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EXHIBIT 10.5
[PRUDENTIAL SECURITIES LETTERHEAD]
Franklin Select Real Estate Income Fund
October 12, 1995
EXHIBIT "A"
Franklin Select Real Estate Income Fund
777 Mariners Island Blvd.
San Mateo, CA 94403
Attention: David P. Goss
President and CEO
Dear David:
This letter confirms the understanding and agreement (the "Agreement")
between Prudential Securities Incorporated ("Prudential Securities") and
Franklin Select Real Estate and its affiliates (the "Company") as follows:
1. The Company hereby engages Prudential Securities as the
Company's exclusive financial advisor for the purpose of
providing the Company with overall financial advisory services
pertaining to acquisitions and sales.
2. Prudential Securities accepts the engagement described in
paragraph 1 and, in that connection:
(i) intends to assist in identifying and introducing
attractive asset acquisition opportunities in an effort
to substantially expand the size and scope of the
Company's current operations;
(ii) advise in structuring the financing of such
acquisitions and in negotiating the terms and conditions
thereof (it is contemplated that a substantial component
of the acquisition consideration/currency to be paid by
the Company in such acquisitions will be in the form of
common equity or equivalent operating partnership
units);
(iii) Prudential Securities, or an affiliate thereof, expects
to invest in and become an ongoing equity participant in
the Company. Prudential Securities does not intend to
become an equity participant in any other REIT with its
primary assets located in the west coast region of the
United States.
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October 12, 1995
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3. For purposes of this Agreement:
(a) An "Acquisition" shall mean any transaction or series or
combination of transactions, other than a transaction relating to
a single property, whereby, directly or indirectly, control of,
or an interest in, a company or any business, assets or
properties are purchased, leased or otherwise acquired,
including, without limitation, a sale or exchange of capital
stock or assets, a lease of assets with a purchase option, a
merger or consolidation, a tender or exchange offer, a leveraged
buy-out, the formation of a joint venture or partnership, a
minority investment or any other similar transaction.
(b) A "Sale" shall mean any transaction or series or combination of
transactions, other than a transaction relating to a single
property, whereby, directly or indirectly, an interest in the
Company or any of its businesses, assets or properties, is sold,
leased or otherwise transferred, including, without limitation, a
sale or exchange of capital stock or assets, a merger or
consolidation, a tender or exchange offer, a leveraged buy-out, a
restructuring, a repurchase of capital stock (other than an
ordinary share repurchase program not related to a restructuring
or recapitalization of the Company), a recapitalization, the
formation of a joint venture or partnership, an investment or any
other similar transaction.
(c) In the case of a tender or exchange offer or a multi-step
transaction which contemplates the Acquisition or Sale of more
than 50% of the Company's or an entity's outstanding voting
power, an Acquisition or Sale shall be deemed to have been
consummated upon the Acquisition or Sale of 50% or more of such
outstanding voting power or the ability to elect a majority of
the Board of Directors or similar body. Any exchange of limited
partnership units for common stock of the Company will not
constitute an Acquisition or Sale if the issuance of such units
was initially treated as an Acquisition or Sale.
(d) "Consideration" shall mean the total value of all cash,
securities, the repurchase or buy-out of any options or warrants,
any agreements or other property and any other consideration,
including, without limitation, any contingent, earned or other
consideration paid or payable, directly or indirectly, in
connection with an Acquisition or Sale. The value of any such
securities (whether debt, equity, options or warrants),
partnership units or other property or agreements shall be
determined as follows: (1) the value of securities that are
freely tradeable in an established public market shall be the
last closing market price of such securities prior to the public
announcement of the Acquisition or Sale; (2) the value of any
partnership interest
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Franklin Select Real Estate Income Fund
October 12, 1995
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which is exchangeable into publicly traded common stock
will be valued as described in (1) above; and (3) the
value of securities which are not freely tradeable or
which have no established public market, or if the
consideration consists of property or agreements other
than securities, the value of such securities or other
property or agreements shall be the fair market value
thereof as mutually agreed by the Company and Prudential
Securities. Consideration shall also be deemed to
include any indebtedness, including, without limitation,
pension liabilities, guarantees and other obligations
assumed, directly or indirectly, in connection with, or
which survives the closing of, an Acquisition or Sale.
4. The term of Prudential Securities' engagement hereunder shall
extend from the date hereof through 24 months. Either party may
terminate Prudential Securities' engagement hereunder at any
time, with or without cause, by giving the other party at least
10 days' prior written notice, subject to the provisions of
paragraphs 4 through 10 and 12 through 16 and the second, third
and fourth sentences of paragraph 11, which shall survive any
termination or expiration (hereinafter collectively,
"termination") of this Agreement. Within one month after the
effective date of termination, Prudential Securities will
deliver to the Company a list (the "List") of parties
discussed, considered or examined by Prudential Securities
and/or the Company as a potential candidate or counter-party in
connection with a proposed Acquisition or Sale.
5. As compensation for the services rendered by Prudential
Securities hereunder, the Company shall pay Prudential
Securities as follows:
(a) If the Company has discussions regarding or announces or
enters into an agreement with respect to an Acquisition
or Sale either:
(i) during the term of the Prudential Securities'
engagement hereunder, or
(ii) at any time during a period of 12 months
following the effective date of termination of
Prudential Securities' engagement hereunder with
any party or parties on the List;
and such Acquisition or Sale is thereafter consummated,
then the Company shall pay to Prudential Securities a
fee equal to two percent (2%) of the first $100 million
(cumulative) of Consideration and a fee equal to one
percent (1%) of Consideration in excess of the first
$100 million. Prudential Securities intends to invest
between 25% - 50% of such fee in the common equity of
the Company.
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Franklin Select Real Estate Income Fund
October 12, 1995
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(b) Compensation pursuant to subparagraph 5(a) above shall be
payable by the Company to Prudential Securities upon the
closing of any Acquisition or Sale, provided that
compensation due to Prudential Securities as a result of
Consideration which is contingent upon the occurrence of
some future event or is contingent as to amount or is to be
paid following the closing of such transaction shall be
paid by the Company to Prudential Securities upon receipt
of such Consideration. However, compensation payable by the
Company to Prudential Securities resulting from any
"refundable" Consideration shall not be payable prior to
the time that the "refundable" Consideration becomes
non-refundable.
6. The Company shall reimburse Prudential Securities for any
reasonable out-of-pocket and incidental expenses incurred in
connection with the engagement hereunder, promptly as requested,
including the fees and expenses of its legal counsel and those
of any advisor retained by Prudential Securities, provided
however, that any third party expenses shall be approved in
advance by the Company.
7. Because Prudential Securities will be acting on behalf of the
Company in connection with the engagement hereunder, the Company
agrees to indemnify Prudential Securities as set forth in a
separate letter agreement dated the date hereof, between
Prudential Securities and the Company.
8. If at any time during the term of this engagement or within the
12 month period following the termination of Prudential
Securities' engagement, the Company (i) decides to engage in a
transaction involving a dealer/manager, Prudential Securities
will have the right to act as the Company's sole dealer/manager;
or (ii) decides to issue any securities, Prudential Securities
will have the right to act as lead manager or sole placement
agent with respect to such issuances of securities. Any decision
by Prudential Securities to act as dealer/manager or lead
manager or placement agent in connection with such transactions
would be contained in separate agreements, which agreements
would contain, among the matters, provisions for customary fees
for transactions of similar size and nature and indemnification
of Prudential Securities. The agreements with respect to
issuances of securities would contain the terms of such
financings, conditions precedent such as due diligence, current
conditions and approval by the requisite committees, as well as
customary representations and warranties.
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October 12, 1995
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9. Prudential Securities shall have the right to place advertisements in
financial and other newspapers and journals at its own expense
describing its services to the Company hereunder. Such advertisements,
prior to publication, will require the approval of the Company.
10. The Company shall have the right to place advertisements in financial
and other newspapers and journals at its own expense describing its
relationship or activities with Prudential Securities. Such
advertisements, prior to publication, will require the approval of
Prudential Securities.
11. In connection with Prudential Securities' engagement, the Company will
furnish Prudential Securities with all information concerning the
Company which Prudential Securities reasonably deems appropriate and
will provide Prudential Securities with access to the Company's
officers, directors, employees, accountants, counsel and other advisors
and facilities. The Company represents and warrants to Prudential
Securities that all such information concerning the Company is and will
be true and accurate in all material respects and does not and will not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in light of the circumstances under which such statements are
made. The Company represents and warrants to Prudential Securities that
any financial projections or forecasts provided to Prudential Securities
represent the best currently available estimates by the management of
the Company of the future financial performance by the Company and are
based upon reasonable assumptions. The Company acknowledges and agrees
that Prudential Securities will be using and relying upon such
information supplied by the Company and its officers, agents and others
and any other publicly available information concerning the Company and
any acquisition candidate without any independent investigation or
verification thereof or independent appraisal by Prudential Securities
of the Company or any acquisition candidate or their respective business
or assets.
12. Any advice, either oral or written, provided to the Company by
Prudential Securities hereunder shall not be publicly disclosed or made
available to third parties without the prior written consent of
Prudential Securities. In addition, Prudential Securities may not be
otherwise publicly referred to without its prior consent.
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Franklin Select Real Estate Income Fund
October 12, 1995
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13. Any confidential or proprietary non-public information, either
oral or written, provided to Prudential Securities by the
Company during the course of the engagement hereunder shall not
be publicly disclosed or made available to third parties without
the prior consent of the Company. In addition, the Company may
not be otherwise publicly referred to without its prior consent.
14. The Company represents and warrants to Prudential Securities
that there are no brokers, representatives or other persons
which have an interest in compensation due to Prudential
Securities from any transaction contemplated herein.
15. The benefits of this Agreement, together with the separate
indemnity letter, shall inure to the respective successors and
assigns of the parties hereto and of the indemnified parties
hereunder and thereunder and their successors, assigns and
representatives, and the obligations and liabilities assumed in
this Agreement by the parties hereto shall be binding upon their
respective successors and assigns.
16. (a) This Agreement may not be amended or modified except
in a writing signed by the party against whom
enforcement is sought and shall be governed by and
construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of
laws.
(b) EACH OF PRUDENTIAL SECURITIES AND THE COMPANY (IN ITS
OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS SHAREHOLDERS) WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED
TO OR ARISING OUT OF THE ENGAGEMENT OF PRUDENTIAL
SECURITIES PURSUANT TO, OR THE PERFORMANCE BY PRUDENTIAL
SECURITIES OF THE SERVICES CONTEMPLATED BY, THIS
AGREEMENT.
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Franklin Select Real Estate Income Fund
October 12, 1995
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Prudential Securities is delighted to accept this engagement and looks
forward to working with the Franklin Properties team on this assignment. Please
confirm that the foregoing correctly sets forth our agreement by signing the
enclosed duplicate of this letter in the space provided and returning it,
whereupon this letter shall constitute a binding agreement as of the date first
above written.
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Richard Schoninger
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Date: Oct. 23, 1995
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ACCEPTED AND AGREED TO
FRANKLIN SELECT REAL ESTATE INCOME FUND
By: /s/ David P. Goss
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Date: Oct. 30, 1995
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October 12, 1995
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, N.Y. 10292
In connection with the engagement, dated October 12, 1995, between
Prudential Securities Incorporated ("Prudential Securities") and Franklin
Select Real Estate Income Fund and its affiliates (the "Company"), the Company
hereby agrees to indemnify and hold harmless Prudential Securities and its
affiliates, their respective directors, officers, controlling persons (within
the meaning of Section 15 of the Securities Act of 1933 or Section 20(a) of the
Securities Exchange Act of 1934), if any, agents and employees of Prudential
Securities or any of Prudential Securities' affiliates (collectively,
"Indemnified Persons" and individually, an "Indemnified Person") from and
against any and all claims, liabilities, losses, damages and expenses incurred
by any Indemnified Person (including fees and disbursements of Prudential
Securities' and an Indemnified Person's counsel) which (A) are related to or
arise out of (i) actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company or (ii)
actions taken or omitted to be taken by an Indemnified Person with the
Company's consent or in conformity with the Company's instructions or the
Company's actions or omissions or (B) are otherwise related to or arise out of
Prudential Securities' engagement, and will reimburse Prudential Securities and
any other Indemnified Person for all costs and expenses, including fees of
Prudential Securities and an Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, or defending any
action, formal or informal claim, investigation, inquiry or other proceeding,
whether or not in connection with pending or threatened litigation, caused by
or arising out of or in connection with Prudential Securities acting pursuant
to the engagement, whether or not Prudential Securities or any Indemnified
Person is named as a party thereto and whether or not any liability results
therefrom. The Company will not, however, be responsible for any claims,
liabilities, losses, damages, or expenses pursuant to clause (B) of the
preceding sentence which are finally judicially determined to have resulted
primarily from Prudential Securities' bad faith or gross negligence. The
Company also agrees that neither Prudential Securities nor any other
Indemnified Person shall have any liability to the Company for or in connection
with such engagement except for any such liability for claims, liabilities,
losses, damages, or expenses incurred by the Company which are finally
judicially determined to have resulted primarily from Prudential Securities'
bad faith or gross negligence. The Company further agrees that the Company will
not, without the prior written consent of Prudential Securities, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not Prudential Securities or any Indemnified
Person is an actual or potential party to such claim, action, suit or
proceeding), which settlement, compromise or consent shall include an
unconditional release of Prudential Securities and each other Indemnified
Person hereunder from all liability arising out of such claim, action, suit or
proceeding.
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October 12, 1995
In order to provide for just and equitable contribution, if a claim for
indemnification is made pursuant to these provisions but is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification is not available for any reason (except, with respect
to indemnification sought solely pursuant to clause (B) of the first paragraph
hereof, for the reasons specified in the second sentence thereof), even though
the express provisions hereof provide for indemnification in such case, then the
Company, on the one hand, and Prudential Securities, on the other hand, shall
contribute to such claim, liability, loss, damage or expense for which such
indemnification or reimbursement is held unavailable in such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and Prudential Securities on the other hand, in connection with the transactions
contemplated by the engagement, subject to the limitation that in any event
Prudential Securities' aggregate contribution to all losses, claims, damages,
liabilities and expenses to which contribution is available hereunder shall not
exceed the amount of fees actually received by Prudential Securities pursuant to
the engagement with respect to the transaction or transactions out of which such
losses, claims, damages, liabilities and expenses arose.
The foregoing right to indemnity and contribution shall be in addition
to any rights that Prudential Securities and/or any other Indemnified Person
may have at common law or otherwise and shall remain in full force and effect
following the completion or any termination of your engagement. The Company
hereby consents to personal jurisdiction and to service and venue in any court
in which any claim which is subject to this agreement is brought against
Prudential Securities or any other Indemnified Person.
EACH OF PRUDENTIAL SECURITIES AND THE COMPANY (ON ITS OWN BEHALF AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SHAREHOLDERS) WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THE ENGAGEMENT
OF PRUDENTIAL SECURITIES PURSUANT TO, OR THE PERFORMANCE BY PRUDENTIAL
SECURITIES OF THE SERVICES CONTEMPLATED BY, THIS AGREEMENT.
It is understood that, in connection with Prudential Securities'
engagement, Prudential Securities may also be engaged to act for the Company in
one or more additional capacities, and that the terms of this engagement or any
such additional engagement may be embodied in one or more separate written
agreements. This indemnification shall apply to said engagement, any such
additional engagement(s) (whether written or oral) and any modification of said
engagement or such additional engagement(s) and shall remain in full force and
effect following the completion or termination of said engagement or such
additional engagements.
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October 12, 1995
The Company further understands that if Prudential Securities is asked
to act for the Company as dealer manager in an exchange or tender offer or as
an underwriter in connection with the issuance of securities by the Company or
to furnish the Company a financial opinion letter or in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
Very truly yours,
Franklin Select Real Estate Income Fund
By: /s/ David P. Goss
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Title: President
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AGREED AND ACCEPTED
PRUDENTIAL SECURITIES INCORPORATED
By:
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Title:
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