Exhibit
10.5

    


    Execution
Copy

    UNITED
STATES SHORT OIL FUND, LP

    


    INDEMNIFICATION
AGREEMENT

    


    This Indemnification Agreement (this
“Agreement”),
dated as of April 13, 2009, is entered into by and among United States Short Oil
Fund, LP (the “Partnership”),
United States Commodity Funds LLC, a Delaware limited liability company (the
“General
Partner”), on behalf of itself and as General Partner of United States
Short Oil Fund, LP, and IMC-Chicago, LLC, an Illinois limited liability
company (the “Limited
Partner”), and a limited partner of the Partnership pursuant to the First
Amended and Restated Agreement of Limited Partnership dated as of the date
hereof, as amended or supplemented from time to time (the “Limited
Partnership Agreement”).  Capitalized terms that are used but
not defined herein shall have the meaning given to such defined terms in the
Limited Partnership Agreement.

    


    Article
1

     

    INDEMNIFICATION;
LIMITATION OF LIABILITY

    


    1.1           Indemnification of Limited
Partner.  The General Partner agrees to indemnify, defend and
hold harmless the Limited Partner, its partners, stockholders, members,
directors, managers, officers, employees, affiliates, agents and any person who
controls such persons within the meaning of Section 15 of the Securities Act of
1933 (the “1933 Act”)
or Section 20 of the Securities Exchange Act of 1934 (the “1934
Act”), and the successors and assigns of all of the foregoing persons
(each an “LP
Indemnified Person”),
from and against any loss, damage, expense, liability or claim (including
reasonable attorney fees and the reasonable cost of investigation) which any
such LP Indemnified Person may incur under the 1933 Act, the 1934 Act, the
Commodities Exchange Act (the “CEA”), the
common law or otherwise, insofar as such loss, damage, expense, liability or
claim arises out of or is based upon:

     

    (a)           any
untrue statement or alleged untrue statement of a material fact contained in the
most recent registration statement of the Partnership, as declared effective by
the Securities and Exchange Commission (the “SEC”) and as the same may be
amended or supplemented from time to time (the “Registration Statement”), the
Prospectus, or any other registration statement, prospectus, preliminary
prospectus or other document used by the Partnership in connection with the
offer and sale of Baskets or Units or any amendment or supplement to any of the
foregoing, or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements made therein not
misleading, except, in each case, to the extent, but only to the extent, that
any such loss, damage, expense, liability or claim arises out of or is based
upon any untrue statement or alleged untrue statement of a material fact, or any
omission or alleged omission to state a material fact, made therein in reliance
upon and in conformity with information concerning the Limited Partner furnished
in writing by or on behalf of the Limited Partner to the General Partner
expressly for use therein;


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (b)           the
failure by the General Partner, the Partnership or their respective agents to
comply with applicable laws and the rules and regulations of any governmental
entity or any self-regulatory organization;

     

    (c)           the
Limited Partner being or having been a limited partner of the Partnership
(including, but not limited to, any act or omission or alleged act or omission
of the Limited Partner in its capacity as such) or the Limited Partner’s
performance of its duties under the Limited Partnership Agreement except in the
case of this clause (c), for any loss, damage, expense, liability or claim
resulting from the willful misconduct, bad faith or gross negligence of the
Limited Partner in performing its duties under the Limited Partnership
Agreement.

     

    In no
case is the indemnity of the General Partner in favor of each LP Indemnified
Person to be deemed to protect any LP Indemnified Person against any liability
to the General Partner or the Partnership to which the LP Indemnified Person
would otherwise be subject by reason of such LP Indemnified Person’s willful
misconduct, bad faith or gross negligence in the performance of its duties and
obligations under the Limited Partnership Agreement.

    


    If any
action, suit or proceeding (each, a “Proceeding”)
is brought against an LP Indemnified Person in respect of which indemnity may be
sought against the General Partner pursuant to this Section 1.1, such LP
Indemnified Person shall promptly notify the General Partner in writing of the
institution of such Proceeding, provided, however, that the omission to so
notify the General Partner shall not relieve the General Partner or the
Partnership from any liability which it may have to the LP Indemnified Person
except to the extent that it has been materially prejudiced by such failure and
has not otherwise learned of such Proceeding. The LP Indemnified Person shall
have the right to employ its own counsel in any such case and the reasonable
fees and expenses of such counsel shall be borne by the General Partner and paid
as incurred (it being understood, however, that the General Partner shall not be
liable for the expenses of more than one separate counsel (in addition to any
local counsel) in any one Proceeding or series of related Proceedings in the
same jurisdiction representing the LP Indemnified Persons who are parties to
such Proceeding) or for the expenses and fees incurred with respect to matters
that are not indemnifiable in accordance with this Section 1.1.  An LP
Indemnified Person shall give the General Partner reasonable prior notice of
settlement of any Proceeding in respect of which indemnity may be sought against
the General Partner pursuant to this Section 1.1, provided, however, that the
omission to so notify the General Partner shall not relieve the General Partner
or the Partnership from any liability which it may have to the LP Indemnified
Person.



    1.2           Indemnification of the Partnership
and the General Partner.  The Limited Partner agrees to
indemnify, defend and hold harmless each of the Partnership, the General Partner
and its partners, stockholders, members, directors, officers, employees and any
person who controls the General Partner within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, and the successors and assigns of all of
the foregoing persons (each, a “GP Indemnified
Person”), from and against any loss, damage, expense, liability or claim
(including reasonable attorney fees and the reasonable cost of investigation)
which any such GP Indemnified Person may incur under the 1933 Act, the 1934 Act,
the CEA, the common law or otherwise, insofar as such loss, damage, expense,
liability or claim arises out of or is based upon:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (a)           any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, or any other registration statement,
prospectus, preliminary prospectus, free writing prospectus or other document
used by the Partnership in connection with the offer and sale of Baskets or
Units or any amendment or supplement to any of the foregoing, or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading, in each case, to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement of a material fact or such omission or alleged omission to state a
material fact was made therein in reliance upon and in conformity with
information concerning the Limited Partner furnished in writing by or on behalf
of the Limited Partner to the General Partner expressly for use therein;
or

     

    (b)           the
failure by the Limited Partner or its respective agents to comply with
applicable laws and the rules and regulations of any governmental entity or any
self-regulatory organization.

     

    In no case is the indemnity of the
Limited Partner in favor of each GP Indemnified Person to be deemed to protect
any GP Indemnified Person against any liability to the Limited Partner to which
such GP Indemnified Person would otherwise be subject by reason of such GP
Indemnified Person’s willful misconduct, bad faith or gross negligence in the
performance of its duties and obligations under the Limited Partnership
Agreement.

    


    If any Proceeding is brought against a
GP Indemnified Person in respect of which indemnity may be sought against the
Limited Partner pursuant to this Section 1.2, such GP Indemnified Person shall
promptly notify the Limited Partner in writing of the institution of such
Proceeding; provided, however, that the omission to so notify the Limited
Partner shall not relieve the Limited Partner from any liability which it may
have to such GP Indemnified Person except to the extent that it has been
materially prejudiced by such failure and has not otherwise learned of such
Proceeding.  The GP Indemnified Person shall have the right to employ
its own counsel and the reasonable fees and expenses of such counsel shall be
borne by the Limited Partner and paid as incurred (it being understood, however,
that the Limited Partner shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one Proceeding or
series of related Proceedings in the same jurisdiction representing the GP
Indemnified Persons who are parties to such Proceeding) or for the expenses and
fees incurred with respect to matters that are not indemnifiable in accordance
with this Section 1.2.  A GP Indemnified Person shall give the Limited
Partner reasonable prior notice of settlement of any Proceeding in respect of
which indemnity may be sought against the Limited Partner pursuant to this
Section 1.2, provided, however that the omission to so notify the General
Partner shall not relieve the General Partner or the Partnership from any
liability which it may have to the GP Indemnified Person.  Nothing in
this Agreement shall be construed to limit the rights of the General Partner to
indemnification under the Limited Partnership Agreement.


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

     

    1.3           Survival.  The
indemnity agreements contained in this Article I shall remain in full force and
effect regardless of any investigation made by or on behalf of the Limited
Partner, its partners, stockholders, members, directors, managers, officers,
employees and or any person (including each partner, stockholder, member,
director, manager, officer or employee of such person) who controls the Limited
Partner within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act, or by or on behalf of each of the General Partner, the Partnership,
their partners, stockholders, members, directors, officers, employees or any
person who controls the General Partner or the Partnership within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, and shall survive for
a period of five years following the termination of the Limited Partner’s status
as a limited partner of the Partnership.  The General Partner, on the
one hand, and the Limited Partner, on the other hand, agree promptly to notify
each other of the commencement of any Proceeding against the General Partner or
the Limited Partner, as the case may be, that relates to the Partnership and, in
the case of the General Partner, against any of the General Partner’s officers
or directors, in connection with the issuance and sale of the Units, or in
connection with the Registration Statement or the Prospectus.

     

    1.4           Contribution.  If
the indemnification provided for in Section 1.1 or 1.2 is unavailable to or
insufficient to hold harmless an indemnified party in respect of any loss,
damage, expense, liability or claim referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such loss, damage, expense, liability or claim in such proportion
as is appropriate to reflect the relative benefits received by the Limited
Partner, the General Partner and the Partnership.  If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Limited Partner on the one hand and the General Partner on the other, as well as
any other relevant equitable considerations.  The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
1.4 were determined by any method of allocation which does not take account of
the equitable considerations referred to above in this Section
1.4.  The amount paid or payable by an indemnified party as a result
of the loss, damage, expense, liability or claim referred to above shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.  No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.


    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    Article
2

     

    REPRESENTATIONS
AND COVENANTS OF THE LIMITED PARTNER.

    


    2.1           Compliance with
Prospectus.  The Limited Partner represents, warrants and
covenants that, for so long as it is a limited partner of the Partnership, (a)
without the written consent of the General Partner, the Limited Partner will not
make, or permit any of its representatives to make, in connection with any sale
or solicitation of a sale of Units any representations concerning the Units or
the General Partner, the Partnership or any GP Indemnified Person other than
representations consistent with (i) the then-current Prospectus of the
Partnership, (ii) printed information approved by the General Partner as
information supplemental to such Prospectus or (iii) any promotional materials
or sales literature furnished to the Limited Partner by the General Partner or
its agents, and (b) the Limited Partner will not furnish or cause to be
furnished to any person or display or publish any information or material
relating to the Units, any GP Indemnified Person or the Partnership other than
the Partnership’s then current Prospectus.

     

    2.2           Compliance with
Law.  The Limited Partner agrees, for so long as it is a
limited partner of the Partnership, to comply with applicable federal securities
laws, commodities laws and the rules of any self-regulatory organization or
national securities exchange in connection with the sale or solicitation of a
sale of the Units.

     

    Article
3

     

    GENERAL
PROVISIONS

    


    3.1           Governing Law;
Severability.  This Agreement shall be governed by the laws of
the State of Delaware, as such laws are applied by Delaware courts to agreements
entered into and to be performed in Delaware by and between residents of
Delaware, without giving effect to provisions thereof regarding conflict of
laws. If any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, (a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions of
this Agreement will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom and
(d) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.

     

    3.2           Acknowledgement.  The
Limited Partner acknowledges receipt of a copy of the Prospectus and represents
that it has reviewed and understands such document.

     

    3.3           Relationship between this Agreement
and the Limited Partnership Agreement.  This Agreement shall
not be construed to amend or otherwise modify the Limited Partnership Agreement
except as to matters specifically set forth herein.

     

    
      3.4           Third Party Beneficiaries.
Each GP Indemnified Person, to the extent it is not a party to this
Agreement, is a third-party beneficiary of this Agreement and may proceed
directly against the Limited Partner (including by bringing proceedings against
the Limited Partner in its own name) to enforce any obligation of the Limited
Partner under this Agreement which directly or indirectly benefits such GP
Indemnified Person.  Each LP Indemnified Person, to the extent it is
not a party to this Agreement, is a third-party beneficiary of this Agreement
and may proceed directly against the General Partner, the Partnership or their
respective agents (including by bringing proceedings against the General
Partner, the Partnership or their respective agents in its own name) to enforce
any obligation of the General Partner, the Partnership or their agents under
this Agreement which directly or indirectly benefits such LP Indemnified
Person.

    


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    3.5           Amendment and
Modification.  This Agreement may be amended, modified or
supplemented only by a written instrument executed by all the
parties.

     

    3.6           Waiver of
Compliance.  Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but any such waiver, or the failure to insist upon strict compliance
with any obligation, covenant, agreement or condition herein, shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure or
breach.

     

    3.7           Successors and Assigns;
Assignment.  All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other parties and
any assignment without such consent shall be null and void.

     

    3.8           Counterparts;
Facsimile.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.  Facsimile counterpart
signatures to this Agreement shall be acceptable and binding.

     

    


    {Signature Page
Follows}


    
      
         


      

      
        6

        
          

        

      

      
         


      

    

    


    IN WITNESS WHEREOF, the parties hereto
have caused this Indemnification Agreement to be executed as of the date first
written above.

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        UNITED
      STATES SHORT OIL FUND, LP

                                      
	 
      	
                                        By:

                                      	
                                        United
      States Commodity Funds LLC, as General Partner

                                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
                                        By:

                                      	
                                        /s/ Howard Mah

                                      
	 
      	 
      	 
      	
                                        Name:
      Howard Mah

                                      	 
      
	 
      	 
      	 
      	

                                        Title:
      Management Director  

                                      	 
      
	 	 
	UNITED
      STATES COMMODITY FUNDS LLC	 
      
	 
      	 
      	 
      	 
      	 
      
	
                                        By:

                                      	
                                        /s/ Howard Mah

                                      	 
      
	 
      	
                                        Name:
      Howard Mah

                                      	 
      
	 
      	
                                        Title:
      Management Director

                                      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                                        IMC-CHICAGO,
      LLC

                                      
	 
      	 
      	 
      	 
      	 
      
	
                                        By:

                                      	
                                        /s/ Emir Al-Rawi

                                      	 
      
	 
      	
                                        Name:
      Emir
      Al-Rawi

                                      	 
      
	 
      	
                                        Title:
      Management Director