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                                                                  Exhibit 10.2

BURNHAM PACIFIC

                                 August 18, 2000

Mr. J. David Martin
100 Bush St., Suite 2400
San Francisco, CA 94104

         Re:      SEPARATION AGREEMENT

Dear Mr. Martin:

         This document, upon your signature, will constitute the agreement
between you, J. David Martin ("you" or "Martin"), and Burnham Pacific Operating
Partnership, L.P., BPP Services, Inc. and Burnham Pacific Properties, Inc.
(collectively, the "Company"), on the terms of your separation from employment
with the Company (the "Separation Agreement"). It is understood that both
parties want to preclude any dispute between them arising from your employment,
your separation or any other matter with the Company.

         1.       It is understood and agreed that:

                  (a) August 15, 2000 will be your last day of employment with
         the Company (the "Effective Termination Date"). As of that date you
         also resign your membership on the Board of Directors of the Company
         and its subsidiaries.

                  (b) You will be compensated at your current salary and
         continue to receive all of your current benefits (including medical
         insurance, dental insurance, 401(k) and other current benefits) through
         the Effective Termination Date.

                  (c) As of the Effective Termination Date, you will cease to
         have any executive authority and/or signing authority on behalf of the
         Company or its subsidiaries. In addition, you shall no longer carry the
         title of President and Chief Executive Officer or be a member of the
         Board of Directors.

                  (d) You agree to provide a reasonable amount of consulting
         services to the Company during the Severance Period (as described in
         Paragraph 2(c) below) or until a Change of Control (as defined in the
         Senior Executive Severance Agreement identified in Paragraph 1(e)
         below), whichever occurs first. Reasonable consulting services shall


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Mr. J. David Martin
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         include, but are not limited to, advising the Company in connection
         with a sale or liquidation, cooperating with the Company's legal
         counsel in the defense of litigation, appearing for depositions, and
         such other services as may be requested from time to time by the
         Company's Board of Directors.

                  (e) Effective August 16, 2000, and provided that this
         Separation Agreement is performed in full by the Company, you will have
         no further rights under that certain Senior Executive Severance
         Agreement dated as of June 30, 1999, as amended (the "Severance
         Agreement"), and such Severance Agreement shall be deemed terminated as
         of August 16, 2000.

                  (f) Effective August 16, 2000, and provided that this
         Separation Agreement is performed in full by the Company, you will have
         no further rights under that certain Phantom Shares Agreement dated as
         of August 1, 1999, as amended (the "Phantom Agreement"), and such
         Phantom Agreement shall be deemed terminated as of August 16, 2000.

                  (g) Effective August 16, 2000, you will have no further rights
         as a member or otherwise under that certain Limited Liability Company
         Agreement of Burnham Pacific Employees LLC, dated as of June 1, 1999,
         as amended (the "LLC Agreement"), and pursuant to Section 7.02 of such
         LLC Agreement, the Units held by you shall automatically cease to be
         issued and outstanding as of August 16, 2000.

                  (h) Effective August 16, 2000, you will cooperate with Dan
         Platt to accommodate the transfer of your shares in BPP Services, Inc.
         to Mr. Platt pursuant to the terms of the applicable documents of BPP
         Services, Inc. In consideration for the payments and benefits contained
         in this Separation Agreement, you acknowledge that the transfer price
         to be paid by Mr. Platt for all such shares pursuant to Section 11.03
         of the applicable documents shall be the sum of Fifteen Hundred Dollars
         ($1,500.00).

         2. In order to assist you in making this transaction, and in
consideration of your acceptance of this Separation Agreement by signing and
returning this Agreement within the time period provided herein and
relinquishing your rights under the agreements recited in Paragraph 1 above, on
the eighth day following your execution of this Agreement, you will be entitled
to the following payments and benefits:

                  (a) Commencing on the Effective Termination Date and
         continuing until February 28, 2002, the Company will pay your monthly
         COBRA premium. COBRA benefit information will be provided to you.


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Mr. J. David Martin
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                  (b) As a severance payment, the Company shall pay to you, in
         the manner described below, the sum of One Million Five Hundred
         Seventy-Five Thousand Dollars ($1,575,000.00), less deductions
         authorized and required by law (the "Severance Payment"). The Severance
         Payment shall be paid in 72 equal installments, commencing on September
         1, 2000 and on the first and fifteenth day of each month thereafter
         until and including August 15, 2003 (the "Severance Period"); provided,
         however, that within 30 days after the occurrence of a change in
         Control (as defined in the Severance Agreement), the full amount of any
         unpaid portion of the Severance Payment shall be paid to Martin, the
         Severance Period shall end, and the Company shall have no further
         obligation to pay the Severance Payment to Martin.

                  (c) In addition, the Company will assign its interest in
         office space located at 100 Bush Street, San Francisco, California
         ("Assignment Premises") to The Martin Group of Companies Inc. ("TMG"),
         effective upon consent of the lessor. If the lessor consents to the
         assignment, TMG will assume the Company's obligations as to the
         Assignment Premises and the Company will sell the furniture, fixtures
         and equipment in the Assignment Premises to TMG for their fair market
         value pursuant to a liquidator's appraisal on or before October 1,
         2000. The Company will cooperate with TMG in the transition period
         regarding the use of the Assignment Premises, furniture, fixtures and
         equipment. You agree on behalf of TMG to lease back to the Company, at
         the current lease rate per square foot and on the same terms as the
         existing lease, so much of the Assignment Premises as the Company
         reasonably requires through the remaining term of the leases. During
         the lease-back period, the Company shall have the right to use any
         needed furniture, fixtures and equipment in the leased-back portion of
         the Assignment Premises. The Company will provide you with office
         space, e-mail and telephone systems for a reasonable period during the
         transition.

         3. The Company hereby confirms the validity and effectiveness of (i)
the most recent Indemnification Agreement made on or about January 1, 1999 by
and among Burnham Pacific Properties, Inc., Burnham Pacific Operating
Partnership, L.P., and Martin, and(ii) the Company's bylaws as amended November
19, 1997.

         4. Nothing in this Agreement is intended to affect Martin's rights as
an insured for purposes of pending litigation or for any other purpose. The
Company warrants and covenants that it shall continue to maintain in full force
and effect all directors and officers insurance policies under which Martin is
an insured (including those policies identified on Schedule A hereto), as well
as any additional such insurance which the Company may have purchased or may in
the future purchase for directors and officers. The Company agrees to support
Martin


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Mr. J. David Martin
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with respect to securing independent representation for him in any shareholder
or derivative litigation. Nothing herein obligates the Company to pay for
Martin's independent representation.

         5. Following the full execution of this Separation Agreement, and until
a Change of Control (as defined in the Severance Agreement identified in
Paragraph 1(e) above), the parties shall each fully cooperate with the other to
answer questions, participate in meetings, provide testimony and provide
information relating to activities of Martin or the Company during the term of
Martin's employment.

         6. The parties agree not to disclose the terms of this Separation
Agreement, the benefits being paid under it or the fact of these payments,
except that the parties may disclose this information to those individuals that
have a need to know in order for them to render professional or financial
services or as may be required by law, rule or regulation.

         7. Nothing in this Separation Agreement is intended to affect Martin's
obligations under Paragraph 9 of his Employment Agreement dated September 28,
1995 ("Employment Agreement").

         8. It is understood and agreed that:

                  (a) You agree to unconditionally and forever release and
         discharge the Company and all its affiliated, related, parent or
         subsidiary entities, and its present and former officers, directors,
         and employees, and each of them ("Released Parties"), from any and all
         debts, claims, liabilities, demands and cause of action of every kind,
         nature and description, known and unknown, that you may now have or
         have ever had against the Released Parties as of the date of this
         Agreement, and all claims arising from your employment with the Company
         or your termination of employment, including claims for compensation,
         bonuses, severance pay, whether based on tort, contract, statute, local
         ordinance, regulation or any comparable law in any jurisdiction
         ("Released Claims"). By way of example and not in limitation, Related
         Claims shall include any claims arising under Title VII of the Civil
         Rights Act of 1964, the Age Discrimination in Employment Act, the
         Americans with Disabilities Act, the Family Medical Leave Act, the
         Employee Retirement Income Security Act, the California Fair Employment
         and Housing Act, as well as any claims asserting wrongful termination,
         breach of contract, breach of the Severance Agreement, the Phantom
         Agreement, or the Employment Agreement; breach of the covenant of good
         faith and fair dealing, negligent or intentional infliction of
         emotional distress, negligent or intentional misrepresentation,
         negligent or intentional interference with contract or prospective
         economic advantage, and defamation. However, claims arising under this
         Separation Agreement shall not be released.


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Mr. J. David Martin
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                  (b) The Company unconditionally and forever releases and
         discharges you from any and all debts, claims, liabilities, demands and
         cause of action of every kind, nature and description, which the
         Company has or may have or could assert against you as of the date of
         the Agreement, except to the extent arising out of your gross
         negligence or intentional misconduct as proven pursuant to a final
         judgment of a court of competent jurisdiction or other tribunal with
         jurisdiction. However, claims arising under this Separation Agreement
         shall not be released.

         9. It is further understood and agreed that as part of the
consideration and inducement for the execution of this Agreement, you and the
Company specifically waive the provisions of section 1542 of the California
Civil Code, and any equivalent law of any other jurisdiction. Section 1542 reads
as follows:

                  "A general release does not extend to claims which the
                  creditor does not know or suspect to exist in his favor at the
                  time of executing the release, which if known by him must have
                  materially affected his settlement with the debtor."

         10. You acknowledge and understand that the release of claims under the
Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Sections 621-634, is
subject to special waiver protection under 29 U.S.C. Section 626(f). In
accordance with that section, you specifically agree that you knowingly and
voluntarily release and waive any rights or claims or discrimination under the
ADEA. In particular, you represent that you have carefully read this Agreement
in its entirety, that you have had an opportunity to consider fully the terms of
this Agreement for twenty-one (21) days (although you may sign it at any time
beforehand if you so choose) and that you have seven (7) days after you sign
this Agreement in which to revoke it. You further represent that you have been
advised by the Company to consult with an attorney of your choosing in
connection with this Agreement, that you have discussed the Agreement with your
independent legal counsel, and that you are signing this Agreement voluntarily
and of your own free will.

         11. You represent that no promise, inducement or other agreement not
expressly contained in this Separation Agreement has been made conferring any
benefit upon you; that this Separation Agreement contains the entire agreement
between us with respect to any benefit conferred upon you; and that all prior
agreements; understanding, oral agreements and writings are expressly superseded
by this Separation Agreement and are of no further force and effect.

         12. It is agreed by the parties that any controversy or claim arising
out of or relating to the drafting, interpretation, or enforcement of this
Agreement, or the breach thereof, shall be submitted to binding arbitration in
San Francisco, California, under the applicable rules of the


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Mr. J. David Martin
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American Arbitration Association. The arbitrator shall determine the applicable
substantive and procedural laws for the arbitration proceedings, including
whether a particular claim is arbitrable. Cost and attorneys' fees shall be paid
by the non-prevailing party.

         13. The Company enters into this Agreement through resolution of the
Board of Directors, confirming its delegation of Robin Wolaner as the Company's
representative for entering into this Agreement on the Company's behalf. The
Company's outside counsel (who does not represent Martin) shall provide an
opinion to Martin that said resolution is valid and duly passed, and that this
Agreement has been duly and lawfully authorized by the Company and is valid and
binding on the Company.

         14. This Separation Agreement is entered into and governed by the laws
of the state of California.

         15. To accept this Agreement, please date and return it to Raymond L.
Wheeler in the enclosed confidential envelope.

                                           Sincerely.

                                           /s/ Robin Wolaner

                                           Robin Wolaner
                                           Burnham Pacific Properties, Inc.

         By signing this letter, I acknowledge that I have had an opportunity to
review this Separation Agreement carefully, consult with my attorney, that I
understand the terms of the Separation Agreement and I voluntarily agree to
them.

/s/ J. DAVID MARTIN                            August 18, 2000
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J. DAVID MARTIN                                Date