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                                                                    Exhibit 10.1


                     SECOND AMENDMENT TO OPERATING AGREEMENT
                                       OF
                                BPP RETAIL, LLC,
                      a Delaware limited liability company

         THIS SECOND AMENDMENT TO OPERATING AGREEMENT ("Second Amendment") is
dated as of December 15, 1999, by and between STATE OF CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM, a unit of the State and Consumer Services Agency
of the State of California ("CalPERS"), with offices at 400 P Street,
Sacramento, California 95814, and BURNHAM PACIFIC EMPLOYEES LLC, a Delaware
limited liability company ("BPE" or the "Manager"), with offices at 110 West A
Street, Suite 900, San Diego, California 92101.

                                    RECITALS:

         A.   BPP Retail, LLC, a Delaware limited liability company (the
"Company"), was formed by the filing of a Certificate of Formation with the
Secretary of State of the State of Delaware on September 15, 1998. The
management and operation of the Company is governed by the terms of that certain
Operating Agreement dated August 31, 1998, by and between CalPERS, as a member
of the Company, and Burnham Pacific Operating Partnership, L.P., a Delaware
limited partnership ("BPOP"), the predecessor to BPE as a member and as the
Manager of the Company (the "Original Agreement"), as amended by that certain
First Amendment dated as of June 1, 1999 to the Original Agreement ( the "First
Amendment," and the Original Agreement, as amended by the First Amendment, the
"Amended Agreement").

         B.   CalPERS and the Manager now wish to further amend the Amended
Agreement, and, in connection therewith, to enter into certain other
transactions with the Company.

         NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and the mutual covenants herein
contained, the parties hereto agree as follows:

         1.   DEFINED TERMS. Capitalized terms used herein and not defined shall
have the same meaning as ascribed thereto in the Amended Agreement. As used in
this Second Amendment:

         "BELL GARDENS PROPERTY" means that certain real property located at
6811 Eastern Avenue in Bell Gardens, California and legally described on
EXHIBIT A to this Second Amendment.

         "CALPERS CONTRIBUTION" means a Capital Contribution by CalPERS in cash
in an amount equal to the then-current Capital Account of the Manager, MINUS the
sum of (a) the agreed fair market value of the Bell Gardens Property (less
11.23% of the difference between the fair market value of the Bell Gardens
Property and the


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credit the Manager received to its Capital Account at the time such property was
contributed to the Companyand (b) $250,000. The CalPERS Contribution shall
initially be made in the estimated amount of $29,236,484 (based upon a
$10,200,000 estimated valuation of the Bell Gardens Property). This amount shall
be subject to an adjustment, if necessary, to be made promptly upon completion
of an independent third-party valuation of the Bell Gardens Property. This
adjustment will be made by means of either an additional capital contribution by
CalPERS to the Company for immediate distribution to the Manager, or a
contribution of capital by the Manager to the Company followed by an immediate
distribution thereof to CalPERS, as the case may be.

         "EXISTING SECTION" refers to a section of the Amended Agreement.

         "MANAGER DISTRIBUTIONS" is defined in Section 2(b).

         "NON-CONTROLLED SUBSIDIARY" means a corporation, all of the capital
stock of which is owned by BPPI and its executive officers or directors,
provided that at least 95% of the economic interest attributable to such
corporation's capital stock is held by BPPI.

         2.   CERTAIN TRANSACTIONS.

         (a)  CALPERS CAPITAL CONTRIBUTION. On or prior to December 20, 1999,
CalPERS shall make the CalPERS Contribution to the Company. The amount of the
Capital Contributions made by BPOP and BPE to the Company shall be verified by
CalPERS and the Manager prior to the CalPERS Contribution.

         (b)  DISTRIBUTIONS TO THE MANAGER. Immediately after receipt of the
CalPERS' Contribution, the Company shall (a) make a cash Distribution to the
Manager in the amount of the CalPERS Contribution, and (b) make a Distribution
in kind to the Manager of the Bell Gardens Property. Title to such property is
currently held by BPOP as nominee on behalf of the Company, and the Manager
hereby requests that the Distribution of the Bell Gardens Property be effected
by means of a mutually acceptable written instrument. (The foregoing cash and
in-kind Distributions are herein referred to as the "Manager Distributions.")
The Manager Distribution will be reported on the tax returns of the Company in
the manner set forth on EXHIBIT B to this Second Amendment.

Immediately upon completion of the Manager Distributions: (i) the Manager shall
have a Percentage Interest of 1% and a Capital Account of $250,000, and (ii)
CalPERS shall have a Percentage Interest of 99% and a Capital Account of
$360,826,852 (subject to final verification by the accounting departments of
CalPERS and the Manager).

         (c)  CONDITIONS TO CALPERS CONTRIBUTION AND MANAGER DISTRIBUTIONS. The
CalPERS Contribution and the Manager Distributions shall be subject to the
satisfaction by the Manager of the following conditions:


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              (i)  REPRESENTATIONS AND WARRANTIES. The Manager shall, by means
of a certificate of an Officer of BPPI (in its capacity as the general partner
of the manager of the Manager) make the following representations and warranties
to CalPERS:

         (A)  The Company is a limited liability company duly formed, validly
              existing and in good standing under the laws of the State of
              Delaware. The Company has all requisite power and authority to
              carry on its business as now conducted.

         (B)  All of the Membership Interests of the Company have been validly
              issued in accordance with applicable law and the Amended
              Agreement, and are held of record by CalPERS or BPE. The Manager's
              Membership Interest is free and clear of any pledge, lien,
              security interest, encumbrance, claim or equitable interest (other
              than security interests granted to secure the indebtedness
              identified on EXHIBIT C to this Second Amendment, which security
              interests shall be released concurrently with the Manager
              Distributions) and the partial liquidation of such interest as a
              result of the Manager Distribution is not in violation of (x) any
              preemptive right, co-sale right, right of first refusal or similar
              right, or (y) any agreement to which the Manager is a party.

         (C)  The Manager has obtained all necessary corporate approvals and
              authorizations for the transactions contemplated by this Second
              Amendment and all third party consents and approvals that may be
              required in order to consummate the transactions contemplated
              herein.

              (ii) THIRD PARTY CONSENTS. The Manager shall have obtained all
necessary corporate approvals and authorizations for the transactions
contemplated by this Second Amendment and all third party consents and approvals
that may be required in order to consummate the transactions contemplated
herein, in form and content satisfactory to CalPERS.

         3.   AMENDMENTS TO THE AMENDED AGREEMENT. The following amendments to
the Amended Agreement shall become effective without further action by either
Member immediately from and after the occurrence of the Manager Distributions:

         (a)  Notwithstanding any provision of the Amended Agreement to the
contrary, the Manager shall not be entitled to any Incentive Distribution and
no Incentive Distribution shall be paid or payable. Accordingly, neither the
Incentive Distribution nor any other amount or factor that would be
determined or calculated solely for purposes of determining the Incentive
Distribution (including without limitation the following: "Applicable NCREIF
Index," "Applicable Percentage," "Cash Inflows," "Cash Outflows," "Future
Value of each Prior

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Incentive Distribution," "Leverage Premium," "NCREIF Adjustment," "NCREIF
Adjusted Tentative Incentive Distribution," "NCREIF Benchmark," "Nominal Return
Benchmark," "Project-Type Premium," "Real Internal Rate of Return," "Tentative
Incentive Distribution," "Threshold Amount," "Total Return," "Unleveraged
Incentive Portfolio Return," and "Unrealized Projects") shall be determined or
calculated.

         (b)  Notwithstanding any provision to the Amended Agreement to the
contrary, (including without limitation, the provisions of Existing Section 3.2
and existing Section 3.12 (which is set forth in the First Amendment), and the
provisions of Section 3 of the First Amendment), the Manager shall have no
obligation to make any further Capital Contribution and shall be deemed to have
made all Capital Contributions required to be made by it.

         (c)  The defined term "Additional Capital Contributions" in Existing
Section 1.1 is amended in its entirety to read as follows:

              "ADDITIONAL CAPITAL CONTRIBUTIONS" means contributions of cash to
         the capital of the Company which may be required from time to time to
         be made by CalPERS as provided in Section 3.2 hereof."

         (d)  The final sentence of the defined terms "Approved by the Members"
and "Approved by CalPERS" in Existing Section 1.1 is deleted in its entirety.

         (e)  The defined term "Budget" in Existing Section 1.1 is amended in
its entirety to read as follows:

              ""BUDGET" means a statement setting forth the estimated receipts
         and expenditures (capital, operating and other) of the Company for the
         period covered by such statement prepared in accordance with a format
         Approved by CalPERS. A separate budget shall be prepared individually
         for each Project and for the portfolio of Projects on a consolidated
         basis."

         (f)  The second sentence of the defined term "Distribution" in Existing
Section 1.1 is deleted in its entirety.

         (g)  The final sentence of the defined term "Fair Market Value" in
Existing Section 1.1 is deleted in its entirety.

         (h)  The defined term "Financing" in Existing Section 1.1 is amended in
its entirety to read as follows:

              ""FINANCING" means any secured or unsecured financing or borrowing
         or assumption of debt, including any refinancing of existing debt, by
         the Company."


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         (i)  The defined term "Percentage Interest" in Existing Section 1.1 is
amended in its entirety to read as follows:

              ""PERCENTAGE INTEREST" shall mean 1% in the case of BPOP, and 99%
         in the case of CalPERS."

         (j)  The defined term "Preferred Return" in Existing Section 1.1 is
deleted in its entirety.

         (k)  The defined term "Program Guidelines" in Existing Section 1.1 is
amended in its entirety to read as follows:

              ""PROGRAM GUIDELINES" means the agreed-upon parameters within
         which the Manager shall seek to acquire, develop and sell one or more
         Projects on behalf of the Company, subject to the requirement to obtain
         CalPERS' Consent, as may be amended from time-to-time by CalPERS after
         consultation with and Notification to BPOP; provided that any such
         amendment shall not affect any transaction to be entered into by the
         Company for which the Company has made a binding commitment to
         undertake or has executed a binding letter of intent or similar
         document. The initial Program Guidelines are attached hereto as
         EXHIBIT B."

         (l)  The fifth paragraph of subsection (b) of Existing Section 3.1 is
amended by the addition of the following sentence at the end thereof:

              "Notwithstanding the foregoing provisions of this paragraph, none
         of the Manager, BPOP nor any of their respective affiliates shall have
         any obligation or liability to the Company with respect to any of the
         Manager's Projects after the first anniversary of the date of the date
         of the Second Amendment to this Agreement, other than for any claim
         made by the Company under this Agreement prior to such anniversary."

         (m)  The first sentence of subsection (a) of Existing Section 3.2 is
amended in its entirety to read as follows:

              "To the extent the Company has insufficient capital from
         operations, the Manager may call for Additional Capital Contributions
         by written Notification to the Members from time to time for any
         purpose permitted under this Agreement, including, without limitation,
         operating deficits and the acquisition, development or redevelopment of
         new Projects by the Company ("NEW PROJECTS") or for emergency needs."

         (n)  Existing Section 3.3 is amended in its entirety to read as
follows:


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              "SECTION 3.3. PERCENTAGE INTERESTS. The Percentage Interest of
         CalPERS shall be equal to 99%, and the Percentage Interest of BPOP
         shall be equal to 1%."

         (o)  Subsection (e) of Existing Section 3.4 is amended in its entirety
to read as follows:

              "ALLOCATION OF INCOME. After giving effect to the Special
         Allocations set forth in SECTION 3.5, and except as provided in SECTION
         3.6, Income of the Company for any period shall be allocated among the
         Members as follows:

                   (i)    To the Members, in proportion to the Loss previously
         allocated to one Member as to the aggregate Loss previously allocated
         to both Members up to the amount of Loss previously allocated to such
         Member reduced by allocations of Income under this SECTION 3.4 (e)(i);
         and

                   (ii)   To the Members, in proportion to their respective
         Percentage Interests."

         (p)  Subsection (f) of Existing Section 3.4 is amended in its entirety
to read as follows:

              "ALLOCATION OF LOSS. After giving effect to the Special
         Allocations set forth in SECTION 3.5, and except as provided in
         SECTION 3.6, Loss of the Company for any period shall be allocated to
         the Members in proportion to their respective Percentage Interests.

              Notwithstanding the above, Loss from a Capital Transaction with
         respect to a sale of a Project shall be allocated first to Manager to
         the extent of Manager's Unreturned Capital Contributions after
         reflecting any distributions of Unreturned Capital Contributions
         resulting from such sale under SECTION 3.9(c), second to CalPERS to the
         extent of CalPERS' Unreturned Capital Contributions after reflecting
         any distributions of Unreturned Capital Contributions resulting from
         such sale under SECTION 3.9(c) and third to the Members in proportion
         to their respective Percentage Interests. Furthermore, Loss from a
         Capital Transaction upon the Liquidation of the Company shall be
         allocated first to Manager to the extent of Manager's Unreturned
         Capital Contributions after reflecting any distributions of Unreturned
         Capital Contributions resulting from such Liquidation pursuant to
         SECTION 3.9(c), second to CalPERS to the extent of CalPERS' Unreturned
         Capital Contributions after reflecting any distributions of Unreturned
         Capital Contributions resulting from such Liquidation pursuant to
         SECTIONS 3.9(c), and


                                      -6-

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         third to the Members in proportion to their respective Percentage
         Interests. Notwithstanding the above, Losses of the Company shall not
         be allocated to the Manager to the extent that such allocation would
         cause the Manager's Capital Account to become negative, but shall
         instead be allocated to CalPERS."

         (q)  Existing Section 3.9 is amended in its entirety to read as
follows:

              "SECTION 3.9. DISTRIBUTIONS.

                   (a)   The Manager shall determine each month whether cash or
         property is available for Distribution to the Members.

                   (b)   Cash or other property of the Company available for
         Distribution upon the dissolution or liquidation of the Company
         (including cash received upon the sale or other disposition of assets
         in anticipation of liquidation) shall be distributed as provided in
         accordance with the provisions of SECTION 6.2 or SECTION 6.3, as
         applicable.

                   (c)   The Company shall make Distributions of Cash Available
         for Distribution monthly and Distributions of Extraordinary Cash Flow
         (including, without limitation, any proceeds from the sale of a
         Project) within 30 days of the event resulting in such Extraordinary
         Cash Flow.

                   (d)   Distributions of Cash Available for Distribution shall
         be made to the Members in proportion to their respective Percentage
         Interests on the date of the Distribution.

                   (e)   Distributions of Extraordinary Cash Flow shall be
         made to the Members in the following order:

                         (i)   To CalPERS, until CalPERS has been distributed an
         amount equal to its Unreturned Capital Contributions in excess of
         $24,750,000; and

                         (ii)  To the Members, in proportion to their
         respective Percentage Interests.

                   (f)   If upon Liquidation of the Company CalPERS has not
         received cumulative Distributions from the inception of the Company in
         an amount equal to CalPERS' Unreturned Capital Contributions, then
         CalPERS shall receive a priority Distribution (after any Distributions
         of Extraordinary Cash Flow have been made under SECTION 3.9(e)(i)
         above) to the extent of its Unreturned


                                      -7-

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         Capital Contributions before any Distributions are made under SECTIONS
         3.9(e)(ii).

                         If the Manager determines that the Company has excess
         capital which can be returned to the Members ("EXCESS CAPITAL"), the
         Company may from time to time make Distributions of such Excess Capital
         in such amounts and at such times as may be determined by the Manager
         in the priority set out in SECTION 3.9(e) for Distributions of
         Extraordinary Cash Flow. After any such Distribution of Excess Capital
         is made, the Capital Account and Unreturned Capital Contributions of
         each Member shall be reduced by the amount of the Distribution received
         by each such Member."

         (r)  Existing Section 3.10 is deleted in its entirety.

         (s)  Subsection (a) of Existing Section 3.12 (which is set forth in the
First Amendment) is amended by changing the amount of the "Additional Capital
Contribution Obligation" of (i) BPOP to "None" and (ii) CalPERS to
"$180,000,000".

         (t)  The first sentence of subsection (b) of Existing Section 3.12
(which is set forth in the First Amendment) is deleted in its entirety.

         (u)  Clause (i) of subsection (n) of Existing Section 3.12 (which is
set forth in the First Amendment) is amended in its entirety to read as follows:

              "(i)  as to BPOP and BPE, there shall be no obligation to provide
         financial information;"

         (v)  Clause (i) of subsection (a) of Existing Section 4.1 is amended in
its entirety to read as follows:

              "(i)  cause the Company to acquire, manage and sell Projects and
         arrange Financings, in accordance with the Investment Objectives and
         Policies, the Program Guidelines, the Annual Investment Plan and this
         Agreement."

         (w)  Clause (xi) of subsection (a) of Existing Section 4.1 is deleted
in its entirety and the clause next following it is renumbered as clause (xi).

         (x)  Clause (ii) of subsection (d) of Existing Section 4.1 is amended
in its entirety to read as follows:

              "(ii) If the Manager desires to present a Project investment
         proposal for CalPERS consideration, then the Manager shall prepare and
         package an investment proposal, in a format consistent with agreed
         specifications, for presentation to CalPERS


                                      -8-

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         for review and for the approval of CalPERS. CalPERS will use its best
         efforts to respond to such proposal within 10 business days after
         submission (however, if the matter requires CalPERS Investment
         Committee approval, then the matter may require 30 days for CalPERS'
         approval)."

         (y)  The first sentence of clause (iii) of subsection (d) of Existing
Section 4.1 is amended in its entirety to read as follows:

              "Select, underwrite, negotiate and coordinate closing and funding
         of investment opportunities in New Projects consistent with the terms
         approved by CalPERS."

         (z)  Clause (iv) of subsection (d) of Existing Section 4.1 is amended
in its entirety to read as follows:

              "(iv) Provide various asset management services for the Projects
         with discretion (subject to Section 4.6 and in accordance with the
         Annual Investment Plan) to execute leasing decisions, capital
         expenditure programs and selection of property management and leasing
         agents. The Manager shall assist CalPERS Staff in developing and
         executing efficient monitoring processes for the Company's Projects
         consistent with the to-be-developed CalPERS Annual CORE Monitoring
         Policy."

         (aa) Clause (vi) of subsection (d) of Existing Section 4.1 is amended
in its entirety to read as follows:

              "(vi) Periodically review and monitor the Projects to determine
         sales opportunities and timing of such sales for properties within the
         portfolio. Once a Project has been determined by the Manager to be a
         sales candidate, the Manager shall prepare and package a sale proposal,
         in a format consistent with agreed specifications, for presentation to
         CalPERS for review and for the approval of CalPERS. CalPERS will use
         its best efforts to respond to such proposal within 10 business days
         after submission (however, if the matter requires CalPERS Investment
         Committee approval, then the matter may require 30 days for CalPERS'
         approval). If such sale proposal is Approved by CalPERS, then the
         Manager shall have responsibility to market and sell the designated
         Project based upon the terms approved by CalPERS. The listing broker,
         if a non-Affiliate of the Manager, must be included in a list of
         brokerage companies Approved by CalPERS. As further provided in SECTION
         4.10, but subject to the limitations in Section 4.10, the Manager may
         be required to market and sell a Project at any time at the sole
         discretion and determination of CalPERS."


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         (bb) Clauses (i), (ii) and (iii) of subsection (e) of Existing Section
4.1 are amended in their entirety to read as follows:

              "(i)  causing the Company to obtain any Financing, or any increase
         in or extension of such Financing, including the approval of the
         documents evidencing any such Financing (it being understood that
         CalPERS will use its best efforts to determine whether or not to give
         such approval within five business days in the case of any proposed
         loan assumptions or seller financings in connection with the
         acquisitions of New Projects), or selecting the lender or lenders
         providing such Financing;

              (ii)  causing the acquisition of any Project or the sale, exchange
         or other voluntary transfer of one or more Projects;

              (iii) commencing any new construction or capital improvement on a
         Project with respect to an uninsured loss costing in excess of $50,000
         not otherwise contained in the Budget;"

         (cc) Clause (x) of subsection (e) of Existing Section 4.1 is amended in
its entirety to read as follows:

              "(x)  instituting any legal action involving a claim in excess of
         $50,000 (excluding unlawful detainer actions or rent collection cases);
         settling any legal action which involves an uninsured expense in excess
         of $50,000 or confessing a judgment against the Company;"

         (dd) The first sentence of Existing Section 4.6 is amended in its
entirety to read as follows:

              "Each year in conjunction with the preparation of the strategic
         plan, the Manager shall prepare and submit a Budget to be Approved by
         CalPERS, and CalPERS will use its best efforts to give its approval
         within 10 business days after such Budget is submitted."

         (ee) Subsection (c) of Existing Section 4.7 is amended in its entirety
to read as follows:

              "(c)  If CalPERS elects to remove the Manager as the result of a
         For Cause Removal Event, the Manager's management authority shall be
         immediately suspended at the discretion of CalPERS. If CalPERS elects
         to remove the Manager as the result of a Without Cause Removal Event,
         the Manager's management authority shall cease on the effective date of
         the termination. In either case, at CalPERS' election to be made within
         45 days, the Company shall either (i) be dissolved and the assets of
         the


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         Company shall be distributed in kind to CalPERS in accordance with the
         procedures described in SECTION 6.3, or (ii) CalPERS may elect to
         continue the Company and to elect a successor Manager in accordance
         with Section 6.1(b). If the Manager is removed due to a For Cause
         Removal Event, any actual damages caused by the Manager may be deducted
         or offset against amounts distributable to the Manager. The Manager
         shall be paid all accrued fees payable to it on the effective date of
         the Manager's termination;"

         (ff) Subsection (c) of Existing Section 5.1 is amended by deleting
clause (ii) of the second sentence thereof.

         (gg) Existing Section 5.2 is amended in its entirety to read as
follows:

              "SECTION 5.2 This Section intentionally left blank."

         (hh) Subsection (b) of Existing Section 6.1 is amended in its entirety
to read as follows:

              "(b) Notwithstanding the occurrence of an event specified in
         SECTION 6.1(a)(i) by or against BPOP, the Company shall not be
         dissolved and its business and affairs shall not be discontinued, and
         the Company shall remain in existence as a limited liability company
         under the Act, if CalPERS elects within 180 days after such occurrence
         to continue the Company and the Company business and elects a successor
         Manager, if necessary; provided, however, that if CalPERS so elects, it
         shall pay (or cause the Company to pay) to the Manager not later than
         15 days after the date of such election an amount in cash equal to the
         amount of the Manager's Capital Account on the date of such election."

         (ii) Clause (ii) of subsection (b) of Existing Section 6.2 is amended
in its entirety to read as follows:

              "(ii) To the Members in accordance with the priorities set forth
         in SECTION 3.9(c) with respect to the distribution of Extraordinary
         Cash Flow."

         (jj) Existing Section 6.3 is amended in its entirety to read as
follows:

              "SECTION 6.3. DISTRIBUTION IN KIND. Upon the dissolution of the
         Company or if a Member's Membership Interest is to be liquidated for
         whatever reason under this Agreement, and provided that a distribution
         in cash has been made to the Manager in the amount provided in
         SECTION 6.2(b)(ii), the Liquidator shall, if CalPERS so elects,
         distribute to CalPERS in kind all or any portion of the assets of
         the Company designated by CalPERS."


                                      -11-

<PAGE>


         (kk) Existing Section 7.15 is deleted in its entirety.

         (ll) Existing Section 7.20 is deleted in its entirety.

         (mm) Existing Sections 10.1-10.6 are deleted in their entirety.

         (nn) The second numbered paragraph (entitled "Asset Management Fee") of
Exhibit H (entitled "Fees to Manager or Affiliates") to the Original Agreement
is amended in its entirety to read as follows:

              "2. ASSET MANAGEMENT FEE. The Asset Management Fee shall be an
         amount equal to (i) .40% of the first $500 million, (ii) .30% of the
         next $500 million, and (iii) .20% of the amount in excess of
         $1 billion of the aggregate Fair Market Value of the Company's Projects
         over the preceding Fiscal Quarter. (For example, if such aggregate Fair
         Market Value were $1.1 billion, then the Asset Management Fee would be
         $3.7 million.) The Asset Management Fee shall be payable in arrears in
         quarterly installments within 30 days after the end of the preceding
         Fiscal Quarter. Notwithstanding the foregoing, the Asset Management Fee
         payable to the Manager (or its designee) shall be reduced to the extent
         that (i) Distributions (other than Distributions of Extraordinary Cash
         Flow ) actually paid to the Manager based upon its Percentage Interest
         with respect to periods after the date of the Manager Distributions
         exceed (ii) the amount of such Distribution that would have been paid
         based upon the Manager's proportionate interest in the total invested
         capital in the Company. (For example, if the Manager (or its designee)
         receives Distributions (other than Distributions of Extraordinary Cash
         Flow) of $100,000 during the year (based on its 1% Percentage
         Interest), but it would have only received such Distributions in an
         amount of $10,000 if such Distributions were made in accordance with
         relative invested capital balances among the Members during such year,
         then the Company shall receive a credit against the Asset Management
         Fees payable to the Manager (or its designee) in the amount of
         $90,000.)"

         (oo) Section 16 of the First Amendment is deleted in its entirety.

              4. SUBSTITUTION OF MANAGER. Pursuant to 5.1(a) of the Original
         Agreement, CalPERS hereby agrees that BPE may at any time on or prior
         to December 31, 1999, withdraw as a Member and as the Manager of the
         Company, provided that BPOP is substituted as to BPE's interest as a
         Member and BPE's position as the Manager pursuant to an Assignment of
         Membership Interest (the "Assignment") that is substantially the same
         form as that which was entered into by BPE on June 1, 1999. In the
         event that BPE effects the Assignment, CalPERS hereby waives the
         180-day notice requirement contained in Section 5.1(a) of the Original
         Agreement and elects under Section 6.1(b) of the


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         original Agreement to continue the Company. After the Assignment
         becomes effective, all references to BPE in the Amended Agreement and
         in this Second Amendment shall be deemed to refer to BPOP. The
         Assignment shall provide that BPE shall be released from its
         obligations under the Agreement (other than any liabilities accruing
         from its acts prior to the effective date of the Assignment), including
         from its duties to act as the Manager of the Company; provided, that
         BPOP shall assume such obligations (including any obligations of BPE
         outstanding at the time of such assumption). BPOP shall remain wholly
         subject to the Transfer prohibition in Section 8.1 of the Original
         Agreement. BPOP shall pay or reimburse the Company for any
         out-of-pocket costs incurred in connection with the Assignment.

              5. ASSIGNMENT OF MANAGEMENT RESPONSIBILITIES AND FEES. CalPERS
         hereby agrees that, at any time after the amendments in Section 3 have
         become effective, the Manager may assign all or any portion of the
         responsibilities for which the Manager is entitled to receive the fees
         provided for in EXHIBIT H to the Original Agreement to a Non-Controlled
         Subsidiary, together with the right to receive such fees with respect
         to the performance of the assigned responsibilities; provided, that the
         Manager shall remain responsible for any non-performance by the
         Non-Controlled Subsidiary of such assigned responsibilities.

              6. REAFFIRMATION. CalPERS hereby reaffirms, as of the date hereof
         and taking into account the provisions of this Second Amendment, each
         of CalPERS' representations acknowledgements made in Sections 2.3 and 8
         of the First Amendment, and represents and warrants that the
         performance by it of its obligations under the Amended Agreement, as
         Amended by this Second Amendment, will not violate any applicable
         constituent document, policy or guideline of CalPERS, or any statute,
         rule or regulation applicable to CalPERS.

              7. CONFLICTS. In the event of any conflicts or discrepancies
         between this Second Amendment and the Amended Agreement, the provisions
         of this Second Amendment shall control. In all other respects not
         specifically modified by this Second Amendment, the Amended Agreement
         shall remain unmodified and in full force and effect. The First
         Amendment and this Second Amendment are the sole amendments or
         modifications to the Amended Agreement.

              8. RATIFICATION OF AGREEMENT. In all other respects, the Amended
         Agreement is hereby ratified and confirmed.


                                      -13-

<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first written above.

MANAGER:

BURNHAM PACIFIC EMPLOYEES LLC,
a Delaware limited liability company

By: BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.
    a Delaware limited partnership, its manager

    By: BURNHAM PACIFIC PROPERTIES, INC.,
    a Maryland corporation, its general partner

    By: /s/ Scott C. Verges
       ----------------------------------------
    Its: Secretary
        ---------------------------------------

MEMBERS:

STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM,
an agency of the State of California

By:   /s/ Guy Jacquier
   ---------------------------------------------
Its: Senior Real Estate Investment Officer
    --------------------------------------------

AND:

BURNHAM PACIFIC EMPLOYEES LLC,
a Delaware limited liability company

By: BURNHAM PACIFIC OPERATING PARTNERSHIP, L.P.
    a Delaware limited partnership, its manager

    By: BURNHAM PACIFIC PROPERTIES, INC.,
    a Maryland corporation, its general partner

    By: /s/ Scott C. Verges
       ----------------------------------------
    Its: Secretary
        ---------------------------------------


                                      -14-

<PAGE>


                                    EXHIBIT A

Bell Gardens Shopping Center, Bell Gardens, California

Parcels 1 thru 15 inclusive of parcel map No. 20044, in the city of Bell
Gardens, county of Los Angeles, state of California, as recorded in Book 244
pages 18 through 23 inclusive of parcel maps, in the office of the county
recorder of said county.

Except therefrom all oil, gases, minerals and hydrocarbon substances in and
under said land as reserved in various deeds of record one of them being
registered on June 14, 1945 as document No. 10090-N of Torrens.

Also except therefrom any and all oil, gases, minerals and hydrocarbons rights
previously reserved in deeds.


                                      -15-

<PAGE>


                                    EXHIBIT B

                              TAX REPORTING METHOD

CalPERS and the Manager acknowledge and agree that $12,794,671 of the Manager
Distributions constitute and shall be reported as a reimbursement to the Manager
of pre-contribution capital expenditures within the meaning of Treasury
Regulations Section 1.707-4(d)(2)(ii) with respect to Greenway Town Center
property and the Young's Bay property. The remainder of the Manager
Distributions constitute and shall be reported as partnership distributions
described in Section 731 of the Code, except to the extent otherwise required
under the Code as determined by the Manager.


                                      -16-

<PAGE>


                                    EXHIBIT C

                                  INDEBTEDNESS

Indebtedness in the aggregate principal amount of $202,800,000, evidenced by
that certain Loan Agreement dated as of November 19, 1999, by and among Burnham
Pacific Operating Partnership, L.P. and certain of its affiliates, as borrowers,
and CMF Capital Company, LLC, as administrative agent for certain lenders,
secured by, among other things, certain rights of the borrowers to distributions
and proceeds from the Company.


                                      -17-