ADDITIONAL COMPENSATION AGREEMENT
---------------------------------
April [ ], 2004
First Trust Advisors, L.P.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated April [
], 2004 (the "Underwriting Agreement"), by and among First Trust/Value Line(R) &
Ibbotson Equity Allocation Fund, a closed-end management investment company (the
"Fund"), First Trust Advisors, L.P. ("First Trust") and each of the respective
Underwriters named therein, with respect to the issuance and sale of the Fund's
common shares of beneficial interest, par value $0.01 per share (the "Common
Shares"), as described therein. Reference is also made to (i) the Investment
Management Agreement (the "Management Agreement") to be entered into between
First Trust and the Fund and (ii) the registration statement on Form N-2
regarding the Common Shares of the Fund (the "Registration Statement").
Capitalized terms used herein and not otherwise defined shall have the meanings
given to them in the Underwriting Agreement.
The Investment Manger agrees to pay to each of [ ] ("[ ]") and
[ ] ("[ ]") (each a "Co-Lead Manager" and together, the "Co-Lead Managers"), in
their capacities as co-lead managers of the offering of the Fund's Common Shares
described in the Registration Statement (the "Offering"), additional
compensation (collectively, the "Additional Compensation") as provided for in
Section 3 hereof; provided, however, that such payments shall not, in the
aggregate, exceed the "Maximum Additional Compensation Amount" (as defined in
Section 3 hereof). The Additional Compensation shall be payable as set forth in
Section 2 hereof.
SECTION 1. PRO RATA PERCENTAGE. Each Co-Lead Manager shall be
assigned a "Pro Rata Percentage," as set forth on Schedule A hereto.
SECTION 2. PAYMENT OF ADDITIONAL COMPENSATION.
(a) Subject to Section 3, in consideration of the services rendered by
each of [ ] and [ ] in its capacity as a Co-Lead Manager, First Trust shall pay
the Additional Compensation, quarterly in arrears, to each Co-Lead Manager in an
amount equal to such Co-Lead Manager's Pro Rata Percentage multiplied by [ ]% of
the aggregate average daily net assets of the Fund for such quarter.
(b) All fees payable hereunder shall be paid to each respective Co-Lead
Manager by wire transfer of immediately available funds within 15 days following
the end of each calendar quarter to a bank account designated by such Co-Lead
Page 1
Manager. At the time of each payment of Additional Compensation hereunder, First
Trust shall deliver to the applicable Co-Lead Manager a statement indicating the
amount of the average daily net assets of the Fund for such quarter on which
such payment was based.
(c) The initial payment of Additional Compensation hereunder shall be
paid with respect to the calendar quarter ending June 30, 2004, prorated in
respect to the period from the closing date of the firm shares offered pursuant
to the Underwriting Agreement to June 30, 2004. In the event that this
Additional Compensation Agreement terminates prior to the end of a calendar
quarter, the Additional Compensation required to be paid hereunder shall be due
and payable within 15 days following the termination hereof and shall be
pro-rated in respect of the period prior to such termination. Notwithstanding
the foregoing, if any payment hereunder would otherwise fall on a day which is
not a business day, it shall be due on the next day which is a business day. All
fees payable hereunder shall be in addition to any fees paid by First Trust
pursuant to the Underwriting Agreement.
(d) First Trust shall be permitted to discharge all or a portion of its
payment obligations hereunder upon prepayment in full or in part of the
remaining balance due of that portion of the Maximum Additional Compensation
Amount (as defined in Section 3) due to the Co-Lead Managers under this
Additional Compensation Agreement as described in this Section 2.
SECTION 3. MAXIMUM ADDITIONAL COMPENSATION AMOUNT. The "Maximum
Additional Compensation Amount" payable by First Trust hereunder shall be [ ]%
of the aggregate offering price of the Common Shares in the offering. [ ] will
receive additional compensation which will not exceed [ ]% of the aggregate
initial offering price of the Common Shares and [ ] will received additional
compensation which will not exceed [ ]% of the aggregate initial offering price
of the Common Shares.
SECTION 4. TERM. This Additional Compensation Agreement shall
terminate on the earliest to occur of (a) notice by the Co-Lead Managers to
First Trust that further payments hereunder would exceed the Maximum Additional
Compensation Amount, (b) the dissolution and winding up of the Fund, (c) the
date on which the Management Agreement or other investment management agreement
between the Fund and First Trust or any successor in interest to First Trust,
including but not limited to an affiliate of First Trust, shall terminate and
(d) the prepayment by First Trust of an agreed upon amount in accordance Section
2(d) hereof.
SECTION 5. NOT AN INVESTMENT ADVISER. First Trust acknowledges
that neither Co-Lead Manager is providing any advice hereunder as to the value
of securities or regarding the advisability of purchasing or selling any
securities for the Fund. No provision of this Additional Compensation Agreement
shall be considered as creating, nor shall any provision create, any obligation
on the part of either Co-Lead Manager, and neither Co-Lead Manager is hereby
agreeing, to: (i) furnish any advice or make any recommendations regarding the
purchase or sale of portfolio securities or (ii) render any opinions, valuations
or recommendations of any kind or to perform any such similar services.
SECTION 6. NOT EXCLUSIVE. Nothing herein shall be construed as
prohibiting either Co-Lead Manager or their respective affiliates from acting as
underwriter for any other clients (including other registered investment
companies or other investment advisers). This Additional Compensation agreement
Page 2
shall not be considered to constitute a partnership, association or joint
venture between First Trust and either Co-Lead Manager. In addition, nothing in
this Additional Compensation Agreement shall be construed to constitute either
Co-Lead Manager as the agent or employee of First Trust or First Trust as the
agent or employee of either Co-Lead Manager and neither of the parties hereto
shall make any representation to the contrary.
SECTION 7. NO LIABILITY. With respect to each Co-Lead Manager,
First Trust agrees that such Co-Lead Manager shall not have liability to First
Trust or the Fund for any act or omission to act by such Co-Lead Manager in the
course of its performance under this Additional Compensation Agreement, in the
absence of gross negligence or willful misconduct on the part of such Co-Lead
Manager. The Investment Adviser agrees to indemnify and hold harmless each
Co-Lead Manager and its respective officers, directors, agents and employees
against any loss or expense arising out of or in connection with such Co-Lead
Manager's performance under this Additional Compensation Agreement. This
provision shall survive the termination, expiration or supersession of this
Additional Compensation Agreement.
SECTION 8. ASSIGNMENT. This Additional Compensation Agreement may
not be assigned by any party without the prior written consent of each other
party.
SECTION 9. AMENDMENT; WAIVER. No provision of this Additional
Compensation Agreement may be amended or waived except by an instrument in
writing signed by the parties hereto.
SECTION 10. GOVERNING LAW. This Additional Compensation Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. No claim may be commenced, prosecuted or continued in any court other
than the courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District of New
York, which courts shall have exclusive jurisdiction over the adjudication of
such matters, and First Trust and each Co-Lead Manager each consents to the
jurisdiction of such courts and personal service with respect thereto. Each of
First Trust and each Co-Lead Manager waives all right to trial by jury in any
proceeding (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Additional Compensation Agreement. Each of First
Trust and each Co-Lead Manager agrees that a final judgment in any proceeding or
counterclaim brought in any such court shall be conclusive and binding upon
First Trust and such Co-Lead Manager and may be enforced in any other courts the
jurisdiction of which First Trust and such Co-Lead Manager is or may be subject,
by suit upon such judgment.
SECTION 11. This Additional Compensation Agreement embodies the
entire agreement and understanding between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof. If
any provision of this Additional Compensation Agreement is determined to be
invalid or unenforceable in any respect, such determination will not affect such
provision in any other respect or any other provision of this Additional
Compensation Agreement, which will remain in full force and effect. This
Additional Compensation Agreement may not be amended or otherwise modified or
waived except by an instrument in writing signed by First Trust and each Co-Lead
Manager.
Page 3
SECTION 12. All notices required or permitted to be sent under this Agreement
shall be sent, if to First Trust:
First Trust Advisors, L.P.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxx--General Counsel
or if to [ ]:
[ ]
Attention: [ ]
or if to [ ]:
[ ]
Attn: [ ]
Any notice shall be deemed to be given or received on the third day
after deposit in the U.S. mail with certified postage prepaid or when
actually received, whether by hand, express delivery service or
facsimile transmission, whichever is earlier.
SECTION 13. COUNTERPARTS. This Additional Compensation Agreement
may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one agreement.
Delivery of an executed signature page of this Additional Compensation Agreement
by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
Page 4
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
First Trust, [ ] and [ ] in accordance with its terms.
Very truly yours,
[ ]
By:
----------------------------------
Name:
Title:
[ ]
By:
----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
FIRST TRUST ADVISORS, L.P.
By:
--------------------------------------
Name:
Title:
Page 5
SCHEDULE A
----------
CO-LEAD MANAGER PRO RATA
PERCENTAGE
---------------- ----------
[ ] [ ]%
[ ] [ ]%
Page 6
