E*TRADE Group, Inc.
No Transaction Fee Mutual Fund Offering
FORM OF RETAIL SHAREHOLDER SERVICES AGREEMENT
This Agreement is made as of January 29, 1999, between E*TRADE Group, Inc.
("E*TRADE"), 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 ___________
(Fund and Fund Affiliate are collectively referred to as "Fund Parties").
WHEREAS, Fund Parties wish to engage E*TRADE to perform certain
record-keeping, shareholder communication, and other shareholder administrative
services for Fund's shareholders; and
WHEREAS, E*TRADE 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 and Fund Parties agree as follows:
1 SERVICES
E*TRADE 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 pursuant to this
Agreement, the Fund Parties shall pay a fee to E*TRADE as shall be calculated
pursuant to Schedule B to this Agreement. Both Fund and Fund Affiliate shall be
severally liable for such compensation in the proportions designated on Schedule
D.
3 TRANSACTION CHARGES
E*TRADE 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
shall have the right to assess customers a fee for executing a purchase or sale
order where the customer has held such position for less than one-hundred and
twenty (120) days, or where E*TRADE provides the customer with a service that is
not contemplated by this Agreement.
4 INDEMNIFICATION
(a) Fund Parties agree to indemnify, defend and hold harmless E*TRADE, 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, 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 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's
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 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 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 of any representation, warranty
or provision contained herein, or (iii) any willful misconduct or gross
negligence by E*TRADE 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
The parties acknowledge and agree that the Services performed by E*TRADE
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 any right to purchase
shares from the Fund; neither does it preclude E*TRADE's ability to purchase
shares from the Fund. E*TRADE 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 is involved in the purchase of shares of
any Fund by E*TRADE's customers, such involvement will be as agent of such
customer only.
6 INFORMATION TO BE PROVIDED
Fund Parties shall provide to E*TRADE 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. Fund Parties agree to submit to E*TRADE 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 to Fund and Fund Affiliate or by Fund and Fund Affiliate
to E*TRADE. Termination of this Agreement shall terminate E*TRADE's 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, C and D, 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, C or D.
13 ENTIRE AGREEMENT; SEVERABILITY
Each Party recognizes the existence of an Underwriting Agreement between
E*TRADE Securities, Inc. and the Fund dated ____, a Clearing Agreement between
E*TRADE Securities, Inc. and NSCC, dated ____, and a Supplemental Agreement
Regarding Networking dated _____ ("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.
_____________________________ _____________________________
(Name of Fund Company) (Name of Fund Affiliate)
By: ________________________ By: ________________________
Name: _______________________ Name: ______________________
Title: _____________________ Title: ______________________
Date: ______________________ Date: ______________________
By:____________________________
E*TRADE Group, Inc.
SCHEDULE A
Services
1. RECORD MAINTENANCE
E*TRADE shall maintain the following records with respect to a Fund for
each customer who holds Fund shares in an E*TRADE 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 shall:
a. Provide to an approved shareholder mailing agent for the purpose of
providing certain Fund-related materials the names and addresses of all E*TRADE
customers who hold shares of such Fund in their E*TRADE 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 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 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 shall communicate, as to shares of each Fund, purchase, redemption
and exchange orders reflecting the orders it receives from its customers.
E*TRADE shall also communicate, as to shares of each Fund, mergers, splits and
other reorganization activities.
4. TAX INFORMATION RETURNS AND REPORTS
E*TRADE 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 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 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 a transaction fee upon the purchase of such
shares; (ii) shares held in an E*TRADE brokerage account prior to the effective
date of this Agreement as to the Fund; and, (iii) shares first held in an
E*TRADE 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 is corrected and the corrected net asset value per
share is reported to E*TRADE 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 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's records shall govern unless an error can be
shown in the number of shares used in such calculation.
Fund Parties shall pay E*TRADE 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 Parties' discretion, by check.
Schedule C
Fund Portfolios and Classes
Fund Name/Class: Cusip/Ticker Symbol:
E*TRADE S&P 500 Index Fund 269244109
_________________________________ _________________________
_________________________________ _________________________
_________________________________ _________________________
_________________________________ _________________________
_________________________________ _________________________
_________________________________ _________________________
_________________________________ _________________________
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.
_________________________________ _________________________
(Name of Fund Company) (Name of Fund Affiliate)
_________________________________ _________________________
(Address) (Address)
_________________________________ _________________________
_________________________________ _________________________
By: ________________________ By: ________________________
Name: _______________________ Name: ______________________
Title: _____________________ Title: _____________________
Date: ______________________ Date: ______________________
By: __________________________
E*TRADE Group, Inc.
Date: ________________________
Schedule D
Payment of Fee
Up to and Over Over
Including $750MM $1.5BB
$750 MM and under
$1.5 BB
Fund Affiliate:
Name: E*TRADE Funds 0 .05% 0.05% 0.05%
By: E*TRADE Asset Management, Inc.
Signature ____________________
Name: Xxxxxx Xxx Xxxxxxxx
Title: Vice President, Operations
Date: January 29, 1999
