Exhibit 2
TAX INDEMNIFICATION AGREEMENT
TAX INDEMNIFICATION AGREEMENT dated March 30,
1994, (the "Agreement") between The Prudential Realty
Advisors, Inc., a New Jersey corporation (the "Advisor") and
Prudential Realty Trust, a Massachusetts business trust (the
"Trust").
WHEREAS the Trust was organized pursuant to a
Declaration of Trust dated June 19, 1985, as a real estate
investment trust ("REIT") under the Internal Revenue Code of
1986, as amended (the "Code"), and regulations promulgated
thereunder;
WHEREAS the Advisor, pursuant to the terms of an
advisory contract between the Advisor and the Trust, makes
recommendations concerning the Trust's investments and
oversees the routine operations of the Trust;
WHEREAS the Advisor and the Trust desire to set
forth the terms and conditions of the Trust's right to
indemnification by the Advisor for certain Covered Tax
Liabilities (as defined below);
NOW, THEREFORE, in consideration of the mutual
covenants herein and in the documents referred to above, the
Advisor and the Trust agree as follows:
SECTION 1. DEFINITIONS.
The following terms shall have the meanings
given below for purposes of this Agreement:
"Covered Tax Liability" shall mean a Tax Liability
of the Trust attributable to the Trust's failure to qualify
as a REIT during any taxable year by reason of its failure
to solicit information from shareholders during such year as
required by Treasury Regulations Section 1.857-8(e);
"Gross-Up Items" shall mean, with respect to any
amount paid under Section 2(a) hereof, all taxes that any
federal, state or local taxing authority requires the Trust
to pay in respect of the receipt of such amount;
"IRS" shall mean the Internal Revenue Service;
"Taxes" shall mean all federal, state or local
income, gross receipts, windfall profits, severance,
property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes,
together with any interest, additions or penalties with
respect thereto and any interest in respect of such
additions or penalties;
"Tax Dispute" shall mean a written proposed
adjustment to a Tax Return of the Trust that would result,
if unopposed, in the imposition of a Tax Liability upon the
Trust;
"Tax Liability" of the Trust shall mean, with
respect to any taxable period for which the Trust has filed
or is required to file a Tax Return, any amounts payable (or
any amounts that would be payable absent any setoff or
relief for losses in such period) in respect of any
assessment, demand or other notice of a liability for Taxes
issued by or on behalf of the IRS or any state or local
government or taxing authority by virtue of which the Trust
is or will become liable to make a payment of Taxes reported
on the Trust's Tax Return, including changes in any such
amounts payable attributable to amended returns,
deficiencies, claims for refund, IRS audits, IRS
examinations or proceedings or litigations resulting from
any of the foregoing events. For purposes of this
Agreement, the amount of a Tax Liability shall include any
interest, penalties, additions to tax and other costs
(including attorneys' fees) incurred in connection with such
Tax Liability or claim therefor;
"Tax Return" shall mean all federal, state or
local tax returns, informational returns, declarations of
estimated tax and other tax reports of the Trust.
SECTION 2. INDEMNIFICATION AND PAYMENT OF
ADDITIONAL AMOUNTS.
(a) The Advisor agrees to pay to the Trust,
as an indemnity, an amount equal to the sum of any Covered
Tax Liability and Gross-Up Items;
(b) The Trust shall, promptly following
notice to the Trust of any event that could give rise to a
Covered Tax Liability, notify the Advisor in writing, in
reasonable detail, of the circumstances giving rise to the
Covered Tax Liability and the amount being claimed
thereunder; provided, however, that the Trust's failure to
provide such notice shall not relieve the Advisor of any
obligations hereunder;
(c) The amounts payable to the Trust under
this Agreement shall be paid within 10 business days after
the Advisor receives written notice of a Covered Tax
Liability as described in Section 2(b) hereof; provided,
however, that in the case of amounts that are being
contested in accordance with Section 4 hereof, no payment
with respect to such amounts shall be required prior to the
time provided in that Section.
SECTION 3. INTEREST ON LATE PAYMENTS.
If any payment due to be made by the Advisor under
this Agreement is not made within the period specified in
Section 3(c) hereof, simple interest shall accrue upon such
payment, from and including the day next following the last
day of such period, at a rate equal to the lesser of (i) the
prime rate of Morgan Guaranty Trust Company of New York, as
announced from time to time, plus 2 percent per annum or
(ii) the maximum rate permitted under state or local law.
SECTION 4. CONDUCT OF TAX DISPUTES.
The Trust shall promptly notify the Advisor in
writing upon receipt by the Trust of notice of any pending
or threatened federal, state or local tax audits or
assessments that may give rise to a Covered Tax Liability,
provided that the Trust's failure to comply with this
provision shall not affect the Trust's right to
indemnification hereunder. The Advisor shall have the sole
right to represent the Trust's interest in any tax audit or
administrative or court proceedings relating to Covered Tax
Liabilities and to employ counsel of the Advisor's choice at
its own expense. Notwithstanding the foregoing, the Advisor
shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim for Taxes
that would have a material adverse effect on any Tax
Liability (other than a Covered Tax Liability) of the Trust,
without the Trust's prior written consent. Such consent
shall not be unreasonably withheld or delayed and shall not
be necessary to the extent that the Advisor has indemnified
the Trust against the effects of any such settlement.
SECTION 5. NOTICES. Notices pursuant to this
Agreement shall be given in the manner set forth in the
Declaration of Trust.
SECTION 6. AMENDMENTS. This Agreement may be
amended in whole or in part only with the written consent of
the Trust and the Advisor.
SECTION 7. GOVERNING LAW. This Agreement, and
the rights of the Advisor and Trust, shall be governed by
and construed in accordance with the laws of the State of
New York without giving effect to conflicts-of-laws
principles.
SECTION 8. SEVERABILITY. Any term or provision
of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability,
without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms and
provisions of this Agreement in any other jurisdiction.
SECTION 9. RECOVERY FROM OTHER PERSONS. Without
prejudice to the Advisor's obligation to make any payment
required by this Agreement, if the Trust is entitled to
recover from a person other than the Advisor (but including
any taxing or other competent authorities) any sum in
respect of any Covered Tax Liability, the Trust shall, as
soon as it becomes aware of such entitlement, promptly
notify the Advisor and, if so required by the Advisor and at
the Advisor's expense, take all appropriate steps to enforce
such recovery, keep the Advisor fully informed of the
progress of any such action, and account to the Advisor for
any amount so recovered to the extent of the amount paid by
the Advisor in respect of the Covered Tax Liability.
SECTION 10. MISCELLANEOUS.
(a) The captions and titles preceding the
text of each paragraph hereof shall be disregarded in the
construction of this Agreement;
(b) This Agreement may be executed in
counterparts, all of which shall for all purposes constitute
one agreement binding on all the parties, notwithstanding
that all parties are not signatories to the same
counterpart.
IN WITNESS whereof, the parties to this Agreement
have hereby set forth their names as of this 30th day of
March, 1994.
PRUDENTIAL REALTY TRUST
By: /s/ James W. McCarthy
James W. McCarthy
THE PRUDENTIAL REALTY
ADVISORS, INC.
By: /s/ Joseph M. Selzer
Joseph M. Selzer