EXHIBIT 13
August 31, 2006
VIA FACSIMILE AND FEDERAL EXPRESS
First Trust Value Line(R) Dividend Fund
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
This letter agreement (the "Agreement") is to confirm the understanding
by and among First Trust Value Line(R) Dividend Fund (the "Fund") and Arthur D.
Lipson and the members of his group, Western Investment LLC, Western Investment
Hedged Partners LP, Western Investment Total Return Master Fund Ltd., Western
Investment Activism Partners LLC, Benchmark Plus Institutional Partners, L.L.C.,
Benchmark Plus Management, L.L.C., Benchmark Plus Partners, L.L.C., Paradigm
Partners, N.W., Inc., Matthew S. Crouse, Scott Franzblau, Michael Dunmire,
Robert Ferguson, James Merchant and Philip Cooper (collectively with Mr. Lipson,
the "Group") in connection with the Group's activities with respect to the Fund.
The intent of this Agreement, among other things, is to preserve each of the
party's respective positions with respect to a shareholder meeting of the Fund
at which Trustees would be elected, except as specified herein. In consideration
of the mutual covenants, obligations and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. Mr. Lipson hereby withdraws his letter to the Fund dated
June 28, 2006 requesting a shareholders list and other
corporate records of the Fund.
2. The members of the Group hereby withdraw their letter to the
Fund dated July 24, 2006 requesting a shareholders list and
other corporate records of the Fund.
3. Mr. Lipson hereby withdraws his letter to the Fund dated June
27, 2006 nominating five nominees for election as Trustees of
the Fund at the 2006 annual meeting of shareholders of the Fund
(the "Nomination Letter"), subject to Section 6 hereof.
4. The Fund agrees that the next meeting of shareholders of the
Fund will be a special meeting of shareholders (the "Special
Meeting") to be held on or prior to February 15, 2007 for the
purpose of approving the reorganization of the Fund into First
Trust Value Line(R) Dividend Index Fund (the "Reorganization")
substantially under the terms described in the press release
issued by the Fund on July 28, 2006 relating to the
Reorganization (the "Press Release"), subject to compliance
with applicable laws, rules and regulations.
5. The Fund agrees that the only business to be conducted at the
Special Meeting will be the approval of the Reorganization and
any matters related thereto, subject to compliance with
applicable laws, rules and regulations. Without limiting the
generality of the foregoing, the Fund agrees that it will not
present to the shareholders a proposal to elect Trustees of the
Fund at the Special Meeting.
6. The parties agree that if either (a) the Reorganization is not
approved by the shareholders at the Special Meeting, (b) the
Reorganization does not take place substantially in accordance
with the terms described in the Press Release by March 31,
2007, (c) the Fund files preliminary proxy materials with
respect to, or announces that it will hold, a meeting of
shareholders for the purpose of electing or re-appointing
Trustees pursuant to Section 7 or otherwise, or (d) the Fund
breaches any material provision of this Agreement, the
provisions of Section 3 hereof shall be inoperative and the
Nomination Letter shall be deemed to have been resubmitted to
the Secretary of the Fund and the nomination of candidates set
forth in such Nomination Letter shall be accepted by the Fund
as being sufficient under the By-Laws, and such candidates
shall be eligible to be considered for election at the next
meeting of shareholders held for the purpose of electing
Trustees.
7. The Fund agrees that, to the extent the Reorganization is not
approved by the shareholders by February 15, 2007 or the
Reorganization does not take place by March 31, 2007
substantially in accordance with the terms described in the
Press Release, the Fund shall promptly call an annual meeting
of shareholders to be held within 90 days thereafter for the
purpose of electing Trustees.
8. The Fund agrees that from the date hereof through the date of
the next meeting of shareholders called for the purpose of
electing Trustees, if any, it will not (i) amend its
Declaration of Trust or By-Laws so as to limit the Group's
ability to nominate or elect a slate of Trustees at such a
meeting, including amending the quorum requirements set forth
in Article III, Section 2 of the By-Laws of the Fund and the
number of shares required to vote to elect a Trustee set forth
in Section 6.6 of the Fund's Declaration of Trust; (ii)
increase the number of Trustees serving in office above five
(5) persons; or (iii) adopt a shareholders rights plan whereby
any member of the Group would be deemed an "Acquiring Person"
so long as the aggregate number of shares of voting securities
of the Fund beneficially owned by the Group does not exceed the
greater of (a) the aggregate number of Shares set forth on
Schedule I or (b) if the aggregate amount of voting securities
of the Fund increases from the amount outstanding on the date
hereof, the percentage of outstanding voting securities of the
Fund deemed beneficially owned in the aggregate by the Group on
the date hereof.
-2-
9. The Fund agrees to provide Mr. Lipson an opportunity to review
and comment on the portion of any press release or public
filing containing statements relating to this Agreement prior
to its public release, and the Fund will consider such comments
but is not obligated to accept such comments.
10. Except as expressly set forth in this Agreement, each member
of the Group covenants and agrees with the Fund that during the
period commencing on the date hereof and ending on the earliest
of the occurrence of any event enumerated in subparagraphs (a)
through (d) of Section 6 hereof (the "Effective Period"), or
upon the consummation of the Reorganization, it will not, and
will cause its Affiliates (as defined below) and Associates (as
defined below) not to, directly or indirectly, alone or in
concert with others, unless specifically requested in writing
by the Chairman and President of the Fund or by a resolution of
a majority of the Trustees of the Fund currently in office,
take any of the actions set forth below (or take any action
that would require the Fund to make an announcement regarding
any of the following):
(a) effect, seek, offer, engage in, propose (whether
publicly or otherwise) or cause or participate in, or assist
any other Person to effect, seek, engage in, offer or propose
(whether publicly or otherwise) or participate in (other than
as specifically contemplated by this Agreement) any
"solicitation" of "proxies" (as such terms are defined in the
rules and regulations promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") but without regard
to the exclusion set forth in Rule 14a-1(1)(2)(iv) from the
definition of "solicitation"), whether or not relating to the
election or removal of Trustees, with respect to the Fund or
any transaction relating to the Fund, or any action resulting
in the Group or any member of the Group or any of their
respective Affiliates or Associates becoming a "participant" in
any "election contest" (as such terms are defined in the rules
and regulations promulgated under the Exchange Act) with
respect to the Fund;
(b) propose any matter for submission to a vote of
shareholders of the Fund;
(c) grant any proxy with respect to any Shares (as
defined below) of the Fund (other than to proxies designated by
the Board of Trustees of the Fund);
(d) execute any written consent with respect to any
Shares;
(e) form, join or participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any Shares or deposit any Shares in a voting trust
or subject any Shares to any arrangement or agreement with
respect to the voting of such Shares or other agreement having
-3-
similar effect (in each case except between a member of the
Group and its Affiliates);
(f) seek, alone or in concert with others, (i) to
call a meeting of shareholders of the Fund; (ii) representation
on the Board of Trustees of the Fund; (iii) the removal of any
member of the Board of Trustees of the Fund; or (iv) to control
or influence the management or policies of the Fund;
(g) make or communicate any disparaging or negative
remarks or comments, or communicate in a disparaging or
negative manner, regarding the Fund, its Trustees, officers,
employees or advisers, or the Reorganization, to any Person (as
defined below) other than each Group member's immediate family
and attorneys who agree in writing to be bound by the
provisions of this Section 10, or in connection with any
proceeding to enforce the terms of this Agreement, or to the
extent required to comply with applicable law; or
(h) except as specifically contemplated by this
Agreement, enter into any discussions, negotiations,
arrangements or understandings with any Person with respect to
any of the foregoing, or advise, assist, encourage or seek to
persuade others to take any action with respect to any of the
foregoing.
11. None of the foregoing covenants in Section 10 shall be
construed to prevent the Group from soliciting the Fund's
shareholders in favor of the Fund's proposal to engage in the
Reorganization.
12. Each member of the Group covenants and agrees that during the
Effective Period it will not, and will cause its Affiliates and
Associates not to (and will not advise, assist or encourage
others to), vote against any proposal proposed by management to
the shareholders of the Fund. Each member of the Group
covenants and agrees that during the Effective Period it will,
and will cause its Affiliates and Associates to, vote each of
the Shares held by such persons on the record date of the
related meeting in favor of the Reorganization.
13. Subject to Section 13(b), during the Effective Period,
each party hereto covenants and agrees that it will not, and it
will cause its Affiliates and Associates not to, directly or
indirectly, initiate or cause to be initiated (or encourage or
aid in the initiation of) against any other party hereto or its
Affiliates or Associates or their respective past, present or
future Trustees, directors, managers, officers, advisers,
attorneys, agents or employees, directly or indirectly, any
suit, action, or proceeding of any kind, or participate,
directly or indirectly, in any such action, individually,
derivatively, as a representative or member of a class, witness
or otherwise, under any contract (express or implied),
-4-
fiduciary duty, common law or equitable doctrine, law, statute,
or regulation, federal, state or local that such party has,
claims to have had or otherwise may have in connection with, in
any way relating to, arising out of, directly or indirectly
from or in consequence of any transactions contemplated
hereunder, including, without limitation, the Reorganization or
any documents, actions or deliberations relating to the
Reorganization. Each party hereto further releases and
discharges any other party hereto and its Affiliates and
Associates and their respective past, present and future
Trustees, directors, managers, officers, advisers, attorneys,
agents and employees from and waives any and all claims
(including, without limitation, any duty to investigate, defend
or indemnify), causes of action, obligations, duties, debts,
penalties, attorneys' fees, costs, damages, injuries or
liabilities of any nature whatsoever, whether based on
contract, tort, statute or other legal or equitable theory of
recovery, whether now known or unknown, whether foreseen or
unforeseen, whether past, present or future, which such party
has, claims to have had or otherwise may have in connection
with, in any way relating to, arising out of, directly or
indirectly from or in consequence of any transactions
contemplated hereunder, including, without limitation, the
Reorganization or any documents, actions or deliberations
relating to the Reorganization. The covenants herein will be a
complete defense to any suit, action or proceeding brought in
violation of this Section 13(a). Nothing herein limits the
right of any party hereto to bring an action to enforce this
Agreement or based on an alleged material breach of this
Agreement.
(b) In the event of a material breach of this Agreement, the
covenants set forth in Section 13(a), as applicable, will not
be binding on the party not in breach.
14. (a) Except for pledges in existence as of the date hereof,
each member of the Group agrees that during the Effective
Period, it shall not (i) sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of (collectively, a
"Transfer"), or enter into any contract, option or other
agreement with respect to, or consent to, a Transfer of, any or
all of the Shares; provided, however that any member of the
Group may Transfer any or all of its Shares to one of its
Affiliates that agrees in writing to be bound by the terms of
this Agreement and, with the consent of the Fund (which consent
shall not be unreasonably withheld), may pledge or encumber any
Shares so long as such pledge or encumbrance would not impair
its obligations under this Agreement; or (ii) take any action
that would have the effect of preventing, impeding, interfering
without adversely affecting its ability to perform its
obligations under this Agreement; provided, however, that no
member of the Group shall be bound by the restrictions
contained in Section 14(a)(i) subsequent to the consummation of
the Reorganization.
-5-
(b) Schedule I sets forth, opposite the name of each member of
the Group, the number of Shares over which such member of the
Group has record and/or beneficial ownership as of the date
hereof. As of the date hereof, each such member of the Group is
the lawful owner of the Shares denoted as being owned by such
member of the Group on Schedule I and has the sole power to
vote (or cause to be voted) such Shares. Except as set forth on
such Schedule I, no member of the Group nor any Affiliate of a
member of the Group owns or holds any right to acquire any
securities of the Fund or any interest therein or any voting
rights with respect to any securities of the Fund. Each member
of the Group has good and valid title to the Shares denoted as
being owned by it on Schedule I, free and clear of any and all
pledges, mortgages, liens, charges, proxies, voting agreements,
encumbrances, adverse claims, options, security interests and
demands of any nature or kind whatsoever, other than (i) those
created by virtue of the fact that Shares may have been
purchased "on margin" and held in margin brokerage accounts,
(ii) those created by this Agreement, or (iii) as could not
reasonably be expected to impair its ability to perform its
obligations under this Agreement.
15. Each party hereto hereby acknowledges and agrees that
irreparable harm will occur in the event any of the provisions
of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that the parties will be entitled to specific
performance hereunder, including, without limitation, an
injunction or injunctions to prevent and enjoin breaches of the
provisions of this Agreement and to enforce specifically the
terms and provision hereof in any state or federal court in
Chicago, Illinois, in addition to any other remedy to which
they may be entitled at law or in equity. Any requirements for
the securing or posting of any bond with respect to any such
remedy are hereby waived. All rights and remedies under this
Agreement are cumulative, not exclusive, and will be in
addition to all rights and remedies available to any party at
law or in equity.
16. The parties hereto hereby irrevocably and unconditionally
consent to and submit to the jurisdiction of the state or
federal courts in Chicago, Illinois for any actions, suits or
proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby, and further agree that
service of any process, summons, notice or document by U.S.
certified mail to the respective addresses set forth in Section
17 hereof will be effective service of process for any such
action, suit or proceeding brought against any party in any
such court. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement, or the transactions
contemplated hereby, in the state or federal courts in Chicago,
Illinois, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Each member of the
-6-
Group (on its behalf and, to the extent permitted by applicable
law, on behalf of its Affiliates) and the Fund waives all right
to trial by jury in any action, proceeding or counterclaim
(whether based upon contract, tort or otherwise) in any way
arising out of or relating to this Agreement.
17. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process
in regard hereto will be validly given, made or served, if in
writing and sent by U.S. certified mail, return receipt
requested, or by overnight courier service:
If to the Fund to:
First Trust Value Line(R) Dividend Fund
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
Attention: W. Scott Jardine, Secretary
With a copy to (which copy shall not constitute notice):
Chapman and Cutler LLP
111 West Monroe Street
Chicago, Illinois 60603
Attention: Eric F. Fess
If to the Group:
Western Investment LLC
2855 East Cottonwood Parkway, Suite 110
Salt Lake City, Utah 84121
Attention: Arthur D. Lipson
With a copy to (which copy shall not constitute notice):
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Adam W. Finerman
18. For purposes of this Agreement:
"Affiliate" has the meaning set forth in Rule 405
promulgated by the SEC (as defined below) under the Securities
Act of 1933, as amended.
"Associate" has the meaning set forth in Rule 12b-2
promulgated by the SEC (as defined below) under the Exchange
Act, except that a passive investment in a Person (as defined
-7-
below) that is not a controlling or managing investment shall
not be deemed to make that Person an Associate of another
Person.
"Person" has the meaning set forth in Section 2(a)(28)
of the 1940 Act.
"SEC" means the United States Securities and Exchange
Commission or any successor entity.
"Shares" means any shares of beneficial interest of the
Fund, or any securities convertible into or exchangeable or
exercisable for any securities of the Fund, or which, upon
redemption thereof could result in the receipt of any
securities of the Fund, or options, warrants, contractual
rights or other rights of any kind to acquire or vote any
securities of the Fund, including any security which such
shares of beneficial interest may be converted into, exchanged
for, exercised for or replaced with in connection with any
reorganization whatsoever of the Fund, including any change of
organizational form, owned beneficially by any member of the
Group as of the date hereof or anytime hereafter during the
Effective Period.
19. This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof and may be
amended only by an agreement in writing executed by the parties
hereto.
20. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Massachusetts,
without regard to any conflict of laws provisions thereof.
21. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. All parties hereto are expressly put on notice of the Fund's
Declaration of Trust and all amendments thereto, a copy of each
of which is on file with the Secretary of the Commonwealth of
Massachusetts, and the limitations of shareholder and trustee
liability contained therein. This Agreement is executed on
behalf of the Fund by one of the Fund's officers as an officer
and not individually and the obligations imposed upon the Fund
by this Agreement are not binding upon any of the Fund's
trustees, officers or shareholders individually but are binding
only upon the assets and property of the Fund, and persons
dealing with the Fund must look solely to the assets of the
Fund and those assets belonging to the Fund for the enforcement
of any claims.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
Kindly acknowledge your agreement and understanding with this Agreement
in the space provided below and return an executed copy to Mr. Lipson at your
convenience.
Very truly yours,
WESTERN INVESTMENT LLC
By: /s/ Arthur D. Lipson
--------------------------------------
Name: Arthur D. Lipson
Title: Sole Member
WESTERN INVESTMENT HEDGED PARTNERS LP
By: Western Investment LLC,
Its General Partner
By: /s/ Arthur D. Lipson
--------------------------------------
Name: Arthur D. Lipson
Title: Managing Member
WESTERN INVESTMENT TOTAL RETURN MASTER FUND LTD.
By: Western Investment LLC,
Its Investment Manager
By: /s/ Arthur D. Lipson
--------------------------------------
Name: Arthur D. Lipson
Title: Managing Member
WESTERN INVESTMENT ACTIVISM PARTNERS LLC
By: Western Investment LLC,
Its Managing Member
By: /s/ Arthur D. Lipson
-------------------------------------
Name: Arthur D. Lipson
Title: Managing Member
-9-
BENCHMARK PLUS INSTITUTIONAL PARTNERS, L.L.C.
By: Benchmark Plus Management, L.L.C.,
Its Managing Member
By: /s/ Scott Franzblau
-------------------------------------
Name: Scott Franzblau
Title: Managing Member
By: /s/ Robert Ferguson
-------------------------------------
Name: Robert Ferguson
Title: Managing Member
By: /s/ Michael Dunmire
-------------------------------------
Name: Michael Dunmire
Title: Managing Member
BENCHMARK PLUS MANAGEMENT, L.L.C.
By: /s/ Scott Franzblau
-------------------------------------
Name: Scott Franzblau
Title: Managing Member
By: /s/ Robert Ferguson
-------------------------------------
Name: Robert Ferguson
Title: Managing Member
By: /s/ Michael Dunmire
-------------------------------------
Name: Michael Dunmire
Title: Managing Member
BENCHMARK PLUS PARTNERS, L.L.C.
By: Paradigm Partners, N.W., Inc.
Its Managing Member
By: /s/ Robert Ferguson
-------------------------------------
Name: Robert Ferguson
Title: Principal
By: /s/ Michael Dunmire
-------------------------------------
Name: Michael Dunmire
Title: Principal
-10-
PARADIGM PARTNERS, N.W., INC.
By: /s/ Robert Ferguson
-------------------------------------
Name: Robert Ferguson
Title: Principal
By: /s/ Michael Dunmire
-------------------------------------
Name: Michael Dunmire
Title: Principal
/s/ ARTHUR D. LIPSON
------------------------------------------
ARTHUR D. LIPSON
/s/ MATTHEW S. CROUSE
------------------------------------------
MATTHEW S. CROUSE
/s/ ROBERT FERGUSON
------------------------------------------
ROBERT FERGUSON
/s/ SCOTT FRANZBLAU
------------------------------------------
SCOTT FRANZBLAU
/s/ MICHAEL DUNMIRE
------------------------------------------
MICHAEL DUNMIRE
/s/ JAMES R. MERCHANT
------------------------------------------
JAMES R. MERCHANT
/s/ PHILIP COOPER
------------------------------------------
PHILIP COOPER
-11-
ACKNOWLEDGED AND AGREED,
as of the date first set forth above
FIRST TRUST VALUE LINE(R) DIVIDEND
FUND
By: /s/ James A. Bowen
-------------------------------
Name: James A. Bowen
Title: President
-12-
SCHEDULE I
OWNERSHIP OF SHARES BY GROUP
Number of Shares
Name Beneficially Owned
- ---- ------------------
Western Investment LLC 2,041,575
Western Investment Hedged Partners LP 951,010
Western Investment Total Return Master Fund Ltd. 143,000
Western Investment Activism Partners LLC 947,565
Benchmark Plus Institutional Partners, L.L.C. 722,100
Benchmark Plus Management, L.L.C. 722,100
Benchmark Plus Partners, L.L.C. 443,200
Paradigm Partners, N.W., Inc. 443,200
Arthur D. Lipson 2,042,575
Matthew S. Crouse 0
Robert Ferguson 1,165,300
Scott Franzblau 722,100
Michael Dunmire 1,165,300
James R. Merchant 0
Phillip Cooper 0
-13-