INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement (this "Agreement"), made as of
March 16, 2020, by and among the First Trust Exchange-Traded Fund III, a
Massachusetts business trust (the "Trust"), First Trust Advisors L.P., an
Illinois limited partnership (the "Manager") and a registered investment adviser
with the Securities and Exchange Commission ("SEC"), and Horizon Investments,
LLC, a South Carolina limited liability company and a registered investment
adviser with the SEC (the "Sub-Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Trust is authorized to issue shares in separate series, with
each series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Trust intends to offer shares in the series set forth on
Schedule A attached hereto and any other series as to which this Agreement may
hereafter be made applicable and set forth on Schedule A, which may be amended
from time to time to add such series by mutual agreement of the Trust, the
Manager and the Sub-Adviser (each such series being herein referred to as a
"Fund" and collectively, the "Funds");
WHEREAS, the Trust has retained the Manager to serve as the investment
adviser for each Fund pursuant to an Investment Management Agreement between the
Manager and the Trust with an effective date for the applicable Fund set forth
on Schedule A hereto (as such agreement may be modified from time to time, the
"Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may, subject
to certain requirements, appoint one or more sub-advisers at its own cost and
expense for the purpose of furnishing certain services required under the
Management Agreement;
WHEREAS, pursuant to the Management Agreement, the respective Fund will
pay to the Manager, at the end of each calendar month, and the Manager agrees to
accept as full compensation therefor, an investment management fee equal to an
annual rate of such Fund's average daily net assets as set forth in such
Management Agreement and reflected on Schedule A hereto (the "Investment
Management Fee"), and the Manager shall pay all of the expenses of each Fund of
the Trust (including the cost of transfer agency, sub-advisory, custody, fund
administration, legal, audit and other services and license fees, if any) but
excluding the fee payment under the Management Agreement, interest, taxes,
brokerage commissions, acquired fund fees, if any, and expenses and other
expenses connected with the execution of portfolio transactions (such as
dividend and distribution expenses from securities sold short and/or other
investment related costs), distribution and service fees payable pursuant to a
Rule 12b-1 plan, if any, and extraordinary expenses (collectively, the "Fund
Expenses"); and
WHEREAS, the Trust and the Manager desire to retain the Sub-Adviser to
furnish investment advisory services for each Fund's investment portfolio, upon
the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Trust and the Manager hereby appoint the Sub-Adviser
to serve as sub-adviser to each Fund and to provide certain investment
sub-advisory services to each Fund for the period and on the terms set forth in
this Agreement and Schedule A. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation set forth
herein and in Schedule A. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Trust, a Fund or the Manager in any way, nor otherwise be deemed an agent of the
Trust, a Fund or the Manager.
2. Services to Be Performed.
(a) Subject always to the oversight of the Trust's Board of Trustees (the
"Board of Trustees") and the Manager, the Sub-Adviser will act as sub-adviser
for and manage on a discretionary basis the investment and reinvestment of the
assets of each Fund allocated to the Sub-Adviser from time to time, furnish an
investment program in respect of, make investment decisions for, report such
investment decisions to the Manager and if authorized under Section 3 hereof,
place all orders (either directly or through the Manager) for the purchase and
sale of securities and other assets for the respective Fund's investment
portfolio, all on behalf of such Fund and consistent with such Fund's currently
effective registration statement on Form N-1A as the same may thereafter be
amended from time to time. In the performance of its duties, the Sub-Adviser
will in all material respects (i) satisfy any applicable fiduciary duties it may
have to the applicable Fund, (ii) monitor a Fund's investments or other
instruments selected for the Fund by the Sub-Adviser, (iii) comply with the
provisions of the Trust's Declaration of Trust and By-laws, as amended from time
to time and communicated by the Fund or the Manager to the Sub-Adviser in
writing, (iv) comply with (A) the investment objectives, policies and
restrictions stated in the applicable Fund's most recently effective prospectus
and statement of additional information, (B) such other investment objectives,
policies, restrictions or instructions as the Manager or the Trust's Board of
Trustees may communicate to the Sub-Adviser in writing, and (C) any changes to
the objectives, policies, restrictions or instructions required under the
foregoing (A) and (B) as communicated to the Sub-Adviser in writing, and (v)
provide assistance in connection with the valuation of portfolio assets held by
the respective Fund as reasonably requested by the Manager or the respective
Fund. The Sub-Adviser and Manager will each make its officers and employees
available to the other from time to time at reasonable times to review the
investment objectives, policies and restrictions of the applicable Fund and to
consult with each other regarding the investment affairs of such Fund. Each Fund
or the Manager shall provide the Sub-Adviser with current copies of the Trust's
Declaration of Trust, the Trust's By-laws, the respective Fund's prospectus and
statement of additional information and any amendments thereto, and any policies
or limitations not appearing therein as they may be relevant to the
Sub-Adviser's performance under this Agreement.
(b) The Sub-Adviser will communicate to the officers and Trustees of the
Trust such information relating to transactions for a Fund as they may
reasonably request. In no instance will a Fund's portfolio assets be purchased
from or sold to the Manager, the Sub-Adviser or any affiliated person of either
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the Trust, the Manager or the Sub-Adviser, except as may be permitted under the
1940 Act and under no circumstances will the Sub-Adviser select brokers or
dealers for Fund transactions on the basis of Fund share sales by such brokers
or dealers.
(c) For purposes of complying with Rule 10f-3, Rule 12d3-1, Rule 17a-10
and Rule 17e-1 under the 1940 Act, the Sub-Adviser hereby agrees that it will
not consult with any other sub-adviser of an investment company or a series of
an investment company that is advised by the Manager (the "First Trust Fund
Complex") or an affiliated person of a sub-adviser (including any sub-adviser
that is a principal underwriter or an affiliated person of such principal
underwriter), concerning transactions for a Fund or any fund in the First Trust
Fund Complex in securities or other fund assets. In addition, with respect to a
fund in the First Trust Fund Complex with multiple sub-advisers, the Sub-Adviser
shall be limited to providing investment advice with respect to only the
discrete portion of the fund's portfolio as may be determined from time to time
by the Board of Trustees or the Manager, and shall not consult with the
sub-adviser (including any sub-adviser that is a principal underwriter or an
affiliated person of such principal underwriter) as to any other portion of the
fund's portfolio concerning transactions for the fund in securities or other
assets. Notwithstanding the foregoing, the provisions in this paragraph do not
apply to the consultations between the Sub-Adviser and any sub-adviser retained
by the Sub-Adviser pursuant to Section 7 hereunder.
(d) The Sub-Adviser further agrees that it:
(i) will use the same degree of skill and care in providing such
services as it uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(ii) will (A) conform in all material respects to all applicable
rules and regulations of the SEC, the Commodity Futures Trading Commission
("CFTC") and any other applicable regulatory authority, (B) comply in all
material respects with all policies and procedures adopted by the Board of
Trustees for the Trust and communicated to the Sub-Adviser in writing, and
(C) conduct its activities under this Agreement in all material respects
in accordance with any applicable law and regulations of any governmental
authority pertaining to its investment advisory, commodity pool operator
and commodity trading advisory activities;
(iii) will report to the Manager and to the Board of Trustees on a
quarterly basis and will make appropriate persons available for the
purpose of reviewing with representatives of the Manager and the Board of
Trustees on a regular basis at such times as the Manager or the Board of
Trustees may reasonably request in writing regarding the management of the
respective Fund, including, without limitation, review of the general
investment strategies of the Fund, the performance of the 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 Manager or
the Board of Trustees;
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(iv) will prepare and maintain such books and records with respect
to a Fund's assets and other transactions for the Fund's investment
portfolio as required for registered investment advisers performing such
services under applicable law, the Fund's compliance policies and
procedures or as otherwise requested by the Manager or the Board of
Trustees and will prepare and furnish the Manager and the Board of
Trustees such periodic and special reports as the Board of Trustees or the
Manager may request. Such records prepared and maintained by the
Sub-Adviser as required hereunder shall be open to inspection at all
reasonable times by the Manager or the Fund and any appropriate regulatory
authorities. The Sub-Adviser further agrees that all records that it
maintains for a Fund are the property of the Fund and the Sub-Adviser will
surrender promptly to such Fund any such records upon the request of the
Manager or the Fund (provided, however, that the Sub-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 under the Investment Advisers Act of 1940 or other applicable law;
and each Fund and the Manager agree that the Sub-Adviser is entitled to
use, present and retain records (or copies thereof) for the investment
performance of each Fund (or portion thereof managed by the Sub-Adviser),
both as a stand-alone performance record or as part of one or more
performance composites of the Sub-Adviser, as the Sub-Adviser may
determine from time to time during and after the termination of this
Agreement; and
(v) will monitor the pricing of portfolio assets, and events
relating to the issuers of those assets and the markets in which the
securities or other assets trade in the ordinary course of managing the
portfolio investments of a Fund, and will notify the Manager promptly of
any issuer-specific or market events or other situations that occur
(particularly those that may occur after the close of a foreign market in
which the investments may primarily trade but before the time at which the
Fund's investments are priced on a given day) that may materially impact
the pricing of one or more securities or other assets in the portfolio. In
addition, the Sub-Adviser will, at the Manager's reasonable request,
provide assistance to the Manager in connection with evaluating the impact
that such an event may have on the net asset value of a Fund and in
determining a recommended fair value of the affected investment or
investments.
(e) The Sub-Adviser shall have no obligation or right to make decisions or
take other action with respect to proxies, tender offers or other corporate
actions regarding investments the Sub-Adviser has recommended, it being
understood that the Manager shall have such right and responsibility unless
reserved by a Fund. Notwithstanding the foregoing, the Sub-Adviser will advise
the Manager and/or the Fund, upon request, with respect to proxies, tender
offers and other corporate actions regarding securities or other assets in the
portion of the Fund's portfolio that was allocated to the Sub-Adviser in
sufficient time to permit the Manager or the Fund to take appropriate action
with respect to such portfolio investments. Similarly, the Sub-Adviser shall
have no responsibility or obligation with respect to filing of claims or other
documents in any class action lawsuits relating to investments held or
previously held by the Fund.
3. Brokerage and Trade Execution. The Sub-Adviser will have no authority
to select brokers or dealers or otherwise place orders for the execution of the
purchase and sales of portfolio investments on behalf of any Fund, unless and
until such time as the Trust, the Manager and the Sub-Adviser mutually agree
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that the Sub-Adviser will be authorized to undertake such activities on behalf
of a Fund. If, and only to the extent that, the Board of Trustees and the
Manager grant the Sub-Adviser such authority in the future, the following
provisions of this Section 3 will apply:
(a) Unless otherwise provided by the Manager, the Sub-Adviser is
authorized to select and enter into agreements with the brokers, dealers,
futures commission merchants, banks or any other agent or counterparty
that will execute the purchases and sales of portfolio investments for a
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
among other things, price, dealer spread or commission, size and
difficulty of the transaction and research or other services provided.
Subject to approval by the Board of Trustees and compliance with the
policies and procedures adopted by the Board of Trustees for the
respective Fund and to the extent permitted by and in conformance with
applicable law (including if applicable Rule 17e-1 under the 1940 Act),
the Sub-Adviser may select brokers or dealers affiliated with the
Sub-Adviser. It is understood that the Sub-Adviser will not be deemed to
have acted unlawfully, or to have breached a fiduciary duty to the Trust
or a Fund, or be in breach of any obligation owing to the Trust or a Fund
under this Agreement, or otherwise, solely by reason of its having caused
a 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 Sub-Adviser determined in good faith that
the commission paid was reasonable in relation to the value of the
brokerage or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Sub-Adviser's
overall responsibilities with respect to its accounts, including the
respective Fund, as to which it exercises investment discretion.
(b) In addition, the Sub-Adviser may, to the extent permitted by
applicable law, aggregate purchase and sale orders of securities or other
instruments placed with respect to the assets of a Fund with similar
orders being made simultaneously for other accounts managed by the
Sub-Adviser or its affiliates, if in the Sub-Adviser's reasonable judgment
such aggregation shall result in an overall economic benefit to the 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 Sub-Adviser and any of its affiliates involved in
such transaction shall be to allocate the assets so purchased or sold, as
well as expenses incurred in the transaction, among the Fund and other
accounts in a fair and equitable manner. Nevertheless, each Fund and the
Manager acknowledge that under some circumstances, such allocation may
adversely affect the Fund with respect to, among other things, the price
or size of the assets obtainable or salable. Whenever a Fund and one or
more other investment advisory clients of the Sub-Adviser have available
funds for investment, investments suitable and appropriate for each will
be allocated in a manner believed by the Sub-Adviser to be equitable to
each, although such allocation may result in a delay in one or more client
accounts being, or the inability of one or more accounts to be, fully
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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 Sub-Adviser and its affiliates may purchase
securities, assets or other instruments of an issuer for one client and at
approximately the same time recommend selling or sell the same or similar
types of securities, assets or instruments for another client.
(c) A Fund may adopt policies and procedures that modify or restrict
the Sub-Adviser's authority regarding the execution of the Fund's
portfolio transactions set forth herein, provided that no such policy or
procedure shall bind the Sub-Adviser until it has been communicated by the
Fund or the Manager in writing to the Sub-Adviser. The Manager shall
provide reasonable advance notice to the Sub-Adviser of such policies and
procedures and any amendments thereto.
4. Custody. Each Fund's assets shall be maintained in the custody of its
designated bank custodian or custodians or such other entities as permitted
under applicable law. The Sub-Adviser will not hold, or have custody of, any
asset of the Fund (or the Fund's documents of title, if any) on behalf of the
Fund or Manager. Any assets added to the Fund shall be delivered directly to the
Fund's custodians, and the Sub-Adviser shall have no liability for the acts or
omissions of any such custodians, except for a loss resulting from the willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in the
performance of its duties under this Agreement, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
5. Cross Trades. The Sub-Adviser will not arrange purchases or sales of
securities or other assets between a Fund and other accounts advised by the
Sub-Adviser or its affiliates unless (i) such purchases or sales are in
accordance with applicable law (including, if applicable, Rule 17a-7 under the
0000 Xxx) and the Fund's policies and procedures, (ii) the Sub-Adviser
determines the purchase or sale is in the best interests of the Fund, and (iii)
the Board of Trustees has approved these types of transactions.
6. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement; provided, however, the Sub-Adviser will not be responsible for
interest, taxes, brokerage commissions, if any and other expenses connected with
the execution of portfolio transactions (such as dividend and distribution
expenses from securities sold short and/or other investment-related costs),
distribution and service fees payable pursuant to a Rule 12b-1 plan, if any,
acquired fund fees and expenses or extraordinary expenses of any Fund. Further,
the Sub-Adviser agrees to bear any and all costs and expenses arising in
connection with any actual, proposed, expected or possible assignment of this
Agreement (even if a proposed, expected or possible assignment ultimately does
not take place). For the avoidance of doubt, without limiting the immediately
preceding sentence, if there is a termination (or possible or anticipated
termination) of this Agreement as a result of an assignment (or possible or
anticipated assignment), then the Sub-Adviser shall bear, without limitation,
(a) the expenses and costs incurred in connection with preparing, printing,
filing and mailing an information statement or proxy statement, as applicable
and (b) if relevant, solicitation and other costs associated with the use of a
proxy statement.
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7. Additional Sub-Advisers. Subject to obtaining the initial and periodic
approvals required under Section 15 of the 1940 Act (after taking into effect
any exemptive order, amendment thereto, no-action assurances or other relief,
rule or regulation upon which the Fund may rely) and the approval of the
Manager, the Sub-Adviser may retain one or more additional sub-advisers at the
Sub-Adviser's own cost and expense for the purpose of furnishing one or more of
the services described in Section 2 hereof with respect to a Fund. Retention of
a sub-adviser hereunder shall in no way reduce the responsibilities or
obligations of the Sub-Adviser under this Agreement and the Sub-Adviser shall be
responsible to the respective Fund for all acts or omissions of any sub-adviser
in connection with the performance of the Sub-Adviser's duties hereunder.
8. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Manager will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory fee
(the "Sub-Advisory Fee") equal to the percentage set forth in Schedule A (the
"Sub-Advisory Fee Rate") monthly in arrears of any remaining monthly Investment
Management Fee paid to the Manager by the respective Fund for the average daily
net assets of the respective Fund allocated to the Sub-Adviser after such Fund's
average Fund Expenses for the average daily net assets allocated to the
Sub-Adviser accrued during the most recent twelve months (or shorter period
during the first eleven months of this Agreement) are subtracted from such
Investment Management Fee for that month. If the average accrued Fund Expenses
for such Fund for any rolling average twelve-month period are greater than such
Fund's Investment Management Fee for the twelfth month of such period, no
Sub-Advisory Fee will be due the Sub-Adviser for such month. For the avoidance
of doubt, any deficit will not be carried forward for purposes of calculating
the Sub-Advisory Fee for a Fund in any subsequent month. 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 is
in effect during the month and year, respectively. At the request of the
Sub-Adviser, the Manager shall provide the Sub-Adviser with an accounting
reasonably satisfactory to the Sub-Adviser of the calculation of the
Sub-Advisory Fee for a Fund. The Manager shall provide prompt advance notice to
the Sub-Adviser of any change to the Manager's compensation agreements with
respect to a Fund, which change may require approval by the Board of Trustees.
9. Services to Others. The Trust and the Manager acknowledge that the
Sub-Adviser now acts, or may in the future act, as an investment adviser to
other managed accounts and as investment adviser or investment sub-adviser to
one or more other investment companies that are not series of the Trust. In
addition, the Trust and the Manager acknowledge that the persons employed by the
Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not
devote their full time to such efforts. It is also agreed that the Sub-Adviser
may use any supplemental research obtained for the benefit of a Fund in
providing investment advice to its other investment advisory accounts and for
managing its own accounts.
10. Limitation of Liability. The Sub-Adviser shall not be liable for, and
the Trust and the Manager will not take any action against the Sub-Adviser to
hold the Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by a Fund or the Manager (including, without limitation, by
reason of the purchase, sale or retention of any security or other asset) in
connection with the performance of the Sub-Adviser's duties under this
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Agreement, except for a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of its duties
under this Agreement, or by reason of its reckless disregard of its obligations
and duties under this Agreement. For avoidance of doubt, the Sub-Adviser shall
not be liable for, and the Fund and the Manager will not take any action against
the Sub-Adviser to hold the Sub-Adviser liable for any acts of (a) the Manager
or (b) any other sub-adviser of the Fund, except for a loss in the case of the
foregoing items (a) or (b) resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of its duties
under this Agreement or by reason of its reckless disregard of its obligations
and duties under this Agreement. The Trust and the Manager acknowledge that the
Sub-Adviser makes no warranty as to the results to be obtained with respect to
the portion of the Fund allocated to it. In no case shall the Sub-Adviser be
liable for any loss affecting any portion of the Fund not allocated to the
Sub-Adviser except for such a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Sub-Adviser or reckless disregard of its
obligations and duties under this Agreement.
11. Term; Termination.
(a) With respect to a Fund, this Agreement shall become effective on the
applicable date set forth on Schedule A, provided that it has been approved in
the manner required by the 1940 Act (after taking into effect any exemptive
order, amendment thereto, no-action assurances, or other relief, rule or
regulation upon which the Fund may rely), and shall remain in full force until
the two year anniversary of the date of its effectiveness unless sooner
terminated as hereinafter provided. This Agreement shall continue in force from
year to year thereafter with respect to a Fund, but only as long as such
continuance is specifically approved for the respective Fund at least annually
in the manner required by the 1940 Act and the rules and regulations thereunder
(after taking into effect any exemptive order, amendment thereto, no-action
assurances, or other relief, rule or regulation upon which the Fund may rely);
provided, however, that if the continuation of this Agreement is not approved
for the respective Fund, the Sub-Adviser may continue to serve in such capacity
for such Fund in the manner and to the extent permitted by the 1940 Act and the
rules and regulations thereunder.
(b) This Agreement shall automatically terminate in the event of its
assignment and may be terminated with respect to a Fund at any time without the
payment of any penalty by the Manager or the Sub-Adviser upon sixty (60) days'
written notice to the other parties. This Agreement may also be terminated by a
Fund by action of the Board of Trustees or by a vote of a majority of the
outstanding voting securities of such Fund upon sixty (60) days' written notice
to the Sub-Adviser by the Fund without payment of any penalty.
(c) This Agreement may be terminated with respect to a Fund at any time
without the payment of any penalty by the Manager, the Board of Trustees or by
vote of a majority of the outstanding voting securities of the applicable Fund
in the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action that results in a breach of the material covenants of the
Sub-Adviser set forth herein.
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(d) The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act and the
rules and regulations thereunder.
(e) This Agreement shall automatically terminate with respect to a Fund in
the event the Management Agreement between the Manager and the Trust on behalf
of the applicable Fund is terminated, assigned or not renewed. Termination of
this Agreement with respect to one Fund will not terminate this Agreement with
respect to the other Funds.
(f) Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 8 earned or accrued prior to such termination and for any
additional period during which the Sub-Adviser serves as such for a Fund,
subject to applicable law.
12. Compliance Certification. From time to time, the Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act, as
are reasonably requested by a Fund or the Manager. In addition, the Sub-Adviser
will, from time to time, provide a written assessment of its compliance program
in conformity with current industry standards that is reasonably acceptable to
the Fund to enable the Fund to fulfill its obligations under Rule 38a-1 under
the 1940 Act.
13. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
If to the Manager or a Fund: If to the Sub-Adviser:
First Trust Exchange-Traded Fund III Horizon Investments, LLC
on behalf of the Funds 0000 Xxxxxx Xxxx Xx, Xxxxx 000
First Trust Advisors L.P. Xxxxxxxxx, XX 00000
000 X. Xxxxxxx Xxxxx Attention: Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Secretary
14. Additional Limitations on Liability. All parties hereto are expressly
put on notice of the Trust'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 and a copy of which has been provided to the Sub-Adviser prior to the
date hereof. This Agreement is executed by the Trust on behalf of each Fund by
the Trust's officers in their capacity as officers and not individually and is
not binding upon any of the Trustees, officers or shareholders of the Trust
individually but the obligations imposed upon the Trust or a Fund by this
Agreement are binding only upon the assets and property of the respective Fund,
and persons dealing with the Trust or a Fund must look solely to the assets of
such Fund for the enforcement of any claims.
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15. Disclosure Documents. During the term of this Agreement, the Manager
shall provide the Sub-Adviser with an opportunity to review and comment on the
portions of prospectuses, statements of additional information, registration
statements, proxy statements, reports to shareholders, advertising and sales
literature or other material prepared for distribution to Fund shareholders or
the public, which refer to the Sub-Adviser in any way, prior to the first use
thereof, and the Manager shall not use any such materials if the Sub-Adviser
reasonably objects in writing identifying errors or omissions within seven (7)
calendar days (or such shorter period as may be necessary to comply with
regulatory filing deadlines, or such other time as may be mutually agreeable)
after receipt thereof; provided, however, that the final form and content of all
such documentation shall be acceptable to the Manager, the Fund and their
respective legal counsel. The Manager shall seek to ensure that all materials
described in this Section 15 prepared by employees or agents of the Manager or
its affiliates that refer to the Sub-Adviser in any way are consistent with
materials previously approved by the Sub-Adviser as referenced in the preceding
sentence. Notwithstanding the foregoing, the Sub-Adviser's review is not
required when (i) previously approved materials are issued or re-issued, as
applicable, with minor modifications, (ii) the Adviser and Sub-Adviser identify
materials which they jointly determine do not require the Sub-Adviser's approval
and (iii) used as required to be disclosed in the registration statement of the
Fund.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
17. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 14 hereof, which shall be
construed in accordance with the laws of the Commonwealth of Massachusetts) the
laws of the State of Illinois. For the avoidance of doubt, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
relaxed by a rule, regulation, no-action assurance, order (including any
amendment thereto) or other relief of the SEC, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation, no-action assurance, order (including any amendment thereto)
or other relief.
18. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
19. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Trust represents that engagement of the Sub-Adviser has been duly authorized
by the Trust and is in accordance with the Trust's Declaration of Trust and
other governing documents of the applicable Fund.
20. Third Party Beneficiaries. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any person or entity that is not
a party hereto.
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21. Forum Selection. Any action brought on or with respect to this
Agreement or any other document executed in connection herewith or therewith by
a party to this Agreement against another party to this Agreement shall be
brought only in a court of competent jurisdiction in Chicago, Xxxx County,
Illinois, or if venue does not lie in any such court only in a court of
competent jurisdiction within the State of Illinois (the "Chosen Courts"). Each
party to this Agreement (a) consents to jurisdiction in the Chosen Courts; (b)
waives any objection to venue in any of the Chosen Courts; and (c) waives any
objection that any of the Chosen Courts is an inconvenient forum. In any action
commenced by a party hereto against another party to the Agreement, there shall
be no right to a jury trial. THE RIGHT TO A TRIAL BY JURY IS EXPRESSLY WAIVED TO
THE FULLEST EXTENT PERMITTED BY LAW.
22. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Sub-Advisory Fee described
in Section 8 are not severable.
23. Entire Agreement; Counterparts. This Agreement constitutes the sole
and entire agreement of the parties hereto with respect to the subject matter
expressly set forth herein. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures were upon the same instrument.
24. Confidentiality. Except as expressly authorized in this Agreement or
as required by applicable law, regulation or court order or as agreed between
the parties, each party hereto and its affiliates (each, for purposes of this
section, the "Recipient Party") shall keep confidential and shall not use or
disclose, except with the consent of the other parties hereto (each, for
purposes of this section, the "Disclosing Party"), any and all non-public,
proprietary or confidential information concerning the business of the
Disclosing Parties and/or their affiliates or investors, or potential investors,
therein obtained in connection with the services rendered under this Agreement,
including, without limitation, portfolio information (the "Information");
provided, that the Recipient Party may make such disclosure to its directors,
officers, partners, employees, agents, advisors, service providers, potential
financing counterparties or representatives, including legal and compliance
personnel (collectively, the "Representatives") who (i) need to know the
Information in connection with this Agreement, (ii) have been informed of the
confidential nature of such Information and (iii) have been advised that such
Information is to be kept confidential and not used for any other purpose. In no
circumstances shall the Manager use, nor shall it permit other persons to use,
the Sub-Adviser's trading data to reverse engineer or otherwise replicate the
Sub-Adviser's trading strategy and methodologies. For the avoidance of doubt,
Information may be released to the public by the Manager or by a Fund on the
Fund's quarterly Form N-Q and semi-annual Form N-CSR, more frequently if and to
any extent required by applicable law or regulations or by terms of any
exemptive relief granted by the SEC upon which the Fund may rely or if the
Disclosing Party has received authorization from the other party. The term
"Information" will not include information that (i) is or becomes publicly
available other than as a result of a disclosure by the Recipient Party in
violation of this section; (ii) is or becomes available to the Recipient Party
or its Representatives from a source other than the Disclosing Party, which
source, to the knowledge of the Recipient Party or its Representatives, does not
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have an obligation of confidentiality to the Disclosing Party with respect to
such information; (iii) was already in the Recipient Party's possession or the
possession of its Representatives prior to receiving such information from the
Disclosing Party; or (iv) is developed independently by the Recipient Party or
its Representatives without use of the Information. The rights and obligations
under this Section 24 shall survive the termination or expiration of this
Agreement.
25. Use of the Name "Horizon". The Trust, each Fund and the Manager
acknowledge that, as between the Trust, each Fund and the Manager, on the one
hand, and the Sub-Adviser, on the other hand, the Sub-Adviser owns and controls
the term "Horizon" and all marks related thereto. The Sub-Adviser grants to each
Fund governed by this Agreement, as amended from time to time pursuant to the
terms of this Agreement, a world-wide, non-exclusive, fully-paid and royalty
free license to use the name "Horizon" in the name of the Fund for the duration
of this Agreement and any extensions or renewals thereof. Such license will,
upon termination of this Agreement, be automatically and without further action
by the Sub-Adviser terminated, in which event the Fund shall promptly take
whatever action may be necessary (including calling a meeting of its Board of
Trustees) to change its name and to discontinue any further use of the name
"Horizon" in the name of the Fund or otherwise. Nothing herein will prevent the
Sub-Adviser from granting a license with respect to the name "Horizon" to any
other party in connection with any of its other activities.
26. Sub-Adviser Marketing Material. The Sub-Adviser may refer to and
generally describe its services for a Fund in advertising brochures and certain
publications (other than marketing material for the Trust or the Fund), and may
use the name of the Trust or the Fund in any publicity release, communication
with the media or advertising subject to prior review and approval by the Trust
or the Manager, such approval or denial to be communicated to the Sub-Adviser
within seven (7) business days of the Manager's receipt of such brochure or
publication.
27. Survival. The provisions of Sections 6, 10, 11(f), 14, 17, 20, 21, 24,
and 25 shall survive the expiration or termination of this Agreement.
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IN WITNESS WHEREOF, the Trust on behalf of the Funds, the Manager and the
Sub-Adviser have caused this Agreement to be executed as of the day and year
first above written.
FIRST TRUST ADVISORS L.P. HORIZON INVESTMENTS, LLC
By /s/ Xxxxx X. Xxxxx By /s/ Xxxxxxx Xxxxxxxx
--------------------------------- ---------------------------------
Title: Chief Financial Officer Title: General Counsel
FIRST TRUST EXCHANGE-TRADED FUND III on
behalf of the series listed on Schedule A
By /s/ Xxxxxx X. Xxxxx
---------------------------------
Title: Treasurer and CFO
SCHEDULE A
(AS OF MARCH 16, 2020)
---------------------------- -------------------------- ----------------- -------------------- -------------------
FUND(S) INVESTMENT MANAGEMENT FEE EFFECTIVE DATE SUB-ADVISORY FEE EFFECTIVE DATE OF
BASED ON ANNUAL RATE OF OF MANAGEMENT RATE INVESTMENT
AVERAGE DAILY NET ASSETS AGREEMENT SUB-ADVISORY
OF THE FUND SET FORTH IN AGREEMENT
THE MANAGEMENT AGREEMENT
---------------------------- -------------------------- ----------------- -------------------- -------------------
First Trust Horizon Managed 80% 3/16/2020 50% of the net 3/16/2020
Volatility Small/Mid ETF unitary management
fee (after
expenses)
---------------------------- -------------------------- ----------------- -------------------- -------------------
