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EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made as of
November 1, 1995, by and between FRANKLIN SELECT REAL ESTATE INCOME FUND, a
California corporation (the "Company"), and ("Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting officers and directors to
expensive litigation risks at the same time as the availability and coverage of
liability insurance has been severely limited;
Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers
and directors without additional protection; and
The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors
of the Company and to indemnify its officers and directors so as to provide
them with the maximum protection permitted by law.
The Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee, consultant or agent of the Company, or any
subsidiary of the Company, by reason of any action or inaction on the part of
Indemnitee while an officer, director, employee, consultant or agent, or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee, consultant or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, settlements (if such
settlement is approved in advance by
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the Company, which approval shall not be unreasonably withheld) and other
amounts actually and reasonably incurred by Indemnitee in connection with such
action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests
of the Company, or, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding by or
in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee, consultant or agent of the Company, or any
subsidiary of the Company, by reason of any action or inaction on the part of
Indemnitee while an officer, director, employee, consultant or agent, or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee, consultant or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement, in each case to the extent actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action or proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company and its shareholders, except that no indemnification shall be made
in respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company in the performance of Indemnitee's duty to
the Company and its shareholders unless and only to the extent that the court
in which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine.
2. Agreement to Serve. Indemnitee agrees to serve in the capacity set
forth on the signature page of this Agreement. Indemnitee may at any time and
for any reason resign from such position (subject to any other contractual
obligation or any obligation imposed by operation of law). The Company shall
have no obligation under this Agreement to continue Indemnitee in any
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position with the Company.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced
in Section 1 hereof. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined
that Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Indemnitee within ten (10) days following delivery of a written request
therefor by Indemnitee to the Company. The expenses referred to in this Section
3(a) do not include amounts actually paid in settlement of any such action or
proceeding; the parties hereto acknowledge that this Section 3(a) provides for
the advancement of expenses and that indemnification for amounts paid in
settlement of any action or proceeding and the right to retain amounts advanced
for expenses are governed by Section 1 hereof.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the date
postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power. So long as the Company shall not be
prejudiced thereby, the failure to notify the Company under this Section 3(b)
shall not affect the Company's obligation to indemnify Indemnitee under this
Agreement.
(c) Procedure. Any indemnification provided for in Section 1
shall be made no later than thirty (30) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Articles of Incorporation or Bylaws
providing for indemnification, is not paid in full by the Company within thirty
(30) days after a written request for payment thereof has first been received
by the Company, Indemnitee may, but need not, at any time thereafter bring an
action against the Company to recover the unpaid amount of the claim and,
subject to Section 13 of this Agreement, Indemnitee shall also be entitled to
be paid for the
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expenses (including attorneys' fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in connection with any action or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed, but the burden of proving such defense
by clear and convincing evidence shall be on the Company, and Indemnitee shall
be entitled to receive interim payments of expenses pursuant to Subsection 3(a)
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice of Insurers. If, at the time of the receipt of a notice of
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to Indemnitee under this Agreement for any fees
of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have the right to employ his
counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have
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reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any provision of this
Agreement, in the event of any change, after the date of this Agreement, in any
applicable law, statute or rule which expands the right of a California
corporation to indemnify a member of its board of directors or an officer,
employee or agent, such changes shall be ipso facto, within the purview of
Indemnitee's rights and the Company's obligations, under this Agreement. In the
event of any change in any applicable law, statute or rule which narrows the
right of a California corporation to indemnify a member of its Board of
Directors or an officer, employee or agent, such changes, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement
shall have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may
be entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the General
Corporation Law of the State of California, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he may have ceased to serve in such capacity
at the time of any action or other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any
civil or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgements, fines or penalties to which Indemnitee is entitled.
6. Directors' and Officers' Liability Insurance. The Company
shall, from time to time, make the good faith determination whether or not it
is practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure
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the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company
shall have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if
the premium costs for such insurance are disproportionate to the amount of
coverage provided, if the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or if Indemnitee is
covered by similar insurance maintained by a subsidiary or parent of the
Company.
7. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) 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 such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
8. Exceptions. Except as provided in Section 4(a) hereof, the Company
shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of
liability under the California General Corporation Law:
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise
as required under Section 317 of the California General Corporation Law, but
such indemnification or advancement of expenses may be provided by
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the Company in specific cases if the Board of Directors has approved the
initiation or bringing of such suit;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous;
(d) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) Short Swing Profits. To indemnify Indemnitee for expenses or
liabilities incurred by Indemnitee under Section 16 of the Securities and
Exchange Act of 1934.
9. Effectiveness of Agreement. This Agreement shall be effective as of
the date set forth on the first page and shall apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was an officer,
director, employee, consultant or other agent of the Company, or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the time
such act or omission occurred.
10. Construction of Certain Phrases. For purposes of this Agreement:
(a) References to the "Company" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that if Indemnitee
is or was a director, officer, employee or agent of such constituent
corporation, or it or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand
in the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to
such constituent corporation if its separate existence had continued.
(b) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the
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Company" shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries.
(c) The term "expenses" shall include all reasonable
attorneys' fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or being or
preparing to be a witness in any proceeding, including any action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, whether or not initiated prior to the
effective date hereof.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, a court of competent jurisdiction
expressly determines that each of the material assertions made by Indemnitee as
a basis for such action was not made in good faith or was frivolous. In the
event of an action instituted by or in the name of the Company under this
Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including
attorneys' fees, incurred by Indemnitee in defense of such action (including
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action the court of competent jurisdiction
expressly determines that each of Indemnitee's material defenses to such action
was made in bad faith or was frivolous.
14. Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
duly given (i) if delivered by hand and receipted for by the party addressee,
on the date of such receipt, or (ii) if mailed by domestic certified or
registered mail with postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the signature
page of this
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Agreement, or as subsequently modified by written notice.
15. Choice of Law and Consent to Jurisdiction. This Agreement
shall be governed by and its provisions construed in accordance with the laws
of the State of California as applied to contracts between California residents
entered into and to be performed entirely within California. The Company and
Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of
the State of California for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state
courts of the State of California.
The parties hereto have executed or caused to be executed this
Agreement as of the date first above written.
FRANKLIN SELECT REAL ESTATE INCOME FUND
By:
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Title:
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Address: 1800 Gateway Drive, Third Floor
San Mateo, California 94403
AGREED TO AND ACCEPTED:
INDEMNITEE:
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(signature)
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(capacity in which employed
by the Company)
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(address)
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