LEAD MANAGING UNDERWRITER
ADDITIONAL COMPENSATION AGREEMENT
June __, 2006
First Trust Advisors, L.P.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date hereof
(the "Underwriting Agreement"), by and among First Trust Tax-Advantaged
Preferred Income Fund, a Massachusetts business trust (the "Fund"), First Trust
Advisors, L.P., an Illinois limited partnership (the "Investment Advisor"),
Stonebridge Advisors, LLC (the "Sub-Advisor", and with the Investment Advisor,
the "Advisors") and each of the respective Underwriters named therein, with
respect to the issue and sale of the Fund's Common Shares of Beneficial
Interest, $0.01 par value (the "Common Shares"), as described therein (the
"Offering"). Reference is also made to (i) the Investment Management Agreement
dated June __, 2006 (the "Advisory Agreement") entered into between the Advisor
and the Fund, and (ii) the registration statement on Form N-2 (File Nos.
333-132639 and 811-21876) 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 Advisor hereby confirms its agreement with the Lead
Managing Underwriter (as defined below) with respect to the additional
compensation referred to in the "Underwriting" section of the Registration
Statement, payable by the Investment Advisor to the Lead Managing Underwriter.
The Investment Advisor agrees to pay to the Lead Managing Underwriter additional
compensation (the "Additional Compensation") as provided for in Section 2
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. Lead Managing Underwriter. For the purposes of this Lead Managing
Underwriter Additional Compensation Agreement ("Additional Compensation
Agreement"), RBC Capital Markets Corporation ("RBC"), an Underwriter of the
Common Shares, shall be deemed to be the "Lead Managing Underwriter."
SECTION 2. Payment of Additional Compensation.
(a) The Investment Advisor shall pay the Additional Compensation,
quarterly in arrears, to the Lead Managing Underwriter in an amount equal to the
product of (i) one-quarter of the "Applicable Percentage Factor" as set forth on
Schedule A hereto times (ii) the sum of the Fund's net asset value attributable
to the Fund's outstanding common shares, plus the liquidation preference of the
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Fund's outstanding preferred shares plus the principal amount of any borrowings
evidenced by notes, commercial paper or other similar instruments issued by the
Fund ("Average Daily Managed Assets").
(b) All fees payable hereunder shall be paid to the Lead Managing
Underwriter by wire transfer of immediately available funds within 15 days
following the end of each calendar quarter to a bank account designated by the
Lead Managing Underwriter. At the time of each payment of Additional
Compensation hereunder, the Investment Advisor shall deliver to the Lead
Managing Underwriter a statement indicating the amount of the aggregate Average
Daily Managed Assets on which such payment was based.
(c) The initial payment of Additional Compensation hereunder shall be
paid with respect to the calendar quarter ending September 30, 2005 and shall be
pro-rated for the number of days in such initial period from and including the
day upon which the Fund receives net proceeds from the Offering. 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 the Fund or the Advisors pursuant to the Underwriting Agreement.
SECTION 3. Maximum Additional Compensation Amount.
(a) The "Maximum Additional Compensation Amount" payable by the
Investment Advisor hereunder shall be such amount as, when taken together with
the amount of all other underwriting compensation received by the Lead Managing
Underwriter in connection with the offering of the Common Shares of the Fund,
equals the maximum compensation allowed under the conduct rules of the NASD, as
such rules are then in effect.
(b) The total amount of additional compensation payments under this
Agreement will not exceed [4.483048]% of the total price to the public of the
Common Shares sold in the Offering. In addition, as provided in the Underwriting
Agreement, the Fund will also pay partial reimbursement of expenses of the
Underwriters under Section 7 of the Underwriting Agreement (estimated not to
exceed $[0.0024] per share or [0.0118]% of the total price to the public of the
Common Shares sold in this Offering).
(c) The Additional Compensation is a separate item from other fee
and/or expense reimbursement. The sum total of all compensation to or
reimbursement of the Underwriters, including sales load, and First Trust
Portfolios, L.P. in connection with the Offering and the Additional
Compensation, will be limited to 9% (or $1.80 per Common Share) of the total
price to the public of the Common Shares sold in the Offering.
SECTION 4. Services to be Provided. The Lead Managing Underwriter has agreed to
provide, as requested by the Investment Advisor, specified after-market support
services designed to maintain the visibility of the Fund on an ongoing basis,
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relevant information, studies or reports regarding the Fund and the closed-end
investment company industry, and consultation regarding market discounts of the
Fund.
SECTION 5. Term. This Additional Compensation Agreement shall continue in
effect until terminated upon the earliest to occur of (a) the liquidation of the
Fund, (b) the payment by the Investment Advisor to the Lead Managing Underwriter
of the Maximum Additional Compensation Amount and (c) the termination of the
investment advisory relationship between the Fund and the Investment Advisor and
their respective successors in interest. For purposes of the foregoing sentence,
the Investment Advisor's successors in interest shall include only those
entities which are either affiliated with the Investment Advisor or which, if
unaffiliated, have provided material consideration to the Investment Advisor in
connection with the transfer of investment advisory responsibilities.
SECTION 6. Certain Understandings. The Investment Advisor acknowledges that the
Underwriters are not 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 any Underwriter, and the Underwriters are not hereby agreeing, to: (a)
furnish any advice or make any recommendations regarding the purchase or sale of
portfolio securities, or (b) render any opinions, valuations or recommendations
of any kind or to perform any such similar services. The Investment Advisor
represents and warrants that the profits derived from the Advisory Agreement
will not result in a breach of the Advisor's fiduciary duties under Section 36
of the Investment Company Act of 1940, as amended, and accordingly, that the
Additional Compensation payable hereunder does not involve an indirect use of
the Fund's assets for distribution.
SECTION 7. Not Exclusive. Nothing herein shall be construed as prohibiting any
Underwriter or its respective affiliates from acting as such for any other
clients (including other registered investment companies or other investment
advisors).
SECTION 8. No Liability. The Investment Advisor agrees that the Lead Managing
Underwriter shall have no liability to the Investment Advisor or the Fund for
any act or omission to act by such Lead Managing Underwriter in connection with
this Additional Compensation Agreement, in the absence of gross negligence or
willful misconduct on the part of the Lead Managing Underwriter. The Investment
Advisor agrees to indemnify and hold harmless the Lead Managing Underwriter and
its respective officers, directors, agents and employees against any loss or
expense arising out of or in connection with the Lead Managing Underwriter's
performance under this Additional Compensation Agreement. This provision shall
survive the termination, expiration or superseding of this Additional
Compensation Agreement.
SECTION 9. Assignment. This Additional Compensation Agreement may not be
assigned by any party without the prior written consent of each other party.
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SECTION 10. 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 11. Governing Law. This Additional Compensation Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 12. 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 as effective as delivery of a manually executed
counterpart hereof.
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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 between
the Investment Advisor and the Lead Managing Underwriter in accordance with its
terms.
Very truly yours,
RBC CAPITAL MARKETS CORPORATION
By:
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Managing Director
CONFIRMED AND ACCEPTED, as of the date first above written:
FIRST TRUST ADVISORS L.P.
By:
-----------------------------------
Name:
Title:
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SCHEDULE A
The "Applicable Percentage Factor" for the Lead Managing Underwriter is set
forth below:
LEAD MANAGING UNDERWRITER APPLICABLE PERCENTAGE FACTOR
------------------------- ----------------------------
RBC Capital Markets Corporation.......... 0.15%
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