JOINT INSURED BOND AGREEMENT
AGREEMENT dated as of this ___ day of
___ 2009, by and between Hatteras 1099 Advantage Fund and Hatteras 1099
Advantage Institutional Fund. Hatteras 1099 Advantage Fund and
Hatteras 1099 Advantage Institutional Fund are hereinafter collectively referred
to as the “Funds.”
BACKGROUND
A. The
Funds are management investment companies registered under the Investment
Company Act of 1940 (the “Act”).
B. Rule
17g-1 requires each Fund to provide and maintain in effect a bond against
larceny and embezzlement by its officers and employees.
C. Rule
17g-1 authorizes the parties hereto to secure a joint insured bond naming each
of them as insureds.
D. The
Funds desire to be named as insureds on a joint fidelity bond.
E. A
majority of the trustees of each Fund, who are not “interested persons” of such
Fund as defined by Section 2(a)(19) of the Act, after giving due consideration
to all factors relevant to the form, amount and ratable allocation of premiums
of the aforesaid joint insured bond, have approved the terms and amount of the
bond and the portion of the premium payable by each party
hereunder.
F. Each
party has determined that the allocation of the proceeds payable under the
aforesaid joint insured bond as set forth herein (which takes into account the
minimum amount of bond required for each party by Rule 17g-1 if it maintained a
single insured bond) is equitable.
NOW, THEREFORE, the parties hereto, in
consideration of the mutual covenants contained herein, hereby agree as
follows:
1. Joint Insured
Bond. The parties shall maintain in effect a joint fidelity
insurance bond (the “Bond”) from a reputable fidelity insurance company
authorized to do business in the place where the Bond is issued, insuring each
party against larceny and embezzlement and covering such of their respective
officers and employees who may, singly or jointly with others, have access,
directly or indirectly, to their respective securities or funds. The
Bond shall name each party as an insured and shall comply with the requirements
for such bond established by Rule 17g-1.
2. Amount. The
Bond shall be in at least the aggregate amount required by Rule 17g-1(d) to be
maintained by the parties.
3. Ratable Allocation of
Premiums. Each Fund shall pay a percentage of the initial
premium and any additional premiums which may become due under the Bond as
determined from time to time by the trustees of such Fund, including a majority
who are not “interested persons” of such Fund.
4. Ratable Allocation of
Proceeds.
a. If
more than one of the parties sustains a single loss (including a loss sustained
before the date hereof) for which recovery is received under the Bond, each such
party shall receive that portion of the recovery which is sufficient in amount
to indemnify that party in full for the loss sustained by it, unless the
recovery is inadequate to fully indemnify all such parties sustaining a single
loss.
b. If
the recovery is inadequate to indemnify fully all parties sustaining a single
loss, the recovery shall be allocated among such parties as
follows:
(i) Each
party sustaining a loss shall be allocated an amount equal to the lesser of its
actual loss or the minimum amount of the fidelity bond which would be required
to be maintained by-such-party under a single insured bond (determined as of the
time of the loss in accordance with the provisions of Rule 17g-1).
(ii) The
remaining portion of the recovery (if any) shall be allocated to each party
sustaining a loss not fully indemnified by the allocation under subparagraph (i)
in the same proportion as the portion of each party’s loss which is not fully
indemnified bears to the sum of the unindemnified losses of all such
parties. If such allocation would result in any party receiving a
portion of the recovery in excess of the loss actually sustained by it, the
aggregate of such excess portion shall be reallocated among the other parties
whose losses would not be fully indemnified as a result of the foregoing
indemnification.
5. Claims and
Settlements. Each party shall, within five (5) days after the
making of any claim under the Bond, provide every other party with written
notice of the amount and nature of such claim. Each party shall,
within five (5) days of the receipt thereof, provide every other party with
written notice of the terms of settlement of any claim made under the Bond by
such party. In the event that two or more parties shall agree to
settlement with the fidelity company of a claim made under the Bond with respect
to a single loss, such parties shall, within five days after settlement, provide
any other party not a party to such claim with written notice of the amounts to
be received by each claiming party under Section 4 hereof. The
officer(s) of the respective parties designated as responsible for filing
notices required by paragraph (g) of the Rule 17g-1 under the Act shall give and
receive any notice required hereby.
6. Modifications and
Amendments. Any party may increase the amount of the Bond,
provided that written notice thereof must be given to the other parties to this
Agreement. If pursuant to Rule 17g-1, any party shall determine that
the coverage provided pursuant to this Agreement should otherwise be modified,
it shall so notify the other parties hereto, and indicate the nature of the
modification which it believes to be appropriate. If, within
forty-five (45) days of such notice any necessary amendments to this Agreement
shall not have been made and the request for modification shall not have been
withdrawn, this Agreement shall terminate with respect to such party (except
with respect to losses occurring prior to such termination), but, with respect
to each other party, shall remain in effect. Any party may withdraw
from this Agreement at any time and cease to be party hereto (except with
respect to losses occurring prior to such withdrawal) by giving written notice
to the other parties of such withdrawal. Upon withdrawal, a
withdrawing party shall be entitled to receive any premium rebated by the
fidelity company with respect to such withdrawal in accordance with the
percentages contained in Section 3 hereof relating to the allocation of payment
of premiums.
7. Governing
Law. This Agreement shall be construed in accordance with the
laws of the State of Delaware.
8. Obligations of the
Funds. Each party acknowledges that this Agreement is executed
on behalf of the Funds by the undersigned officers of the Funds as officers and
not individually. Each party acknowledges and agrees that the
obligations of the Funds under this Agreement are not binding on any officers,
trustees or interest holders of the Funds individually but are binding only upon
the assets and properties of the Funds, and any person dealing with any class of
shares of a Fund must look solely to the assets and properties of such Fund
belonging to such class for the enforcement of any claims against such
Fund.
9. No
Assignment. This Agreement is not assignable.
10.
Notices. Notices
relating to termination of the Agreement, breaches of contractual duties,
initiation of legal proceedings, complaints in relation to services provided
hereunder or any other material notices under the Agreement, other than notices
given in the ordinary course of business (each a “Material Notice”), must be
given in writing (either by way of facsimile or registered mail). A notice sent
by facsimile shall be deemed to have been served at the close of business on the
day upon which the other party confirms receipt. A notice sent by
registered mail shall be deemed to have been served at the close of business on
the day upon which it is delivered. Material Notices shall be sent as follows,
or to such other address as the parties may agree from time to
time:
[NAME OF
FUND]
c/o
[Board chairman]
[Address]
[Address]
Re:
Material Notice, [name of Fund]
Facsimile: []
Telephone:
[]
IN
WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as
of the day and year first above written.
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HATTERAS 1099 ADVANTAGE FUND
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BY:
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[NAME AND TITLE]
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BY:
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[NAME AND TITLE]
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