland law and Burnham's charter
and bylaws, the board of directors must
obtain approval of holders of a majority
of the votes entitled to be cast at a
meeting of stockholders in order to
dissolve Burnham.
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<PAGE>
THE OPERATING PARTNERSHIP THE COMPANY
------------------------- -----------
AMENDMENT OF THE PARTNERSHIP AGREEMENT OR BURNHAM'S CHARTER
The general partner, in many cases, Amendments to the charter must be
may amend the operating partnership approved by the board of directors and
agreement without the consent of the generally by the vote of a majority of
other holders of limited partnership the votes entitled to be cast at a
units. However, some amendments set meeting of stockholders except as
forth in the operating partnership otherwise provided by law. Burnham may
agreement require consent of not amend the charter in a manner that
unitholders holding a majority-in- would impair the term of the preferred
interest of the outstanding limited stock without approval of holders of at
partnership units. This excludes least a majority of outstanding shares
limited partnership units which may of preferred stock, voting separately as
be voted by the general partner. a class.
Furthermore, the general partner may
not amend the operating partnership
agreement in any manner affecting
the terms and conditions of, or the
rights or preferences of, the
preferred units without approval
of (1) holders of at least a majority
of outstanding shares of preferred
stock, voting separately as a class,
and (2) holders of at least a majority
of the outstanding preferred units.
COMPENSATION, FEES AND DISTRIBUTIONS
The general partner is not entitled The directors receive capital stock of
to receive compensation for its Burnham as compensation for their
services as general partner of the services. The operating partnership pays
operating partnership. As a partner the compensation of the officers of
in the operating partnership, however, Burnham.
the general partner has the same right
to allocations and distributions as
other partners of the operating
partnership. In addition, the
operating partnership will reimburse
the general partner for administrative
expenses relating to the operation of
Burnham and other expenses arising in
connection with its role as general
partner. All officers of Burnham are
employees of the operating
partnership.
LIABILITY OF INVESTORS
Under the operating partnership Under Maryland law, stockholders
agreement and Delaware law, the generally are not personally liable for
limited partners of the operating the debts or obligations of Burnham.
partnership are liable for its debts
and obligations but only to the
extent of their investment in the
operating partnership, together with
any interest in any undistributed
income.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
To qualify for the favorable tax treatment afforded to REITS, Burnham
must comply with highly technical and complex requirements under the Internal
Revenue Code. The following discussion summarizes these requirements and
their effect on Burnham and its stockholders. This discussion is for general
information only and is not an exhaustive list of all tax considerations that
may be material. For example, this discussion does not address any state,
local or foreign tax considerations. Also, this discussion does not address
issues that arise as a result of your, or any other investor's, special
circumstances or special status under the Internal Revenue Code. The summary
is qualified in its entirety by, and you should refer to, Sections 856
through 860 of the Internal Revenue Code and the related Treasury
regulations, which set forth the particular provisions applicable to REITs.
This discussion is not intended to be, nor should you construe it as,
tax advice. You should consult your own tax advisor to determine the impact
of owning Burnham's stock on your own personal situation, including tax
consequences arising under the laws of any state, municipality or other
taxing jurisdiction. In particular, foreign investors should consult their
own tax advisors concerning the tax consequences of an investment in Burnham,
including the possibility of United States income tax withholding on company
distributions.
GENERAL
Under the Internal Revenue Code, if applicable requirements are met
in a taxable year, including the requirement that the REIT distribute to its
stockholders at least 95% of its real estate investment trust taxable income
for the taxable year, a REIT generally will not be subject to federal income
tax with respect to income that it distributes to its stockholders. However,
Burnham may be subject to federal income tax under some circumstances. As
discussed below, stockholders may be credited for all or a portion of the
taxes paid by Burnham on its retained net capital gains. If Burnham fails to
qualify during any taxable year as a REIT, unless statutory relief is
available, it will be subject to tax on its taxable income at regular
corporate rates. Stockholders could be harmed if Burnham's taxable income
were taxed at regular corporate rates.
BURNHAM BELIEVES BUT CANNOT GUARANTEE THAT IT QUALIFIES AS A REIT
Burnham has elected to qualify as a REIT under the Internal Revenue
Code. In the opinion of Goodwin, Procter & Hoar LLP, Burnham has been organized
in conformity with the requirements for qualification as a REIT under the
Internal Revenue Code, and its manner of operation has met and will continue to
meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code. This opinion is based on various assumptions and is
conditioned upon representations made by Burnham as to factual matters and the
continuation of those factual matters. You should be aware, moreover, that
opinions of counsel are not binding upon the IRS or any court. In addition,
Burnham must meet several requirements of the Internal Revenue Code each tax
year in order to be taxed as a REIT. Burnham's compliance with these
requirements will not be reviewed by Goodwin, Procter & Hoar LLP. Accordingly,
Burnham may not satisfy all of the requirements to qualify for taxation as a
REIT for any particular tax year. Likewise, although Burnham believes that it
has operated in a manner that satisfies the REIT qualification requirements
under the Internal Revenue Code since 1987, Burnham's qualification as a REIT
could be challenged by the IRS for taxable years still subject to audit.
UNDISTRIBUTED LONG-TERM CAPITAL GAINS
Burnham may elect to retain and pay income tax on its net long-term
capital gains received during the taxable year. If Burnham so elects for a
taxable
42
<PAGE>
year, the stockholders would include in income as long-term capital gains their
proportionate share of the portion of Burnham's undistributed long-term capital
gains for the taxable year that Burnham designates. A stockholder would be
deemed to have paid his or her share of the tax paid by Burnham on the
undistributed capital gains, and the tax paid would be credited or refunded to
the stockholder. The stockholder's basis in his or her stock would be increased
by the amount of undistributed long-term capital gains included in the
stockholder's long-term capital gains, less the stockholder's share of the
capital gains tax paid by Burnham. As discussed below, stockholders should note
that the IRS has issued Notice 97-64, which provides interim guidance on the
proper treatment of capital gains dividends and undistributed capital gains for
individuals, estates and some types of trusts.
ORDINARY DIVIDENDS
As long as Burnham qualifies as a REIT, distributions made to its
taxable U.S. stockholders out of current or accumulated earnings and profits,
and not designated as a capital gain dividends, will be taken into account by
U.S. stockholders as ordinary income and will not be eligible for the dividends
received deduction generally available to corporations. For purposes of
determining whether distributions on Burnham's stock are out of current or
accumulated earnings and profits, Burnham's earnings and profits will be
allocated first to the outstanding preferred stock and then to Burnham's common
stock.
When we refer to a "U.S. stockholder," we mean a holder of common or
preferred stock that for United States federal income tax purposes is not an
entity that has a special status under the Internal Revenue Code, such as a
tax-exempt organization or dealer in securities, and the holder is:
o a citizen or resident of the United States;
o a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political
subdivision thereof;
o an estate, the income of which is subject to United States
federal income taxation regardless of its source; or
o a trust, if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States persons have the authority to control all
substantial decisions of the trust.
CAPITAL GAIN DIVIDENDS
To the extent that Burnham has net capital gain for a taxable year,
dividends either paid or deemed to be paid during the year that are properly
designated as long-term capital gains will be treated as such for the taxable
year regardless of the period for which the stockholder has held his stock.
However, corporate stockholders may be required to treat up to 20% of some
capital gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations.
OTHER DIVIDENDS
Distributions, other than capital gain dividends, in excess of Burnham's
current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that the distributions do not exceed the adjusted
basis of the stockholder's stock, but rather will reduce the adjusted basis of
the stock. To the extent that distributions in excess of current and accumulated
earnings and profits exceed the adjusted basis of a stockholder's stock, the
distribution will be treated as long-term capital gain or loss if the shares of
stock have been held for more than 12 months and otherwise as short-term capital
gain or loss, assuming the
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<PAGE>
stock is a capital asset in the hands of the stockholder. In addition, any
dividend declared by Burnham in October, November or December of any year and
payable to stockholders of record on a specified date in those months shall be
treated as both paid by Burnham and received by the stockholder on December 31
of that year, provided that the distribution is actually paid by Burnham during
January of the following calendar year.
CONVERSION OF PREFERRED STOCK TO COMMON STOCK
No gain or loss generally will be recognized upon conversion of
preferred stock into common stock except with respect to any cash paid in lieu
of fractional shares of common stock. The tax basis of the common stock received
upon conversion will be equal to the tax basis of the preferred stock converted,
and, provided the preferred stock is held as a capital asset, the holding period
of the common stock will include the holding period of the preferred stock
converted. Additionally, if a conversion takes place when there is a dividend
arrearage on the preferred stock and the fair market value of the common stock
exceeds the issue price of the preferred stock, a portion of the common stock
received might be treated as a dividend distribution taxable as ordinary income.
ADJUSTMENT OF CONVERSION PRICE
When the conversion price of convertible preferred stock is adjusted to
reflect certain taxable distributions with respect to the stock into which it is
convertible, regulations under Section 305 of the Internal Revenue Code treat
the adjustment as a constructive distribution by the issuer, taxable as a
dividend to the extent of the issuer's current or accumulated earnings and
profits. Accordingly, an adjustment to the conversion price of the preferred
stock may give rise to a deemed taxable dividend to the holders of the stock,
whether or not they exercise their conversion privilege. In addition, the
failure to fully adjust the conversion price of the preferred stock under some
circumstances may give rise to a deemed taxable dividend to the holders of
common stock.
NO PROCEEDS TO BURNHAM
Neither Burnham nor the operating partnership will receive any cash
proceeds from the issuance of any shares of common stock or preferred stock
offered under this prospectus. With each issuance of shares of common stock or
preferred stock as a result of a redemption of partnership units, however,
Burnham's economic interest in the operating partnership will increase.
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time of:
o up to 2,000,000 shares of our preferred stock that we may issue
upon redemption of preferred units of the operating partnership,
o up to 3,252,033 shares of our common stock that we may issue
upon conversion of the above referenced preferred stock at the
initial conversion ratio of approximately 1.626 shares of common
stock for each share of preferred stock,
o up to an additional 574,483 shares of our common stock that we
may issue upon redemption of common units of the operating
partnership, and
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<PAGE>
o an indeterminate number of additional shares of our common stock
that we may issue as a result of the anti-dilution provisions of
the preferred stock.
We are filing the registration statement of which this prospectus is a
part to fulfill our contractual obligations to the holders of the preferred
units and common units and to provide them with freely tradable securities.
Registration of the shares does not necessarily mean that we will issue all or
any portion of the shares.
We will not receive any proceeds from the issuance of the securities
offered hereby. We have agreed to bear some expenses of registration of the
securities offered under this prospectus under federal and state securities
laws.
LEGAL MATTERS
Legal matters, including the legality of the shares of preferred stock
and common stock offered hereby, will be passed upon for Burnham by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from Burnham's
Annual Report on Form 10-K for the year ended December 31, 1998, have been
audited by Deloitte & Touche, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus,
incorporated herein by reference or contained in a prospectus supplement. We
have not authorized anyone else to provide you with different or additional
information. Neither we nor the selling stockholders named herein are making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or information
incorporated in this prospectus by reference or contained or incorporated by
reference in any prospectus supplement is accurate as of any date other than the
date on the front of the document containing such information.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................2
Risk Factors........................................4
About This Prospectus and Where You
Can Find More Information.......................17
The Company........................................19
Forward Looking Information........................21
Description of Securities......................... 22
Description of Units and Redemption
of Units of Operating Partnership ..............31
Federal Income Tax Considerations..................42
No Proceeds to Burnham.............................44
Plan of Distribution...............................44
Legal Matters......................................45
Experts............................................45
</TABLE>
------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,000,000 Shares
Series 1997-A Convertible
Preferred Stock
and
3,252,033 Shares
Common Stock Issuable Upon
Conversion Thereof
and
574,483 Other Shares
Common Stock
Burnham Pacific Properties, Inc.
------------------
------------------
Prospectus
------------------
------------------
April , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) anticipated to be
paid by Burnham in connection with the issuance and distribution of the
Securities.
<TABLE>
<S> <C>
SEC Registration fee $ 35,127
Legal fees and expenses 50,000
Accounting fees and expenses 5,000
Printing fees and expenses 5,000
Transfer and Agency fees 1,000
Miscellaneous 3,873
--------
TOTAL $100,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law ("MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for liability resulting from (i) actual receipt of an improper benefit or
profit in money, property or services or (ii) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
charter of Burnham Pacific Properties, Inc. ("Burnham") contains such a
provision which eliminates such liability to the maximum extent permitted by
Maryland law.
The charter of Burnham authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (i) any individual
who is a present or former director, officer, employee or agent of Burnham or of
its predecessor, Burnham Pacific Properties, Inc., a California corporation (the
"Predecessor Corporation") or (ii) any individual who, while a director of
Burnham or Predecessor Corporation and at the request of Burnham or 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. The bylaws of Burnham obligate it, to the maximum extent
permitted by Maryland law, to indemnify (a) any individual who is a present or
former director, officer, employee or agent of Burnham or Predecessor
Corporation or (b) any individual who, while a director of Burnham or
Predecessor Corporation and at the request of Burnham or 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.
The MGCL requires a corporation (unless its charter provides otherwise,
which Burnham's charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to 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 (i) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit in money, property or services or (iii) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL allows a corporation to advance expenses to a director or
officer, provided that, as a condition to advancing expenses, the corporation
obtains (x) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the corporation as authorized by the bylaws and (y) a written statement by or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibit No. Description
4.1 Charter of Burnham, as Amended and Restated May 6, 1997,
incorporated by reference to pages B- 1 through B-13 of Burnham's
Proxy Statement for its 1997 Annual Meeting, filed March 31, 1997.
4.2 Articles Supplementary Designating 4,800,000 shares of preferred
stock as 4,800,000 shares of Series 1997-A Convertible preferred
stock, incorporated by reference to Exhibit 3.1.2 to Burnham's
Current Report on Form 8-K dated December 31, 1997.
4.3 Bylaws of Burnham, as amended November 19, 1997, incorporated by
reference to Exhibit 3.2 of Burnham's Current Report on Form 8-K,
filed December 16, 1997.
4.4.1 Form of common stock certificate of Burnham, incorporated by
reference to Exhibit 4.0 of Burnham's registration statement No.
33-20489 and subsequently overprinted to state "THE CORPORATION IS
NOW INCORPORATED IN THE STATE OF MARYLAND WITH $0.01 PAR VALUE PER
SHARE."
*4.4.2 Form of Series 1997-A Convertible Preferred Stock Certificate of
Burnham.
4.5 Agreement of Limited Partnership of Burnham Pacific Operating
Partnership, L.P. dated as of November 14, 1997, incorporated by
reference to Exhibit 10.1.1 of Burnham's Current Report on
Form 8-K dated November 7, 1997.
4.6 First Amendment to Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P. dated as of December 31, 1997,
incorporated by reference to Exhibit 10.1 of Burnham's Report on
Form 8-K dated December 31, 1997, and, with respect to Exhibit C
thereto ("Rights of Preferred Units and Common Units"), to Exhibit
10.1.3 of Burnham's 1997 Annual Report on Form 10-K filed March
20, 1998.
4.7 Third Amendment to the Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P. incorporated by reference to
Exhibit 10.1 of Burnham's Current Report on Form 8-K dated June 1,
1998.
**5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being registered.
**8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters.
10.1 Operating Agreement of BPP Retail, LLC between State of California
Public Employees' Retirement System and Burnham Pacific Operating
Partnership, L.P., dated August 31, 1998 (being the joint venture
agreement with CalPERS), incorporated by reference to Exhibit 10.1
of Burnham's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
10.2 Agreement to Contribute among Burnham Pacific Properties, Inc.,
Burnham Pacific Operating Partnership, L.P. and the Contributors
and Existing Partners Listed on Exhibit A-1 thereto, incorporated
by reference to Exhibit 10.2 to Burnham's Current Report on Form
8-K dated November 7, 1997.
10.3 Stock Purchase Agreement dated as of December 5, 1997 by and among
Burnham Pacific Properties, Inc., Burnham Pacific Operating
Partnership, L.P., Westbrook Burnham Holdings, L.L.C. and
Westbrook Burnham Co-Holdings, L.L.C. incorporated by reference to
Exhibit 4.1 of Burnham's Current Report on Form 8-K dated December
31, 1997.
*10.4 Form of Indemnification Agreement between Burnham Pacific
Properties, Inc. and Burnham Pacific Operating Partnership, L.P.
as indemnitors and their Directors and Officers as indemnitees.
***23.1 Consent of Deloitte & Touche LLP.
**23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibits 5.1
and 8.1 hereto).
*24.1 Powers of Attorney.
99.1 Registration Rights Agreement dated as of December 31, 1997 by and
among Burnham, Westbrook Burnham Holdings, L.L.C. and Westbrook
Burnham Co-Holdings, L.L.C., incorporated by reference to Exhibit
4.2.1 of Burnham's Current Report on Form 8-K dated December 31,
1997.
99.2 Registration Rights Agreement dated as of December 31, 1997 by and
among Burnham, Westbrook Burnham Holdings, L.L.C. and each of the
Existing Partners Listed on Exhibit A-1 thereto, incorporated by
reference to Exhibit 4.2.2 of Burnham's Current Report on Form 8-K
dated December 31, 1997.
- ----------------------
* Previously filed on December 30, 1998.
** Previously filed on February 26, 1999.
*** Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act")
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the undersigned registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by
reference in the registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA
FIDE offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act each filing
of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in
the registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange
Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 2 to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Diego,
State of California on April 9, 1999.
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ J. DAVID MARTIN
--------------------
J. David Martin, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 2 to the registration statement has been signed
by the following persons in the capacities and on April 9, 1999.
NAME TITLE
/s/ J. DAVID MARTIN President, Chief Executive
- ------------------- Officer (Principal Executive Officer)
J. David Martin and Director
* Chief Financial Officer (Principal
- ------------------ Financial Officer)
Daniel B. Platt
* Vice President Finance and Treasurer
- ----------------- (Principal Accounting Officer)
Marc A. Artino
* Director
- --------------------------
Malin Burnham
* Director
- --------------------------
James D. Harper, Jr.
* Director
- --------------------------
James D. Klingbeil
* Director
- --------------------------
Nina B. Matis
* Director
- --------------------------
Donne P. Moen
* Director
- --------------------------
Thomas A. Page
* Director
- --------------------------
Philip S. Schlein
Director
- --------------------------
Robin Wolaner
*By:/s/ J. DAVID MARTIN
-------------------
J. David Martin,
as attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1 Charter of Burnham, as Amended and Restated May 6, 1997,
incorporated by reference to pages B-1 through B-13 of Burnham's
Proxy Statement for its 1997 Annual Meeting, filed March 31, 1997.
4.2 Articles Supplementary Designating 4,800,000 shares of preferred
stock as 4,800,000 shares of Series 1997-A Convertible Preferred
Stock, incorporated by reference to Exhibit 3.1.2 to Burnham's
Current Report on Form 8-K dated December 31, 1997.
4.3 Bylaws of Burnham, as amended November 19, 1997, incorporated by
reference to Exhibit 3.2 of Burnham's Current Report on Form 8-K,
filed December 16, 1997.
4.4.1 Form of common stock certificate of Burnham, incorporated by
reference to Exhibit 4.0 of Burnham's registration statement No.
33-20489 and subsequently overprinted to state "THE CORPORATION IS
NOW INCORPORATED IN THE STATE OF MARYLAND WITH $0.01 PAR VALUE PER
SHARE."
*4.4.2 Form of Series 1997-A Convertible Preferred Stock Certificate of
Burnham.
4.5 Agreement of Limited Partnership of Burnham Pacific Operating
Partnership, L.P. dated as of
November 14, 1997, incorporated by reference to Exhibit 10.1.1 of
Burnham's Current Report on Form 8-K dated November 7, 1997.
4.6 First Amendment to Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P. dated as of December 31, 1997,
incorporated by reference to Exhibit 10.1 of Burnham's Report on
Form 8-K dated December 31, 1997, and, with respect to Exhibit C
thereto ("Rights of Preferred Units and Common Units"), to Exhibit
10.1.3 of Burnham's 1997 Annual Report on Form 10-K filed March
20, 1998.
4.7 Third Amendment to the Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P. incorporated by reference to
Exhibit 10.1 of Burnham's Current Report on Form 8-K dated June 1,
1998.
**5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
securities being registered.
**8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters.
10.1 Operating Agreement of BPP Retail, LLC between State of California
Public Employees' Retirement System and Burnham Pacific Operating
Partnership, L.P., dated August 31, 1998 (being the joint venture
agreement with CalPERS), incorporated by reference to Exhibit 10.1
of Burnham's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
10.2 Agreement to Contribute among Burnham Pacific Properties, Inc.,
Burnham Pacific Operating Partnership, L.P. and the Contributors
and Existing Partners Listed on Exhibit A-1 thereto, incorporated
by reference to Exhibit 10.2 to Burnham's Current Report on Form
8-K dated November 7, 1997.
10.3 Stock Purchase Agreement dated as of December 5, 1997 by and among
Burnham Pacific Properties, Inc., Burnham Pacific Operating
Partnership, L.P., Westbrook Burnham Holdings, L.L.C. and
Westbrook Burnham Co-Holdings, L.L.C. incorporated by reference to
Exhibit 4.1 of Burnham's Current Report on Form 8-K dated December
31, 1997.
*10.4 Form of Indemnification Agreement between Burnham Pacific
Properties, Inc. and Burnham Pacific Operating Partnership, L.P.
as indemnitors and their Directors and Officers as indemnitees.
***23.1 Consent of Deloitte & Touche LLP.
**23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibits 5.1
and 8.1 hereto).
*24.1 Powers of Attorney.
99.1 Registration Rights Agreement dated as of December 31, 1997 by and
among Burnham, Westbrook Burnham Holdings, L.L.C. and Westbrook
Burnham Co-Holdings, L.L.C., incorporated by reference to Exhibit
4.2.1 of Burnham's Current Report on Form 8-K dated December 31,
1997.
99.2 Registration Rights Agreement dated as of December 31, 1997 by and
among Burnham, Westbrook Burnham Holdings, L.L.C. and each of the
Existing Partners Listed on Exhibit A-1 thereto, incorporated by
reference to Exhibit 4.2.2 of Burnham's Current Report on Form 8-K
dated December 31, 1997.
- ----------------------
* Previously filed on December 30, 1998.
** Previously filed on February 26, 1999.
*** Filed herewith.
II-5
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-69957 of Burnham Pacific Properties, Inc. on Form
S-3 of our reports dated February 23, 1999 (March 9, 1999) as to paragraph 4 of
Note 18) appearing in the Annual Report on Form 10-K of Burnham Pacific
Properties, Inc. For the year ended December 31, 1998, and to the reference to
us under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
/s/ Deliotte & Touche LLP
San Diego, California
April 5, 1999
