INTERIM INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 12th day of October, 2010, by
and between FIRST TRUST EXCHANGE-TRADED ALPHADEX(R) FUND, a Massachusetts
business trust (the "Company"), and FIRST TRUST ADVISORS L.P., an Illinois
limited partnership (the "Adviser").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company;
WHEREAS, the Company is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Company has offered shares in the series set forth on
Schedule A attached hereto (each such series being herein referred to as a
"Fund," and collectively as the "Funds");
WHEREAS, the Company has retained the Adviser as investment adviser, to
furnish certain investment advisory and portfolio management services to the
Company with respect to each Fund pursuant to an Investment Management Agreement
(the "Management Agreement");
WHEREAS, effective this date, Xxxxx X. Xxxxx, the President of the
Adviser, has acquired all the common stock of The Charger Corporation, the
general partner to the Adviser (the "Transaction");
WHEREAS, the Transaction operates as an "assignment" of the Management
Agreement and therefore the Management Agreement terminates pursuant to Section
11 thereof;
WHEREAS, the Company desires to continue to retain the Adviser to furnish
certain investment advisory and portfolio management services for each Fund; and
WHEREAS, the Company and the Adviser desire to enter into this agreement
(the "Agreement") pursuant to Rule 15a-4 under the 1940 Act, under which the
Adviser will furnish certain investment advisory and portfolio management
services for each Fund upon the terms and conditions hereafter set forth:
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Company hereby engages the Adviser to act as the investment
adviser for, and to manage the investment and reinvestment of the assets of,
each Fund in accordance with each Fund's investment objective and policies and
limitations, and to administer each Fund's affairs to the extent requested by
and subject to the supervision of the Board of Trustees of the Company for the
period and upon the terms herein set forth. The investment of each Fund's assets
shall be subject to the Fund's policies, restrictions and limitations with
respect to securities investments as set forth in the Fund's then current
registration statement under the l940 Act, and all applicable laws and the
regulations of the Securities and Exchange Commission relating to the management
of registered open-end management investment companies.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services (other than such services, if any,
provided by the Funds' transfer agent, administrator or other service providers)
for the Funds, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Company if elected to such
positions, and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall at its own expense furnish all executive and
other personnel, office space, and office facilities required to render the
investment management and administrative services set forth in this Agreement.
In the event that the Adviser pays or assumes any expenses of a Fund not
required to be paid or assumed by the Adviser under this Agreement, the Adviser
shall not be obligated hereby to pay or assume the same or similar expense in
the future; provided, that nothing contained herein shall be deemed to relieve
the Adviser of any obligation to a Fund under any separate agreement or
arrangement between the parties.
2. The Adviser shall, for all purposes herein provided, be deemed to be
an independent contractor and, unless otherwise expressly provided or
authorized, shall neither have the authority to act for nor represent the
Company in any way, nor otherwise be deemed an agent of the Company.
3. For the services and facilities described in Section 1, each Fund will
pay to the Adviser, and the Adviser agrees to accept as full compensation
therefor, an investment management fee equal to the annual rate of each Fund's
average daily net assets as set forth on Schedule A, subject to the following.
The compensation accrued hereunder will be held in an interest-bearing escrow
account with the Fund's custodian or another bank (as defined in the 0000 Xxx)
designated by the Company. If a new investment management agreement (the "New
Management Agreement") with the Adviser on behalf of the respective Fund is
approved by the vote of a majority of the outstanding voting securities of such
Fund by the end of the 150-day term of this Agreement, the amount in the escrow
account (including the interest earned) will be paid to the Adviser. If a
majority of the outstanding voting securities of the applicable Fund does not
approve the New Management Agreement with the Adviser on behalf of such Fund
within the 150-day period, the Adviser will be paid, out of the escrow account,
the lesser of: (i) any costs incurred by the Adviser in performing the Agreement
for that Fund (plus interest earned on that amount while in escrow); or (ii) the
total amount in the escrow account for that Fund (plus interest earned).
For the month and year in which this Agreement becomes effective, or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement shall have been in effect during the month and year,
respectively. The services of the Adviser to the Company under this Agreement
are not to be deemed exclusive, and the Adviser shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby.
4. The Adviser shall arrange for suitably qualified officers or employees
of the Adviser to serve, without compensation from the Company, as trustees,
officers or agents of the Company, if duly elected or appointed to such
positions, and subject to their individual consent and to any limitations
imposed by law.
5. For purposes of this Agreement, brokerage commissions paid by a Fund
upon the purchase or sale of a Fund's portfolio securities shall be considered a
cost of securities of the Fund and shall be paid by the Fund.
6. The Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of a Fund's securities on behalf of the Fund,
and is directed to use its commercially reasonable efforts to obtain best
execution, which includes most favorable net results and execution of the Fund's
orders, taking into account all appropriate factors, including price, dealer
spread or commission, size and difficulty of the transaction and research or
other services provided. Subject to approval by the Company's Board of Trustees
and to the extent permitted by and in conformance with applicable law (including
Rule 17e-1 of the 1940 Act), the Adviser may select brokers or dealers
affiliated with the Adviser. It is understood that the Adviser will not be
deemed to have acted unlawfully, or to have breached a fiduciary duty to the
Company, or be in breach of any obligation owing to the Company under this
Agreement, or otherwise, solely by reason of its having caused the Fund to pay a
member of a securities exchange, a broker or a dealer a commission for effecting
a securities transaction for the Fund in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Adviser determined in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Adviser's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the Adviser may, to the extent permitted by applicable law,
aggregate purchase and sale orders of securities with similar orders being made
simultaneously for other accounts managed by the Adviser or its affiliates, if
in the Adviser's reasonable judgment such aggregation shall result in an overall
economic benefit to a Fund, taking into consideration the selling or purchase
price, brokerage commissions and other expenses. In the event that a purchase or
sale of an asset of a Fund occurs as part of any aggregate sale or purchase
orders, the objective of the Adviser and any of its affiliates involved in such
transaction shall be to allocate the securities so purchased or sold, as well as
expenses incurred in the transaction, among the Fund and other accounts in an
equitable manner. Nevertheless, each Fund acknowledges that under some
circumstances, such allocation may adversely affect the Fund with respect to the
price or size of the securities positions obtainable or salable. Whenever a Fund
and one or more other investment advisory clients of the Adviser have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner believed by the Adviser to be equitable to each, although
such allocation may result in a delay in one or more client accounts being fully
invested that would not occur if such an allocation were not made. Moreover, it
is possible that due to differing investment objectives or for other reasons,
the Adviser and its affiliates may purchase securities of an issuer for one
client and at approximately the same time recommend selling or sell the same or
similar types of securities for another client.
The Adviser will not arrange purchases or sales of securities between a
Fund and other accounts advised by the Adviser or its affiliates unless (a) such
purchases or sales are in accordance with applicable law (including Rule 17a-7
of the 0000 Xxx) and the Company's policies and procedures, (b) the Adviser
determines the purchase or sale is in the best interests of each Fund, and (c)
the Company's Board of Trustees have approved these types of transactions.
To the extent a Fund seeks to adopt, amend or eliminate any objectives,
policies, restrictions or procedures in a manner that modifies or restricts
Adviser's authority regarding the execution of the Fund's portfolio
transactions, the Fund agrees to use reasonable commercial efforts to consult
with the Adviser regarding the modifications or restrictions prior to such
adoption, amendment or elimination.
The Adviser will communicate to the officers and trustees of the Company
such information relating to transactions for the Funds as they may reasonably
request. In no instance will portfolio securities be purchased by or sold to the
Adviser or any affiliated person of either the Company or the Adviser, except as
may be permitted under the 1940 Act.
The Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform in all material respects to all applicable rules
and regulations of the Securities and Exchange Commission and comply in
all material respects with all policies and procedures adopted by the
Board of Trustees for the Company and communicated to the Adviser and, in
addition, will conduct its activities under this Agreement in all material
respects in accordance with any applicable regulations of any governmental
authority pertaining to its investment advisory activities;
(c) will report regularly to the Board of Trustees of the Company
(generally on a quarterly basis) and will make appropriate persons
available for the purpose of reviewing with representatives of the Board
of Trustees on a regular basis at reasonable times the management of each
Fund, including, without limitation, review of the general investment
strategies of each Fund, the performance of each Fund's investment
portfolio in relation to relevant standard industry indices and general
conditions affecting the marketplace and will provide various other
reports from time to time as reasonably requested by the Board of Trustees
of the Company; and
(d) will prepare and maintain such books and records with respect
to each Fund's securities and other transactions as required under
applicable law and will prepare and furnish the Company's Board of
Trustees such periodic and special reports as the Board of Trustees may
reasonably request. The Adviser further agrees that all records which it
maintains for each Fund are the property of the Fund and the Adviser will
surrender promptly to the Fund any such records upon the request of the
Fund (provided, however, that Adviser shall be permitted to retain copies
thereof); and shall be permitted to retain originals (with copies to the
Fund) to the extent required under Rule 204-2 of the Investment Advisers
Act of 1940 or other applicable law.
7. Subject to applicable statutes and regulations, it is understood that
officers, trustees, or agents of the Company are, or may be, interested persons
(as such term is defined in the 1940 Act and rules and regulations thereunder)
of the Adviser as officers, directors, agents, shareholders or otherwise, and
that the officers, directors, shareholders and agents of the Adviser may be
interested persons of the Company otherwise than as trustees, officers or
agents.
8. The Adviser shall not be liable for any loss sustained by reason of
the purchase, sale or retention of any security, whether or not such purchase,
sale or retention shall have been based upon the investigation and research made
by any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
9. Subject to obtaining the initial and periodic approvals required under
Section 15 of the 1940 Act, the Adviser may retain one or more sub-advisers at
the Adviser's own cost and expense for the purpose of furnishing one or more of
the services described in Section 1 hereof with respect to a Fund. Retention of
a sub-adviser shall in no way reduce the responsibilities or obligations of the
Adviser under this Agreement and the Adviser shall be responsible to a Fund for
all acts or omissions of any sub-adviser in connection with the performance of
the Adviser's duties hereunder.
10. The Company acknowledges that the Adviser now acts, and intends in the
future to act, as an investment adviser to other managed accounts and as
investment adviser or sub-investment adviser to one or more other investment
companies that are not a series of the Company. In addition, the Company
acknowledges that the persons employed by the Adviser to assist in the Adviser's
duties under this Agreement will not devote their full time to such efforts. It
is also agreed that the Adviser may use any supplemental research obtained for
the benefit of the Company in providing investment advice to its other
investment advisory accounts and for managing its own accounts.
11. With respect to each Fund, this Agreement shall become effective on
the date provided in Schedule A for the applicable Fund (the "Effective Date")
and shall remain in full force for (i) 150 days following the Effective Date or
(ii) until a vote of a majority of the outstanding voting securities of the
respective Fund shall approve the New Management Agreement with the Adviser or
(iii) unless sooner terminated for the respective Fund as hereinafter provided,
whichever occurs first.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any penalty
by the Adviser upon sixty (60) days' written notice to the other party. The
Company may terminate this Agreement on behalf of a Fund by action of the Board
of Trustees or by vote of a majority of the outstanding voting securities of the
respective Fund, upon ten (10) calendar days' written notice to the Adviser
without payment of any penalty. This Agreement may be terminated, at any time,
without the payment of any penalty, by the Board of Trustees of the Company, or
by vote of a majority of the outstanding voting securities of the Company, in
the event that it shall have been established by a court of competent
jurisdiction that the Adviser, or any officer or director of the Adviser, has
taken any action which results in a breach of the material covenants of the
Adviser set forth herein. Termination of this Agreement shall not affect the
right of the Adviser to receive payments on any unpaid balance of the
compensation, described in Section 3, earned prior to such termination and for
any additional period during which the Adviser serves as such for the Fund,
subject to applicable law. The terms "assignment" and "vote of the majority of
outstanding voting securities" shall have the same meanings set forth in the
1940 Act and the rules and regulations thereunder.
12. This Agreement may be amended or modified only by a written instrument
executed by both parties.
13. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
14. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for receipt of such notice.
15. All parties hereto are expressly put on notice of the Company's
Declaration of Trust and all amendments thereto, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts and the limitation of
shareholder and trustee liability contained therein. This Agreement is executed
on behalf of the Company (and its Funds) by the Company's officers as officers
and not individually and the obligations imposed upon the Company (and its
Funds) by this Agreement are not binding upon any of the Company's Trustees,
officers or shareholders individually but are binding only upon the assets and
property of the applicable Fund, and persons dealing with the Company or a Fund
thereof must look solely to the assets of the applicable Fund for the
enforcement of any claims.
16. This Agreement shall be construed in accordance with applicable
federal law and (except as to Section 15 hereof which shall be construed in
accordance with the laws of Massachusetts) the laws of the State of Illinois.
IN WITNESS WHEREOF, the Company and the Adviser have caused this Agreement
to be executed on the day and year above written.
FIRST TRUST EXCHANGE-TRADED
ALPHADEX(R) FUND
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
FIRST TRUST ADVISORS L.P.
By: /s/ Xxxxx X. Xxxxx
------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
SCHEDULE A
FUNDS
------------------------------------------------------------- ---------------- --------------
ANNUAL RATE
OF AVERAGE EFFECTIVE
INDEX SERIES DAILY NET DATE
ASSETS
------------------------------------------------------------- ---------------- --------------
First Trust Consumer Discretionary AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Consumer Staples AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Energy AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Financials AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Health Care AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Industrials/Producer Durables AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Materials AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Technology AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Utilities AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Large Cap Core AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Mid Cap Core AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Small Cap Core AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Large Cap Value Opportunities AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Large Cap Growth Opportunities AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Multi Cap Value AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
First Trust Multi Cap Growth AlphaDEX(R) Fund 0.50% 10/12/2010
------------------------------------------------------------- ---------------- --------------
