EXPENSE REIMBURSEMENT, FEE WAIVER AND RECOVERY
AGREEMENT
THIS EXPENSE REIMBURSEMENT, FEE WAIVER AND RECOVERY AGREEMENT (this
"Agreement") is entered into between First Trust Exchange-Traded AlphaDEX(R)
Fund, a Massachusetts business trust (the "Trust"), and First Trust Advisors
L.P., an Illinois limited partnership ("FTA"), as of October 12, 2010.
RECITALS:
A. WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), comprised of various exchange-traded funds (each, a "Fund," and,
collectively, the "Funds") set forth on Exhibit A attached hereto, which may be
amended from time to time. Each Fund constitutes a separate exchange-traded fund
with its own investment objectives and policies.
B. WHEREAS, FTA is the investment adviser to the Funds and is responsible
for the selection and ongoing monitoring of the securities in the Funds'
portfolios and certain other services necessary for the management of the Funds
and is paid an annual management fee by the Funds.
C. WHEREAS, the Trust and FTA have entered into an expense reimbursement,
fee waiver, and recovery agreement dated April 26, 2007, as extended from time
to time (the "Prior Expense Reimbursement Agreement") pursuant to which FTA
agreed to waive management fees and reimburse certain expenses to prevent a
Fund's expense ratio from exceeding a particular expense cap for a term provided
therein.
D. WHEREAS, Section 5 of the Prior Expense Reimbursement Agreement
provided that FTA may recover a portion of the amount it reimbursed a Fund for
up to three years from the date the fee or expense was incurred during the
Expense Cap Term (as defined therein) to the extent such restitution would not
cause a Fund to exceed the specified expense cap. The obligations in Section 5
of the Prior Expense Reimbursement Agreement survive the termination of such
agreement.
E. WHEREAS, the Prior Expense Reimbursement Agreement shall terminate
immediately with respect to a Fund in the event that the investment advisory
agreement between such Fund and FTA (the "Advisory Agreement") is either
terminated for any reason or not renewed by the Board of Trustees.
F. WHEREAS, the Advisory Agreement is anticipated to automatically
terminate in connection with a change of control of FTA and cause the Prior
Reimbursement Agreement to terminate pursuant to Section 5 thereof.
G. WHEREAS, FTA proposes to continue to waive management fees and
reimburse certain expenses to prevent a Fund's Expense Ratio (as defined below)
from exceeding a particular expense cap and to retain its ability to seek
restitution for any fees waived during the Recovery Period (as defined
below)(including fees for which FTA would be eligible for restitution under
Section 5 of the Prior Expense Reimbursement Agreement).
NOW, THEREFORE, IN CONSIDERATION of the foregoing facts and other good and
valuable consideration, the parties hereto hereby agree as follows:
Section 1. Definitions. The following terms shall have the following
definitions in this Agreement:
"Expense Ratio" is defined as a Fund's annual investment management fees
and expenses (excluding taxes, interest, all brokerage commissions, other normal
charges incident to the purchase and sale of portfolio securities, and
extraordinary expenses) as a percentage of such Fund's daily net asset value.
"Expense Cap" shall be equal to an Expense Ratio for the Funds as set
forth on Exhibit A.
Section 2. Waiver of Fees and Reimbursement of Expenses. On a Fund by
Fund basis, FTA will waive investment management fees payable to it by a Fund
and/or reimburse a Fund for other expenses borne by such Fund up to such Fund's
respective Expense Cap set forth in Exhibit A for the term set forth in Exhibit
A (the "Expense Cap Term"), subject to FTA's right to recover such fees and
expenses set forth in Section 3. The aggregate amount of investment management
fees waived and expenses reimbursed for a Fund from time to time under this
Agreement for a particular Fund shall collectively be referred to as the
"Reimbursed Amount." The Reimbursed Amount shall be accrued and paid on a
monthly basis for each Fund but calculated and settled on an annual fiscal year
basis.
Section 3. Recovery. To the extent that the Expense Ratio of a particular
Fund is less than such Fund's applicable Expense Cap, FTA may recover a portion
of the Reimbursed Amount for such Fund equal to the amount of the Expense Cap
less the actual Expense Ratio for such Fund (the "Recovered Amount") for up to
three (3) years from the date the fee or expense was incurred during the Expense
Cap Term (the "Recovery Period"). The Recovered Amount shall be accrued and paid
on a monthly basis for each Fund but calculated and settled on an annual fiscal
year basis. Under no circumstances, however, will FTA be eligible to recover any
of the Reimbursed Amount if such recovery would cause the Expense Ratio for a
particular Fund to exceed such Fund's Expense Cap for the most recent fiscal
year period for which the Expense Cap was in place. Accordingly, if during the
Recovery Period the Expense Cap is no longer in place, FTA may not recover any
portion of the Reimbursed Amount if such recovery would cause the Fund's Expense
Ratio to exceed the Fund's Expense Cap that was most recently in place. In
addition, FTA may recover any amounts eligible for restitution to FTA under the
terms and calculated and paid in the manner set forth in the Prior Expense
Reimbursement Agreement. Notwithstanding anything to the contrary herein, the
obligations set forth in this Section 3 shall survive any termination of this
Agreement as contemplated in Section 5.
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Section 4. FTA's fund accounting department shall develop and maintain
appropriate internal accounting policies and procedures to monitor and calculate
the Reimbursed Amount and the Recovered Amount on a monthly basis for each Fund.
Section 5. Term and Continuation. This Agreement shall be effective on
the date provided on Exhibit A (the "Effective Date") for each respective Fund.
This Agreement shall continue in effect for each respective Fund until the end
of such Fund's Recovery Period unless the Agreement is continued for additional
periods as agreed to by the parties. This Agreement may be terminated by the
Trust on behalf of a Fund at any time and by FTA after the expiration of the
Expense Cap Term of a particular Fund upon sixty (60) days' written notice to
the other party. Notwithstanding the foregoing, this Agreement shall terminate
immediately with respect to a Fund in the event that the investment advisory
agreement between such Fund and FTA is either (i) terminated for any reason or
(ii) not renewed by the Board of Trustees.
Section 6. Notices. Any notice shall be sufficient when sent by
registered or certified mail to the other party at the address of such party,
set forth below such party's signature on this Agreement.
Section 7. Entire Agreement; Amendments. This Agreement supersedes and
abrogates all prior understandings, communications and agreements (whether
written or oral) between the parties with respect to the subject matter hereof,
and this Agreement constitutes the entire agreement between the parties with
respect to such subject matter. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto. No assignment by
either party shall be of any force except with the prior written consent of the
other party.
Section 8. Governing Law; Miscellaneous. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Illinois (without
regard to principles of law), including all matters of construction, validity,
and performance; provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation of the Securities and
Exchange Commission. If any provision of this Agreement shall be held or made
invalid by a court's decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. The captions in this Agreement are
included for convenience only and in no way define any of the provisions hereof
or otherwise affect their construction or effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FIRST TRUST ADVISORS L.P. FIRST TRUST EXCHANGE-TRADED
ALPHADEX(R) FUND
By /s/ Xxxxx X. Xxxxx By /s/ Xxxxx X. Xxxxx
--------------------------------- -----------------------------
Xxxxx X. Xxxxx, President Xxxxx X. Xxxxx, President
Address: First Trust Advisors L.P. Address: First Trust Advisors L.P.
000 X. Xxxxxxx Xxxxx 000 X. Xxxxxxx Xxxxx
Xxxxx 000 Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: W. Xxxxx Xxxxxxx Attention: W. Xxxxx Xxxxxxx
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EXHIBIT A
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NAME OF FUND EXPENSE CAP EFFECTIVE DATE EXPENSE CAP TERM
(OF AVERAGE NET
ASSETS)
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First Trust Consumer Discretionary AlphaDEX(R) 0.70% October 12, 2010 October 12, 2012
Fund
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First Trust Consumer Staples AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Energy AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Financials AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Health Care AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Industrials/Producer Durables 0.70% October 12, 2010 October 12, 2012
AlphaDEX(R) Fund
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First Trust Materials AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Technology AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Utilities AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Large Cap Core AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Mid Cap Core AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Small Cap Core AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Large Cap Value Opportunities 0.70% October 12, 2010 October 12, 2012
AlphaDEX(R) Fund
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First Trust Large Cap Growth Opportunities 0.70% October 12, 2010 October 12, 2012
AlphaDEX(R) Fund
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First Trust Multi Cap Value AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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First Trust Multi Cap Growth AlphaDEX(R) Fund 0.70% October 12, 2010 October 12, 2012
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