Form of
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of the date set
forth on the signature page by and between ______________, a [Maryland
corporation][Massachusetts business trust] (the "Fund"), and the
[director][trustee] of the Fund whose name is set forth on the signature page
(the "Board Member").
WHEREAS, the Board Member is a [director][trustee] of the Fund, and the
Fund wishes the Board Member to continue to serve in that capacity; and
WHEREAS, the [Articles of Incorporation and By-Laws] [Declaration of Trust
and By-Laws] of the Fund and applicable laws permit the Fund to contractually
obligate itself to indemnify and hold the Board Member harmless to the fullest
extent permitted by law;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements set forth herein, the parties hereby agree as set forth below.
Certain capitalized terms used herein are defined in Section 5.
1. Indemnification. The Fund shall indemnify and hold harmless the Board
Member against any liabilities or Expenses (collectively, "Liability") actually
and reasonably incurred by the Board Member in any Proceeding arising out of or
in connection with the Board Member's service to the Fund, to the fullest extent
permitted by the [Articles of Incorporation and By-Laws] [Declaration of Trust
and By-Laws] of the Fund and the laws of the [State of Maryland][Commonwealth of
Massachusetts], the Securities Act of 1933, and the Investment Company Act of
1940, as now or hereafter in force, subject to the provisions of paragraphs (a),
(b) and (c) of this Section 1. The Fund's Board of [Directors][Trustees] shall
take such actions as may be necessary to carry out the intent of these
indemnification provisions and shall not amend the Fund's By-laws to limit or
eliminate the right to indemnification provided herein with respect to acts or
omissions occurring prior to such amendment or repeal.
(a) Special Condition. With respect to Liability to the Fund or its
shareholders, and subject to applicable state and federal law, the Board Member
shall be indemnified pursuant to this Section 1 against any Liability unless
such Liability arises by reason of the Board Member's willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office as defined in such Section 17(h) of the Investment
Company Act of 1940, as amended ("Disabling Conduct").
(b) Special Process Condition. With respect to Liability to the Fund or its
shareholders, no indemnification shall be made unless a determination has been
made by reasonable and fair means that the Board Member has not engaged in
disabling conduct. Such reasonable and fair means shall be established in
conformity with then applicable law and administrative interpretations. In any
determination with respect to disabling conduct, a [director] requesting
indemnification who is not an "interested person" of the [Corporation], as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended,
shall be afforded a rebuttable presumption that such [director] [trustee]did not
engage in such conduct while acting in his or her capacity as a [director]
[trustee].
(c) State Law Restrictions. In accordance with the [General Corporation Law
of the State of Maryland][General Laws of the Commonwealth of Massachusetts],
the Board Member shall not be indemnified and held harmless pursuant to this
Section 1 if the substantive and procedural standards for indemnification under
such law have not been met.
2. Advancement of Expenses. The Fund shall promptly advance funds to the
Board Member to cover any and all Expenses the Board Member incurs with respect
to any Proceeding arising out of or in connection with the Board Member's
service to the Fund, to the fullest extent permitted by the laws of the [State
of Maryland] [Commonwealth of Massachusetts], the Securities Act of 1933, and
the Investment Company Act of 1940, as such statutes are now or hereafter in
force, subject to the provisions of paragraphs (a) and (b) of this Section 2.
(a) Affirmation of Conduct. A request by the Board Member for advancement
of funds pursuant to this Section 2 shall be accompanied by the Board Member's
written affirmation of his or her good faith belief that he or she met the
standard of conduct necessary for indemnification, and such other statements,
documents or undertakings as may be required under applicable law.
(b) Special Conditions to Advancement. With respect to Liability to the
Fund or its shareholders, and subject to applicable state and federal law, the
Board Member shall be entitled to advancements of Expenses pursuant to this
Section 2 against any Liability to the Fund or its shareholders if (1) the Fund
has obtained assurances to the extent required by applicable law, such as by
obtaining insurance or receiving collateral provided by the Board Member, to the
reasonable satisfaction of the Board, that the advance will be repaid if the
Board Member is found to have engaged in Disabling Conduct, or (2) the Board has
a reasonable belief that the Board Member has not engaged in disabling conduct
and ultimately will be entitled to indemnification. In forming such a reasonable
belief, the Board of [Directors] [Trustees] shall act in conformity with then
applicable law and administrative interpretations, and shall afford a [director]
[trustee] requesting an advance who is not an "interested person" of the
[Corporation][Trust], as defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended, a rebuttable presumption that such [director][trustee]
did not engage in disabling conduct while acting in his or her capacity as a
[director][trustee].
3. Procedure for Determination of Entitlement to Indemnification and
Advancements. A request by the Board Member for indemnification or advancement
of Expenses shall be made in writing, and shall be accompanied by such relevant
documentation and information as is reasonably available to the Board Member.
The Secretary of the Fund shall promptly advise the Board of such request.
(a) Methods of Determination. Upon the Board Member's request for
indemnification or advancement of Expenses, a determination with respect to the
Board Member's entitlement thereto shall be made by the Board or Independent
Counsel in accordance with applicable law. The Board Member shall have the
right, in his or her sole discretion, to have Independent Counsel make such a
determination. The Board Member shall cooperate with the person or persons
making such determination, including without limitation providing to such
persons upon reasonable advance request any documentation or information that is
not privileged or otherwise protected from disclosure and is reasonably
available to the Board Member and reasonably necessary to such determination.
Any Expenses incurred by the Board Member in so cooperating shall be borne by
the Fund, irrespective of the determination as to the Board Member's entitlement
to indemnification or advancement of Expenses.
(b) Independent Counsel. If the determination of entitlement to
indemnification or advancement of Expenses is to be made by Independent Counsel,
the Board of [Directors][Trustees] shall select the Independent Counsel, and the
Secretary of the Fund shall give written notice to the Board Member advising the
Board Member of the identity of the Independent Counsel selected. The Board
Member may, within five days after receipt of such written notice, deliver to
the Secretary of the Fund a written objection to such selection. Such objection
may be asserted only on the ground that the Independent Counsel so selected does
not meet the requirement of independence set forth in Section 4, and shall set
forth with particularity the factual basis of such assertion. Upon such
objection, the Board of [Directors][Trustees], acting in conformity with
applicable law, shall select another Independent Counsel.
If within fourteen days after submission by the Board Member of a written
request for indemnification or advancement of Expenses no such Independent
Counsel shall have been selected without objection, then either the Board or the
Board Member may petition the Superior Court of the State of California or any
other court of competent jurisdiction for resolution of any objection that shall
have been made to the selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate, and the person with respect to whom
an objection is favorably resolved or the person so appointed shall act as
Independent Counsel.
The Fund shall pay all reasonable fees and Expenses charged or incurred by
Independent Counsel in connection with his or her determinations pursuant to
this Agreement, and shall pay all reasonable fees and Expenses incident to the
procedures described in this paragraph, regardless of the manner in which such
Independent Counsel was selected or appointed.
(c) Failure to Make Timely Determination. If the person or persons
empowered or selected to determine whether the Board Member is entitled to
indemnification or advancement of Expenses shall not have made such
determination within thirty days after receipt by the Secretary of the Fund of
the request therefor, the requisite determination of entitlement to
indemnification or advancement of Expenses shall be deemed to have been made,
and the Board Member shall be entitled to such indemnification or advancement,
absent (i) an intentional misstatement by the Board Member of a material fact,
or an intentional omission of a material fact necessary to make the Board
Member's statement not materially misleading, in connection with the request for
indemnification or advancement of Expenses, or (ii) a prohibition of such
indemnification or advancements under applicable law; provided, however, that
such period may be extended for a reasonable period of time, not to exceed an
additional thirty days, if the person or persons making the determination in
good faith require such additional time to obtain or evaluate documentation or
information relating thereto.
(d) Payment Upon Determination of Entitlement. If a determination is made
pursuant to Section 1 or Section 2 (or is deemed to be made pursuant to
paragraph (c) of this Section 3) that the Board Member is entitled to
indemnification or advancement of Expenses, payment of any indemnification
amounts or advancements owing to the Board Member shall be made within ten days
after such determination (and, in the case of advancements of further Expenses,
within ten days after submission of supporting information). If such payment is
not made when due, the Board Member shall be entitled to an adjudication in a
court of competent jurisdiction, of the Board Member's entitlement to such
indemnification or advancements. The Board Member shall commence such proceeding
seeking an adjudication within one year following the date on which he or she
first has the right to commence such proceeding pursuant to this paragraph (d).
In any such proceeding, the Fund shall be bound by the determination that the
Board Member is entitled to indemnification or advancements, absent (i) an
intentional misstatement by the Board Member of a material fact, or an
intentional omission of a material fact necessary to make his or her statement
not materially misleading, in connection with the request for indemnification or
advancements, or (ii) a prohibition of such indemnification or advancements
under applicable law.
(e) Appeal of Adverse Determination. If a determination is made that the
Board Member is not entitled to indemnification or advancements, the Board
Member shall be entitled to an adjudication of such matter in any court of
competent jurisdiction. Alternatively, the Board Member, at his or her option,
may seek an award in arbitration to be conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association. The Board Member shall
commence such proceeding or arbitration within one year following the date on
which the adverse determination is made. Any such judicial proceeding or
arbitration shall be conducted in all respect as a de novo trial or arbitration
on the merits, and the Board Member shall not be prejudiced by reason of such
adverse determination.
(f) Expenses of Appeal. If the Board Member seeks a judicial adjudication
of or an award in arbitration to enforce his or her rights under, or to recover
damages for breach of, the indemnification or Expense advancement provisions of
this Agreement, the Board Member shall be entitled to recover from the Fund, and
shall be indemnified by the Fund against, any and all Expenses actually and
reasonably incurred by the Board Member in such judicial adjudication or
arbitration, but only if the Board Member prevails therein. If it shall be
determined in such judicial adjudication or arbitration that the Board Member is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the Expenses incurred by the Board Member in connection with
such judicial adjudication or arbitration shall be prorated as the court or
arbitrator determines to be appropriate.
(g) Validity of Agreement. In any judicial proceeding or arbitration
commenced pursuant to this Section 3, the Fund shall be precluded from asserting
that the procedures and presumptions set forth in this Agreement are not valid,
binding and enforceable against the Fund, and shall stipulate in any such court
or before any such arbitrator that the Fund is bound by all the provisions of
this Agreement.
4. General Provisions.
(a) Non-Exclusive Rights. The provisions for indemnification of, and
advancement of Expenses to, the Board Member set forth in this Agreement shall
not be deemed exclusive of any other rights to which the Board Member may
otherwise be entitled. The Fund shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that the Board Member has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
(b) Continuation of Provisions. This Agreement shall be binding upon all
successors of the Fund, including without limitation any transferee of all or
substantially all assets of the Fund and any successor by merger, consolidation,
or operation of law, and shall inure to the benefit of the Board Member's
spouse, heirs, assigns, devisees, executors, administrators and legal
representatives. The provisions of this Agreement shall continue until the later
of (1) ten years after the Board Member has ceased to provide any service to the
Fund, and (2) the final termination of all Proceedings in respect of which the
Board Member has asserted, is entitled to assert, or has been granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by the Board Member pursuant to Section 3 relating thereto. Unless
required by applicable law, no amendment of the [Articles of
Incorporation][Declaration of Trust] or By-Laws of the Fund shall limit or
eliminate the right of the Board Member to indemnification and advancement of
Expenses set forth in this Agreement. In the event the Fund or any successor
shall discontinue its operations within the term of this Agreement, adequate
provision shall be made to honor the Fund's obligations under this Agreement.
(c) Selection of Counsel. Counsel selected by the Board shall be entitled
to assume the defense of any Proceeding for which the Board Member seeks
indemnification or advancement of Expenses under this Agreement. However,
counsel selected by the Board Member shall conduct the defense of the Board
Member to the extent reasonably determined by such counsel to be necessary to
protect the interests of the Board Member, and the Fund shall indemnify the
Board Member therefore to the extent otherwise permitted under this Agreement,
if (1) the Board Member reasonably determines that there may be a conflict in
the Proceeding between the positions of the Board Member and the positions of
the Fund or the other parties to the Proceeding that are indemnified by the Fund
and not represented by separate counsel, or the Board Member otherwise
reasonably concludes that representation of both the Board Member, the Fund and
such other parties by the same counsel would not be appropriate, or (2) the
Proceeding involves the Board Member but neither the Fund nor any such other
party and the Board Member reasonably withholds consent to being represented by
counsel selected by the Fund. If the Board has not selected counsel to assume
the defense of any such Proceeding for the Board Member within thirty days after
receiving written notice thereof from the Board Member, the Fund shall be deemed
to have waived any right it might otherwise have to assume such defense.
(d) D&O Insurance. For a period of at least six years after the Board
Member has ceased to provide services to the Fund, the Fund shall purchase and
maintain in effect, through "tail" or other appropriate coverage, one or more
policies of insurance on behalf of the Board Member to the maximum extent of the
coverage provided to the active members of the Board of [Directors] [Trustees]
of the Fund.
(e) Subrogation. In the event of any payment by the Fund pursuant to this
Agreement, the Fund shall be subrogated to the extent of such payment to all of
the rights of recovery of the Board Member, who shall, upon reasonable written
request by the Fund and at the Fund's expense, execute all such documents and
take all such reasonable actions as are necessary to enable the Fund to enforce
such rights. Nothing in this Agreement shall be deemed to diminish or otherwise
restrict the right of the Fund or the Board Member to proceed or collect against
any insurers and to give such insurers any rights against the Fund under or with
respect to this Agreement, including without limitation any right to be
subrogated to the Board Member's rights hereunder, unless otherwise expressly
agreed to by the Fund in writing, and the obligation of such insurers to the
Fund and the Board Member shall not be deemed to be reduced or impaired in any
respect by virtue of the provisions of this Agreement.
(f) Notice of Proceedings. The Board Member shall promptly notify the
Secretary of the Fund in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding which may be subject to indemnification or advancement of expense
pursuant to this Agreement, but no delay in providing such notice shall in any
way limit or affect the Board Member's rights or the Fund's obligations under
this Agreement.
(g) Notices. All notices, requests, demands and other communications to a
party pursuant to this Agreement shall be in writing, addressed to such party at
the address specified on the signature page of this Agreement (or such other
address as may have been furnished by such party by notice in accordance with
this paragraph), and shall be deemed to have been duly given when delivered
personally (with a written receipt by the addressee) or two days after being
sent (1) by certified or registered mail, postage prepaid, return receipt
requested, or (2) by nationally recognized overnight courier service.
(h) Severability. If any provision of this Agreement shall be held to be
invalid, illegal, or unenforceable, in whole or in part, for any reason
whatsoever, (1) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any provision that is not itself invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby,
and (2) to the fullest extent possible, the remaining provisions of this
Agreement shall be construed so as to give effect to the intent manifested by
the provision held invalid, illegal or unenforceable.
(i) Modification and Waiver. This Agreement supersedes any existing or
prior agreement between the Fund and the Board Member pertaining to the subject
matter of indemnification, advancement of Expenses and insurance. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both parties or their respective successors or legal representatives.
Any waiver by either party of any breach by the other party of any provision
contained in this Agreement to be performed by the other party must be in
writing and signed by the waiving party or such party's successor or legal
representative, and no such waiver shall be deemed a waiver of similar or other
provisions at the same or any prior or subsequent time.
(j) Headings. The headings of the Sections of this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
(k) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, and all of which when taken
together shall constitute one document.
(l) Applicable Law. This Agreement shall be governed by and construed and
enforce in accordance with the laws of the state of organization of the Fund
without reference to principles of conflict of laws.
5. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Board" means the board of [directors] [trustees] of the Fund,
excluding those members of the board of [directosr] {trustees] who are not
eligible under applicable federal or state law to participate in making a
particular determination pursuant to Section 3 of this Agreement; provided,
however, that if no two members of the Board of [directors] [trustees] are
eligible to participate, Board shall mean Independent Counsel.
(b) "Disabling Conduct" shall be as defined in Section 1.
(c) "Expenses" shall include without limitation all judgments, penalties,
fines, amounts paid or to be paid in settlement, ERISA excise taxes,
liabilities, losses, interest, expenses of investigation, attorneys' fees,
retainers, court costs, transcript costs, fees of experts and witnesses,
expenses of preparing for and attending depositions and other proceedings,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other costs, disbursements or
expenses of the type customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or acting as a
witness in a Proceeding.
(d) "Final termination of a Proceeding" shall mean a final adjudication by
court order or judgment of the court or other body before which a matter is
pending, from which no further right of appeal or review exists.
(e) "Independent Counsel" shall mean a law firm, or a member of a law firm,
that is experienced in matters of investment company law and neither at the time
of designation is, nor in the five years immediately preceding such designation
was, retained to represent (A) the Fund or the Board Member in any matter
material to either, or (B) any other party to the Proceeding giving rise to a
claim for indemnification or advancements hereunder. Notwithstanding the
foregoing, however, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Fund or the Board
Member in an action to determine the Board Member's rights pursuant to this
Agreement, regardless of when the Board Member's act or failure to act occurred.
(f) "Independent Board Member" shall mean a [director] [trustee] of the
Fund who is neither an "interested person" of the Fund as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended, nor a party to the
Proceeding with respect to which indemnification or advances are sought.
(g) "Liability shall be as defined in Section 1.
(h) "Proceeding" shall include without limitation any threatened, pending
or completed claim, demand, threat, discovery request, request for testimony or
information, action, suit, arbitration, alternative dispute mechanism,
investigation, hearing, or other proceeding, including any appeal from any of
the foregoing, whether civil, criminal, administrative or investigative, and
shall also include any proceeding brought by the Board Member against the Fund.
(i) The Board Member's "service to the Fund" shall include without
limitation the Board Member's service as a [director] [trustee], officer,
employee, agent or representative of the Fund, and his or her service at the
request of the Fund as a [director] [trustee], officer, employee, agent or
representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth below.
Dated: __________________
a [Maryland corporation]
[Massachusetts business trust]
By: ________________________
Name: ___________________
Title: ____________________
Address for notices:
[DIRECTOR] [TRUSTEE]:
Print Name: ____________________
Address for notices:
