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(TM)
Fund, a Massachusetts business trust (the "Trust"), and First Trust Advisors
L.P., an Illinois limited partnership ("FTA"), as of April 26th, 2007.
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, FTA has contractually agreed to waive management fees and
reimburse certain expenses to prevent a Fund's Expense Ratio from exceeding a
particular Expense Cap (as such terms are hereinafter defined) for a term
provided herein; provided, however, FTA has reserved the right to seek
restitution of any fees waived and expenses reimbursed within three years to the
extent that such restitution would not cause a Fund to exceed the current
expense limitations.
D. WHEREAS, FTA and the Trust desire to more fully describe and document
the above-described fee waivers, expense reimbursements and recovery all in
accordance with the terms and provisions hereinafter set forth.
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.
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.
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
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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.
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(TM) 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.
0000 Xxxxxxxxxxx Xxxx 0000 Xxxxxxxxxxx Xxxx
Xxxxx 000 Xxxxx 000
Xxxxx, Xxxxxxxx 00000 Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: W. Xxxxx Xxxxxxx Attention: W. Xxxxx Xxxxxxx
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EXHIBIT A
EXPENSE CAP
(OF AVERAGE
NAME OF FUND NET ASSETS) EFFECTIVE DATE EXPENSE CAP TERM
______________ ___________ _______________ ________________
First Trust Consumer Discretionary 0.70% 04/26/2007 04/26/2007-
AlphaDEX(TM) Fund 04/26/2009
First Trust Consumer Staples 0.70% 04/26/2007 04/26/2007-
AlphaDEX(TM) Fund 04/26/2009
First Trust Energy AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Financials AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Health Care AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Industrials AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Materials AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Technology AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Utilities AlphaDEX(TM) Fund 0.70% 04/26/2007 04/26/2007-
04/26/2009
First Trust Large Cap Core AlphaDEX(TM) 0.70% 04/26/2007 04/26/2007-
Fund 04/26/2009
First Trust Mid Cap Core AlphaDEX(TM) 0.70% 04/26/2007 04/26/2007-
Fund 04/26/2009
First Trust Small Cap Core AlphaDEX(TM) 0.70% 04/26/2007 04/26/2007-
Fund 04/26/2009
First Trust Large Cap Value 0.70% 04/26/2007 04/26/2007-
Opportunities AlphaDEX(TM) Fund 04/26/2009
First Trust Large Cap Growth 0.70% 04/26/2007 04/26/2007-
Opportunities AlphaDEX(TM) Fund 04/26/2009
First Trust Multi Cap Value AlphaDEX(TM) 0.70% 04/26/2007 04/26/2007-
Fund 04/26/2009
First Trust Multi Cap Growth 0.70% 04/26/2007 04/26/2007-
AlphaDEX(TM) Fund 04/26/2009
