E*TRADE Securities, Inc.
No Transaction Fee Mutual Fund Offering
RETAIL SHAREHOLDER SERVICES AGREEMENT
This Agreement is made as of February 3, 1999, between E*TRADE
Securities, Inc. ("E*TRADE Securities"), a Delaware corporation, E*TRADE Funds,
a Delaware business trust registered under the Investment Company Act of 1940,
as amended (the "1940 Act") as an open-end management investment company (the
"Fund"), and E*TRADE Asset Management, Inc. ("Fund Affiliate"), a Delaware
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, and which serves as investment adviser to the Fund pursuant to an
agreement dated February 3, 1999 (Fund and Fund Affiliate are collectively
referred to as "Fund Parties").
WHEREAS, Fund Parties wish to engage E*TRADE Securities to perform
certain record-keeping, shareholder communication, and other shareholder
administrative services for Fund's shareholders; and
WHEREAS, E*TRADE Securities agrees to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, E*TRADE Securities and Fund Parties agree as follows:
1. SERVICES
E*TRADE Securities shall perform such services for Fund Parties as
are designated in Schedule A to this Agreement ("Services"), as such Schedule A
may from time to time be amended, such amendments to be evidenced by the
signature thereto by a duly authorized representative of each of the Parties.
2. COMPENSATION
In consideration for the Services rendered by E*TRADE Securities
pursuant to this Agreement, the Fund Affiliate shall pay a fee to E*TRADE
Securities as shall be calculated pursuant to Schedule B to this Agreement.
3. TRANSACTION CHARGES
E*TRADE Securities shall not assess any of Fund shareholders or
prospective shareholders any fee for executing any purchase or sale order where
such order involves the securities of the Fund. Notwithstanding this provision,
E*TRADE Securities shall have the right to assess customers a fee that is
payable to the Fund where E*TRADE Securities provides the customer with a
service that is not contemplated by this Agreement.
4. INDEMNIFICATION
(a) Fund Parties severally agree to indemnify, defend and hold harmless
E*TRADE Securities, its officers, directors, employees, agents, and affiliates
from and against (i) any and all claims, demands, liabilities and expenses,
including legal expenses, which E*TRADE Securities, its officers, directors,
employees, agents, and affiliates may incur arising out of or based upon any
untrue statement, or alleged untrue statement, of material fact contained in any
registration statement, prospectus, statement of additional information, sales
material, or other information provided by the Fund, or based upon any omission,
or alleged omission, to state a material fact required to be stated to make the
statements contained therein not misleading, except to the extent that E*TRADE
Securities has itself produced such materials; (ii) any breach by either Fund or
Fund Affiliate of any representation, warranty or provision contained herein, or
(iii) any willful misconduct or gross negligence by Fund or Fund Affiliate in
the performance of, or failure to perform, its respective obligations under this
Agreement, except to the extent that such claims, liabilities or expenses are
caused by E*TRADE Securities' breach of this Agreement or willful misconduct or
gross negligence in the performance, or failure to perform, their respective
obligations under this Agreement. This section 4(a) shall survive termination of
this Agreement.
(b) E*TRADE Securities agrees to indemnify, defend and hold harmless Fund
Parties, their officers, directors, employees, agents, and affiliates from and
against any and all claims, demands, liabilities and expenses, including legal
expenses, which Fund Parties, their officers, directors, employees, agents, and
affiliates may incur arising out of or based upon (i) any untrue statement, or
alleged untrue statement, of material fact contained in any advertising or sales
literature prepared by E*TRADE Securities without reliance upon information
provided by either Fund Parties or an unaffiliated mutual fund rating or
statistical information agency; (ii) any breach by E*TRADE Securities of any
representation, warranty or provision contained herein, or (iii) any willful
misconduct or gross negligence by E*TRADE Securities in the performance of, or
failure to perform, its obligations under this Agreement, except to the extent
that such claims, liabilities or expenses are caused by Fund Parties' breach of
this Agreement or willful misconduct or gross negligence in the performance, or
failure to perform, their respective obligations under this Agreement. This
section 4(b) shall survive termination of this Agreement.
No party hereto shall be liable for any special, consequential or incidental
damages.
5. ROLE OF E*TRADE SECURITIES
The parties acknowledge and agree that the Services performed by
E*TRADE Securities pursuant to this Agreement are not the services of an
underwriter or principal underwriter of the Fund within the meaning of the 1940
Act or the Securities Act of 1933, as amended. This Agreement does not grant
E*TRADE Securities any right to purchase shares from the Fund; neither does it
preclude E*TRADE Securities' ability to purchase shares from the Fund. E*TRADE
Securities shall not be deemed to be an agent of Fund Parties or of the Fund for
the purposes of selling the Fund's shares to any dealer or the public. To the
extent that E*TRADE Securities is involved in the purchase of shares of any Fund
by E*TRADE Securities' customers, such involvement will be as agent of such
customer only.
6. INFORMATION TO BE PROVIDED
Fund Parties shall provide to E*TRADE Securities prior to the
effectiveness of this Agreement or as soon thereafter as is reasonably
practicable:
(a) Certified resolutions of the board of directors or board of trustees,
as applicable, of Fund Parties authorizing the execution of this Agreement and
the performance by the Fund Party pursuant to this Agreement; and
(b) Two (2) written copies of each current prospectus and statement of
additional information relating to any of Fund's shares which may be purchased
by customers of E*TRADE Securities. Fund Parties agree to submit to E*TRADE
Securities two (2) written copies of any amendment or supplement to or any
updated version of such prospectus(es) and statement(s) of additional
information no later than the effective date of such amendment, supplement or
updated version.
7. TERMINATION OF AGREEMENT
This Agreement is terminable, without penalty, at any time upon
ninety (90) days' notice by E*TRADE Securities to Fund and Fund Affiliate or by
Fund and Fund Affiliate to E*TRADE Securities. Termination of this Agreement
shall terminate E*TRADE Securities' obligations to perform the Services, as of
the effective date of the termination, and shall terminate Fund Parties'
obligations to pay any compensation hereunder, as of the effective date of the
termination. Notwithstanding any provision herein to the contrary, Fund Parties'
obligations pursuant to this Agreement shall not be terminated with respect to
any transactions in Fund's shares commenced prior to the effective date of the
termination of this Agreement.
8. NOTICES
Notices and other communications will be duly given if mailed,
telegraphed, or transmitted by similar telecommunications device to addresses
designated on Schedule C hereto.
9. NON-EXCLUSIVITY
Each Party to this Agreement may enter into agreements similar to
this Agreement with other parties for the performance of services similar to
those to be provided under this Agreement, unless otherwise agreed to in writing
by the Parties.
10. JURISDICTION AND NON-ASSIGNABILITY
This Agreement will be construed in accordance with the laws of the
State of California and is non-assignable by the parties hereto. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the Parties and their respective successors and assigns.
11. FUND PORTFOLIOS AND CLASSES
The portfolios, series and classes of shares of Fund to which this
Agreement shall apply are designated in Schedule C hereto.
12. EXHIBITS AND SCHEDULES
Schedules A, B and C, which are attached hereto, are each a part of
and is incorporated by reference into this Agreement. This Agreement shall not
be deemed to be complete absent such Schedules A, B or C.
13. ENTIRE AGREEMENT; SEVERABILITY
Each Party recognizes the existence of an Underwriting Agreement
between E*TRADE Securities and the Fund dated February 3, 1999, a Clearing
Agreement between E*TRADE Securities and NSCC, dated January 27, 1999
("Fund/SERV Agreement"), and a Supplemental Agreement Regarding Networking dated
_____ (collectively, the "Other Agreements"). To the extent of any inconsistency
or conflict between the provisions of this Agreement and any provision of the
Other Agreements, such provision of the Other Agreements shall govern, and the
provision of this Agreement shall be null and void. Except as specified in this
Section 13, however, this Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for retail
shareholder services. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein and shall
be enforceable notwithstanding the un-enforceability of any such other provision
or agreement.
14. REPRESENTATIONS OF THE PARTIES
Each Party represents and warrants to each other Party that (i) it
is duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder and has taken all necessary action to authorize such
execution, delivery and performance, (ii) the person signing this Agreement on
its behalf is duly authorized to do so, (iii) it has obtained all authorizations
of any governmental body required in connection with this Agreement and such
authorizations are in full force and effect and (iv) the execution, delivery and
performance of this Agreement will not violate any law, ordinance, charter,
by-law or rule applicable to it or any agreement by which it is bound or by
which any of its assets are affected.
15. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original, but all of which together shall
constitute one and the same instrument.
In witness whereof, each Party has executed this Agreement by a duly
authorized representative of such Party.
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E*TRADE Funds E*TRADE Asset Management, Inc.
By: ________________________ By: _______________________
Name: ______________________ Name: _____________________
Title: ______________________ Title: ______________________
Date: ______________________ Date: ______________________
By:____________________________
E*TRADE Securities, Inc.
SCHEDULE A
Services
1. RECORD MAINTENANCE
E*TRADE Securities shall maintain the following records with respect
to a Fund for each customer who holds Fund shares in an E*TRADE Securities
brokerage account:
a. Number of shares;
b. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and dates and amounts of dividends paid for at least the
current year to date;
c. Name and address of the customer, including zip codes and social
security numbers or taxpayer identification numbers;
d. Records of distributions and dividend payments; e. Any transfers
of shares; and f. Overall control records.
2. SHAREHOLDER COMMUNICATIONS
E*TRADE Securities shall:
a. Provide to an approved shareholder mailing agent for the purpose
of providing certain Fund-related materials the names and contact information of
all E*TRADE Securities customers who hold shares of such Fund in their E*TRADE
Securities brokerage accounts. The shareholder mailing agent shall be a person
or entity with whom the Fund has arranged for the distribution of certain
Fund-related material in accordance with the Fund/SERV Agreement. The
Fund-related materials shall consist of updated prospectuses and any supplements
and amendments thereto, annual and other periodic reports, proxy or information
statements and other appropriate shareholder communications. In the alternative,
in accordance with the Fund/SERV Agreement, E*TRADE Securities may distribute
the Fund-related materials to its customers.
b. Deliver current Fund prospectuses and statements of additional
information and annual and other periodic reports upon customer request and, as
applicable, with confirmation statements;
c. Deliver statements to customers on a monthly basis (or, as to
accounts in which there has been no activity in a particular month, no less
frequently than quarterly) showing, among other things, the number of shares of
each Fund owned by such customer and the net asset value of such Fund as of a
recent date;
d. Produce and provide to customers confirmation statements
reflecting purchases and redemptions of shares of each Fund in E*TRADE
Securities brokerage accounts;
e. Respond to customer inquiries regarding, among other things,
share prices, account balances, dividend amounts and dividend payment dates; and
3. TRANSACTIONAL SERVICES
E*TRADE Securities shall communicate, as to shares of each Fund,
purchase, redemption and exchange orders reflecting the orders it receives from
its customers. E*TRADE Securities shall also communicate, as to shares of each
Fund, mergers, splits and other reorganization activities.
4. TAX INFORMATION RETURNS AND REPORTS
E*TRADE Securities shall prepare and file with the appropriate
governmental agencies, such information, returns and reports as are required to
be so filed for reporting (i) dividends and other distributions made, (ii)
amounts withheld on dividends and other distributions and payments under
applicable federal and state laws, rules and regulations, and (iii) gross
proceeds of sales transactions as required.
5. FUND COMMUNICATIONS
E*TRADE Securities shall, on a monthly basis and for each Fund,
report the number of shares on which the Fee is to be paid pursuant to this
Agreement. Such summaries shall be expressed in both shares and dollar amounts.
SCHEDULE B
Calculation of Fee
The Fee shall be calculated by multiplying the Daily Value of Qualifying Shares
by the appropriate Fee Rate (indicated below). The Fee shall be paid monthly in
arrears.
The Daily Value of Qualifying Shares is the aggregate daily value of all shares
of the Fund held in E*TRADE Securities brokerage accounts, subject to the
following exclusions. There shall be excluded from the shares: (i) shares as to
which a brokerage customer paid E*TRADE Securities a transaction fee upon the
purchase of such shares; (ii) shares held in an E*TRADE Securities brokerage
account prior to the effective date of this Agreement as to the Fund; and, (iii)
shares first held in an E*TRADE Securities brokerage account after the
termination of this Agreement as to the Fund.
The Fee Rate is determined based on the aggregate value of the Qualifying Shares
of all Funds listed on Schedule C, as amended from time to time, as of the prior
review date. The review dates are December 31, and June 30. The Fee Rate is
effective from the next business day following the review date up to and
including the next review date. The Fee Rates are as follows:
Up to and including $750 million 1 basis point
Over $750 million and up to
And including $1.5 billion 1 basis point
Over $1.5 billion 1 basis point
Note: The rate scale is not intended to produce a "blended rate." Rather, once a
threshold is reached, the rate applicable to the total amount of assets will be
used for all assets.
For purposes of this exhibit, the daily value of the shares of each Fund will be
the net asset value reported by such Fund to the National Association of
Securities Dealers, Inc. Automated Quotation System. No adjustments will be made
to the net asset values to correct errors in the net asset values so reported
for any day unless such error results in a higher Fee to E*TRADE Securities or
is corrected and the corrected net asset value per share is reported to E*TRADE
Securities before 5 o'clock p.m., Palo Alto time, on the first business day
after the day to which the error relates.
As soon as is possible after the end of the month, E*TRADE Securities shall
provide to the Fund Parties an invoice for the amount of the Fee due for each
Fund. In the calculation of such Fee, E*TRADE Securities' records shall govern
unless an error can be shown in the number of shares used in such calculation.
Fund Affiliate shall pay E*TRADE Securities the Fee within thirty (30) days
after the Fund Parties receipt of such statement. Such payment shall be by wire
transfer, unless the amount thereof is less than $250.00. Such wire transfers
shall be separate from wire transfers of redemption proceeds or other
distributions. Amounts less than $250.00 may be paid, at Fund Affiliate's
discretion, by check.
Schedule C
Fund Portfolios and Classes
Fund Name/Class: Cusip/Ticker Symbol:
E*TRADE S&P 500 Index Fund 269244109
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Asterisk indicates that Fund is a "No-Load" or "No-Sales Charge" Fund as defined
in Section 26 of the NASD's Rules of Fair Practice.
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E*TRADE Funds E*TRADE Asset Management, Inc.
0000 Xxxx Xxxx 0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000 Xxxx Xxxx, XX 00000
By: ________________________ By: _______________________
Name: ______________________ Name: _____________________
Title: ______________________ Title: ______________________
Date: ______________________ Date: ______________________
By:____________________________
E*TRADE Securities, Inc.
Date: ______________________
