ESCROW AGREEMENT
This
ESCROW AGREEMENT (the “Agreement”) is made and entered into this 16th day
of July, 2009, by and between Hatteras 1099 Advantage Fund, a Delaware statutory
trust (the “Fund”), UMB Fund Services, Inc., as recordkeeper (“UMBFS”) and UMB
Bank, N.A., a national banking association organized and existing under the laws
of the United States of America, as escrow agent (the “Escrow
Agent”).
WITNESSETH:
WHEREAS,
the Fund is a statutory trust which is registered as a closed-end,
non-diversified investment company under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933 and is authorized to offer
and sell shares of beneficial interest in the Fund (“Shares”); and
WHEREAS,
the Fund accepts subscription proceeds for Shares, accepts requests for the
repurchase of Shares and makes distributions as described in the Fund’s
Prospectus dated July 21, 2009 and any successor thereto; and
WHEREAS,
the Fund desires to appoint UMB Bank, N.A. as escrow agent for the purpose of
holding investment proceeds tendered by investors prior to the time such funds
are transferred to the Fund for investment.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto hereby agree as
follows:
1. Appointment
and Delegation.
The Fund hereby appoints UMB Bank, N.A.
as Escrow Agent, on the terms set forth in this Agreement. UMB Bank,
N.A. hereby agrees to serve as Escrow Agent on the terms set forth in this
Agreement. The Fund hereby authorizes UMBFS, in its capacity as
recordkeeper, to provide instructions to the Escrow Agent on the Fund’s behalf
in accordance with the terms of this Agreement.
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2.
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Procedures.
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(a) The
Fund will establish an escrow account with the Escrow Agent consisting of four
(4) segregated sub-accounts, the Subscription Sub-Account, the Repurchase
Sub-Account, the Income Sub-Account and the Holdback Sub-Account. Purchase
payments periodically received by UMBFS (the “Purchase Proceeds”) will be
deposited into the Subscription Sub-Account. Proceeds from periodic repurchases
of Shares by the Fund from its subscribers (“Repurchase Proceeds”) will be
deposited into the Repurchase Sub-Account, less a withholding amount (the
“Holdback Amount”), such amount typically being 5% of the repurchase amount, if
applicable. Any Holdback Amount will be deposited into the Holdback
Sub-Account (the Subscription Sub-Account, the Repurchase Sub-Account and the
Holdback Sub-Account shall be referred to collectively as the “Escrow
Accounts”).
(b) Simultaneously
with any deposit of Purchase Proceeds, UMBFS will deliver to the Escrow Agent a
cash letter confirming the amount of the Purchase Proceeds so
delivered. In the event the Fund or UMBFS provides written notice to
the Escrow Agent that an underlying purchase order has been revoked in the form
of a cash letter, the Escrow Agent shall promptly (but in no event later than
the close of business on the day of receipt of such Purchase Reversal Letter in
accordance with subparagraph (d) or Paragraph 4) transfer from the Subscription
Sub-Account the Purchase Proceeds specified in the Purchase Reversal Letter to
UMBFS in accordance with the payment procedures in Paragraph 4. The
Escrow Agent shall have no duty or obligation with respect to the collection of
any Purchase Proceeds.
(c) On
the last business day of each calendar month or as otherwise instructed by the
Fund, UMBFS will deliver to the Escrow Agent a cash letter instructing the
Escrow Agent to disburse the Purchase Proceeds, if any, on deposit (the “Cash
Disbursement Letter”).
(d) The
Escrow Agent shall provide the Fund and UMBFS with a statement of the assets
held and transactions of the Escrow Accounts on a monthly basis and shall
provide electronic access on a daily basis. At the Escrow Agent’s
request, UMBFS shall provide periodic summaries of Escrow Account
activity.
(e) The
Escrow Agent shall invest all amounts deposited in the Escrow Accounts with it
hereunder, and earnings thereon, if any, in the UMB Money Market Special
Account. All monies must be deposited to the Escrow Accounts prior to
4:00 p.m. CT in order to receive credit for that day’s earnings. All
investment earnings on the Escrow Accounts shall be transferred on the first
business day of each month to the Income Sub-Account. In turn, the
earnings will be swept to the Fund’s custody account on the first business day
of the month. Notwithstanding the foregoing, until the date of the
Fund’s initial closing no amounts will be invested in the UMB Money Market
Special Account and no investment earnings will be earned or credited for
amounts held in any Escrow Accounts.
(f) The
Fund may from time to time deposit Repurchase Proceeds in the Repurchase
Sub-Account. After UMBFS has received written confirmation from the
Fund of the value of Shares being repurchased for any applicable period for
which repurchases occur, UMBFS will deliver to the Escrow Agent a cash letter to
disburse the Repurchase Proceeds, if any, on deposit in custody, and a cash
letter to move the Repurchase Proceeds out of the Repurchase Sub-Account for
disbursement to investors (each, a “Repurchase Disbursement
Letter”).
(g) On
an annual basis, UMBFS will deliver to the Escrow Agent a cash letter to
disburse the Holdback Amount, if any, on deposit in the Holdback Sub-Account
(the “Holdback Disbursement Letter”).
(h) In
the event an adjustment needs to be made in connection with any money movement
hereunder, UMBFS shall deliver to the Escrow Agent a cash letter specifying the
corrective action to be taken.
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(i) Prior
to delivery to it or its designated agents of the Purchase Proceeds or
Repurchase Proceeds, the Fund or its agents shall have no title, right, claim,
lien or any other interest in the funds held in escrow hereunder, and such funds
shall under no circumstances be available to the Fund or its agents or their
creditors for payment or reimbursement for liabilities or
indebtedness.
3. Compensation.
For its services hereunder, the Escrow
Agent shall be entitled to a one-time account acceptance fee of $500, plus an
annual escrow fee of $600 for the Escrow Accounts and transaction fees of $5.00
per deposit and/or distribution. In addition to the foregoing fees,
all reasonable out-of-pocket expenses relating to the administration of this
Agreement and the Escrow Accounts such as, but not limited to, wire fees,
postage, shipping, courier, telephone and facsimile charges will be paid
directly by the Fund.
4. Payment
Procedures.
(a) Whenever
payments are required to be made to the Escrow Agent under this Agreement, such
payments shall be made by electronic transfer per the following
instructions:
UMB Bank, N.A., Kansas City,
Missouri
ABA # 000000000
A/C # 9800006823
A/C Name: Trust Clearing
FFC A/C# 134533.1
Attn: Xxxx Xxxxxxx
(b) Whenever
payments are required to be made by the Escrow Agent to UMBFS under this
Agreement, such payments shall be made by electronic transfer per the following
instructions:
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UMB
Bank, N.A., Kansas City, Missouri
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ABA #000000000
A/C # 9871878988
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Attn:
Financial Control
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(c) Every
cash letter delivered to the Escrow Agent hereunder pursuant to Paragraph 2
shall bear the signature of two (2) authorized UMBFS signers. If
requested by UMBFS, each cash letter shall also bear the countersignature of one
(1) authorized Fund signer. In connection with the execution of this
Agreement, UMBFS shall deliver to the Escrow Agent, and the Fund shall deliver
to UMBFS, a list of authorized signers, together with a certificate of
incumbency and specimen signatures. The party providing such
certificate may provide an updated certificate evidencing the appointment,
removal or change of authority of any authorized signer, it being understood
that the party relying on such certificate shall not be held to have notice of
any change in the authority of any authorized signer until receipt of written
notice thereof.
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(d) A
cash letter must be received by the Escrow Agent by 3:00 p.m. CT on the day such
cash letter is transmitted in order for the instructions contained in such cash
letter to be honored on that day.
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5.
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Representations.
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The Fund
represents and warrants as follows:
(a) it
is duly organized and in good standing under the laws of the State of Delaware
and all necessary action has been taken by it and it is duly authorized to enter
into this Agreement;
(b) its
Tax Identification Number is 00-0000000;
(c) this
Agreement and all other documents related to the transactions described herein
have been duly executed and delivered by the Fund and constitute the legal,
valid and binding obligations of the Fund, enforceable in accordance with their
respective terms;
(d) the
execution, delivery and performance of this Agreement and all other documents
related to the transactions described herein by the Fund do not and will not
breach or violate or cause a default under its Agreement and Declaration of
Trust or any provision of any agreement, instrument, judgment, injunction or
order applicable to or binding upon it.
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6.
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Miscellaneous.
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It is understood and agreed, further,
that the Escrow Agent shall:
(a) be
under no duty to pay and transfer any monies hereunder, unless the same shall
have been first received by the Escrow Agent pursuant to the provisions of this
Agreement;
(b) be
under no duty to accept any information from any person or entity other than the
Fund or UMBFS, and then only to the extent and in the manner expressly provided
for in this Agreement;
(c) act
hereunder as a depository only and be protected in acting upon any written
instruction or notice provided by the Fund or UMBFS pursuant to this Agreement
and the information contained therein without responsibility to determine the
validity or sufficiency of the same, and be protected in acting upon any other
notice, opinion, request, certificate, approval, consent or other paper
delivered to it and represented to it to be genuine and to be signed by the
proper party or parties;
(d) be
indemnified and held harmless by the Fund against any claim made against it by
reason of its acting or failing to act in connection with any of the
transactions contemplated hereby and against any loss, liability, cost, suit or
expense, including the expense of defending itself against any claim of
liability it may sustain in carrying out the terms of this Agreement except such
claims which are occasioned by its fraud, bad faith, reckless disregard of its
duties, gross negligence or willful misconduct;
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(e) have
no liability or duty to inquire into the terms and conditions of any
subscriptions for Shares, and that its duties and responsibilities shall be
limited to those expressly set forth under this Agreement and are purely
ministerial in nature;
(f) be
permitted to consult with counsel of its choice, including in-house counsel, and
shall not be liable for any action taken, suffered or omitted by it in good
faith in accordance with the advice of such counsel, provided, however, that
nothing contained in this Subparagraph (f), nor any action taken by the Escrow
Agent, or of any such counsel, shall relieve the Escrow Agent from liability for
any claims which are occasioned by its fraud, bad faith, reckless disregard of
its duties, gross negligence or willful misconduct, all as provided in
Subparagraph (d) above;
(g) not
be bound by any amendment or revocation of this Agreement, unless the same shall
be in writing and signed by all of the parties of this Agreement;
(h) be
entitled to refrain from taking any action other than to keep all property held
by it in escrow hereunder until it shall be directed otherwise in writing by the
Fund, or by a final judgment by a court of competent jurisdiction, provided that
it shall be uncertain as to its duties and rights hereunder (including, without
limitation, the receipt of conflicting instructions or directions from any of
the parties hereto or any third parties);
(i) have
no liability for following the instructions herein contained or expressly
provided for, or written instructions given by, the Fund or UMBFS;
(j) have
the right, at any time, to resign hereunder by giving written notice of its
resignation to the Fund at the address as set forth in Subparagraph (l) hereof,
at least sixty (60) days before the date specified for such resignation to take
effect, and upon the effective date of such resignation;
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(i)
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all
cash and other funds and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such successor Escrow Agent as may
be designated in writing by the Fund, whereupon the Escrow Agent’s
obligations hereunder shall cease and
terminate;
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(ii)
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if
no such successor Escrow Agent has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate, and the Escrow Agent’s sole responsibility thereafter shall be
to keep all property then held by it and to deliver the same to a person
designated in writing by the Fund or in accordance with the directions of
a final order or judgment of a court of competent jurisdiction; yet, if no
such designation, order or judgment is received by Escrow Agent within
sixty (60) days after its giving such resignation notice, it is
unconditionally and irrevocably authorized and empowered to petition a
court of competent jurisdiction for
directions.
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(k) be
reimbursed by the Fund upon its request for all reasonable costs, fees, charges,
expenses, disbursements and advances incurred or made by it in accordance with
any provision of this Agreement, or as a result of the acceptance of this
Agreement.
(l)
all deliveries and notices to the Escrow Agent shall be in writing and shall be
sent or delivered to:
UMB Bank,
N.A., as Escrow Agent
Attn: Xxxx
X. Xxxxxxx, M/S 1020409
0000
Xxxxx Xxxxxxxxx, 0xx
Xxxxx
Xxxxxx
Xxxx, XX 00000
Facsimile:
(000) 000-0000
All
deliveries and notices hereunder to the Fund shall be in writing and shall be
sent or delivered to:
Attn: J.
Xxxxxxx Xxxxxx
0000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
All
deliveries and notices hereunder to UMBFS shall be in writing and shall be sent
or delivered to:
UMB Fund
Services, Inc.
Attn:
Xxxxxxx X. Xxxxxx Xxxxxx
000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
(m) Nothing
in this Agreement is intended to or shall confer upon anyone other than the
parties hereto any legal or equitable right, remedy or claim. This
Agreement shall be construed in accordance with the laws of the State of
Missouri and may be amended or settled only by a writing executed by the parties
thereto.
(n) This
Agreement may be executed in multiple counterparts, each of which shall be
regarded for all purposes as an original, and such counterparts shall constitute
but one and the same instrument. In addition, the transaction
described herein may be conducted and related documents may be stored by
electronic means. Copies, telecopies, facsimiles, electronic files
and other reproductions of original executed documents shall be deemed to be
authentic and valid counterparts of such original documents for all purposes,
including the filing of any claim, action or suit in the appropriate court of
law.
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(o) In
order to comply with provisions of the USA PATRIOT Act of 2001, as amended from
time to time, Escrow Agent may request certain information and/or documentation
to verify, confirm and record identification of persons or entities who are
parties to the Agreement.
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7.
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Tax
Reporting.
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The parties hereto agree that for
purposes of tax reporting, all interest or other income, if any, attributable to
the Escrow Accounts pursuant to this Agreement shall be allocable to the
Fund. The Fund agrees to provide the Escrow Agent with an Internal
Revenue Service Form W-9 upon execution of this Agreement. The Fund
understands that if such tax reporting documentation is not so certified to the
Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code, as
amended from time to time, to withhold a portion of any interest or other income
earned on the investment of monies or other property held by the Escrow Agent
pursuant to this Agreement. The Escrow Agent will prepare and send
notifications on Form 1099 for each calendar year for which such Form is
required during the term hereof.
IN
WITNESS WHEREOF, the parties hereto have caused the Escrow Agreement to be
executed by their respective duly authorized officers.
By: /s/ J. Xxxxxxx
Xxxxxx
Title: Secretary
UMB BANK, N.A., AS
ESCROWAGENT
By: /s/ Xxxx X.
Xxxxxxx
Title: Vice
President
UMB FUND SERVICES, INC.
By: /s/ Xxxx X.
Xxxxx
Title: Chief Executive
Officer
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