SHAREHOLDER SERVICES AGREEMENT
This Agreement is made as of October 7, 2002, between E*TRADE Funds, a
Delaware business trust ("Trust"), on behalf of each series ("Portfolio") listed
on Schedule A hereto as amended from time to time, E*TRADE Asset Management,
Inc., a Delaware corporation ("ETAM") and E*TRADE Securities, Inc. a Delaware
corporation ("E*TRADE Securities") (ETAM and E*TRADE Securities collectively are
referred to as the "Shareholder Servicing Agent').
RECITALS
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act");
WHEREAS, the Trust issues shares of beneficial interest ("shares") in
separate series ("Portfolios"), with each Portfolio representing interests in a
separate portfolio of securities and other assets;
WHEREAS, certain beneficial owners of the Trust's shares ("investors" or
"shareholders") may require administrative, recordkeeping, and other services,
and the provisions of such services to investors requiring these services may
benefit such investors and facilitate their ability to invest in the Portfolios;
WHEREAS, ETAM serves as the investment adviser and administrator to the
Trust under separate agreements and provides certain additional shareholder
services on behalf of each Portfolio; and
WHEREAS, E*TRADE Securities serves as the primary distributor to the Trust
under separate agreement and provides certain additional shareholder services on
behalf of each Portfolio; and
WHEREAS, the Trust desires that Shareholder Servicing Agent provide, or
arrange for an affiliate to provide, certain shareholder services with respect
to shares of the Portfolios in accordance with the terms and conditions of this
Agreement set forth below.
W I T N E S S E T H:
The Trust and Shareholder Servicing Agent (each a "Party") agree as
follows:
1. Appointment. The Trust hereby authorizes Shareholder Servicing Agent to
provide certain shareholder support services to investors in the Portfolios. The
appointment of Shareholder Servicing Agent hereunder is non-exclusive, and
Shareholder Servicing Agent recognizes and agrees that, from time to time, the
Trust may enter into other agreements with financial intermediaries with respect
to the provision of administrative, recordkeeping or investor services.
2. Services to be Performed. For the duration of this Agreement,
Shareholder Servicing Agent agrees to use its best efforts, subject to
applicable legal and contractual
restrictions and in compliance with the procedures described in the
prospectus(es) and statement(s) of additional information of the Portfolios as
from time to time in effect (collectively, the "Prospectus"), to provide in
respect of investors investing in shares of the Portfolios the following
services:
(a) Support services to investors in connection with investments in
the Shares of a Portfolio, which services may include, but are not limited to:
receiving, aggregating and processing purchase and redemption orders; arranging
for the wiring of funds; providing and maintaining retirement plan records;
communicating periodically with investors or shareholders and answering
questions and handling correspondence from investors or shareholders about their
accounts; acting as the sole shareholder of record and nominee for shareholders;
providing check writing services to investors; maintaining account records and
providing beneficial owners with account statements; processing subaccounting
services for payments; issuing shareholder reports and transaction
confirmations; integrating periodic statements with other shareholder
transactions; providing subaccounting services for payments; providing
subaccounting services for Portfolio shares held beneficially; forwarding
shareholder communications to beneficial owners; general account administration
activities; and providing such other similar services as the Trust may
reasonably request to the extent Shareholder Servicing Agent is permitted to do
so under applicable statutes, rules, or regulations. Overhead and other expenses
of Shareholder Servicing Agent related to its "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.
(b) Shareholder Servicing Agent will provide such office space and
equipment, telephone facilities, and personnel (which may be any part of the
space, equipment, and facilities currently used in Shareholder Servicing Agent's
business, or any personnel employed by Shareholder Servicing Agent) as may be
reasonably necessary or beneficial in order to provide such support services
with respect to a Portfolio's Shares.
3. Compensation.
(a) In consideration of Shareholder Servicing Agent's provision of the
services as described in this Agreement, the Trust agrees, subject to the
limitations of applicable law and regulations, to pay ETAM fees ("Service Fees")
at an annual rate, as specified in Schedule A hereto, of the average of the
aggregate net asset value of outstanding shares of each Portfolio serviced by
Shareholder Servicing Agent, measured on each business day during each month.
ETAM may, in turn, pay any or all of these Services Fees to affiliates,
including E*TRADE Securities, or other service providers with whom it has
entered into services agreements, with no recourse to or liability on the part
of the Trust or any Portfolio. Service Fees shall be accrued daily and paid
monthly or at such other interval as Trust and ETAM shall agree. The Parties
acknowledge and agree that the Service Fees will be paid by the Trust on behalf
of each Portfolio and shall be paid for each Portfolio only so long as the
Agreement is in effect.
(b) Notwithstanding other provisions of this Agreement, the fee rate
with respect to any Portfolio may be prospectively increased or decreased by the
Trust, in its sole discretion, at any time upon notice to Shareholder Servicing
Agent.
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(c) On behalf of each Portfolio, Shareholder Servicing Agent may spend
such amounts and incur such expenses as it deems necessary or appropriate on any
service activities. Such expenses may include, without limitation, compensation
to employees and expenses, including overhead and telephone and other
communications expenses, as Shareholder Servicing Agent may determine to be
necessary. Shareholder Servicing Agent shall be solely liable for any expenses
it incurs hereunder.
(d) In addition, Shareholder Servicing Agent will furnish to the Trust
or its designees such information as the Trust or its designees may reasonably
request (including, without limitation, periodic certifications confirming the
rendering of services with respect to shares of the Portfolios as described
herein) and will otherwise cooperate with the Trust and its designees
(including, without limitation, any auditors designed by the Trust) in the
preparation of reports to the Trust's Board of Trustees concerning this
Agreement and the monies paid or payable by the Trust pursuant hereto, as well
as any other reports or filings that may be required by law.
4. 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.
5. Term and Termination.
(a) Unless sooner terminated, this Agreement will continue in effect
until one year from the date hereof and thereafter for successive annual
periods, provided that such continuance is specifically approved at least
annually by votes of a majority of both (i) the Board of Trustees of the Trust
and (ii) those Trustees of the Trust who are not "interested persons" (as
defined in the 0000 Xxx) and have no direct or indirect financial interest in
the operation of the Agreement.
(b) This Agreement may be terminated with respect to a Portfolio, at
any time without the payment of any penalty, by (i) a vote of a majority of the
Board of Trustees of the Trust; (ii) a vote of a majority of a Portfolio's
shares; or (iii) by Shareholder Servicing Agent on 30 days' written notice.
6. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of
Delaware applicable to agreements fully executed and to be performed therein,
without regard to its conflicts of law rules.
7. Limitation on Liability. The obligations of each Portfolio of the
Trust under this Agreement shall only be binding upon the assets and property of
that Portfolio of the Trust, and shall not be binding upon any Trustee, officer
or shareholder of the Trust individually or upon any other Portfolio of the
Trust.
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8. Exculpation: Indemnification.
(a) The Trust shall not be liable to Shareholder Servicing Agent and
Shareholder Servicing Agent shall not be liable to the Trust except for acts or
failures to act which constitute lack of good faith or gross negligence and for
obligations expressly assumed by either Party hereunder. Nothing contained in
this Agreement is intended to operate as a waiver by the Trust or by Shareholder
Servicing Agent of compliance with any applicable federal or state law, rule, or
regulation.
(b) Shareholder Servicing Agent will indemnify the Trust and hold it
harmless from any claims or assertions relating to the lawfulness of Shareholder
Servicing Agent's participation in this Agreement and the transactions
contemplated hereby or relating to any activities of any persons serving as
officers or employees of Shareholder Servicing Agent and performed in connection
with the discharge of its responsibilities under this Agreement. If any such
claims are asserted, the Trust shall have the right to manage its own defense,
including the selection and engagement of legal counsel of its choosing, and all
costs of such defense shall be borne by Shareholder Servicing Agent.
9. Notices. Each notice required by this Agreement shall be given in
writing and delivered personally, mailed by certified mail or courier service,
or sent by facsimile or electronic mail to the Party's address identified on the
signature page to this Agreement or such other address as each Party may by
written notice provide to the other.
10. Complete Agreement. This Agreement, including Schedule A, contains the
full and complete understanding of the parties and supersedes all prior
representations, promises, statements, arrangements, agreements, warranties and
understandings between the parties with respect to the subject matter hereof,
whether oral or written, express or implied. This Agreement shall not be deemed
to be complete absent Schedule A.
11. Amendment. This Agreement may be modified or amended, and the terms of
this Agreement may be waived, by a writing signed by each of the parties.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
13. Severability. If any provision of this Agreement shall be held invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement by
their duly authorized officers as of the date and year first written above.
E*TRADE FUNDS
By:__________________________________ Address for Notices:
0000 Xxxxxxxx Xxxxx
Xxxx:________________________________ Xxxxx Xxxx, XX 00000
Fax: (000)000-0000
Title:______________________________
E*TRADE ASSET MANAGEMENT, INC.
By:__________________________________ Address for Notices:
0000 Xxxxxxxx Xxxxx
Xxxx:________________________________ Xxxxx Xxxx, XX 00000
Fax: (000)000-0000
Title:______________________________
E*TRADE SECURITIES, INC.
By:__________________________________ Address for Notices:
0000 Xxxxxxxx Xxxxx
Xxxx:________________________________ Xxxxx Xxxx, XX 00000
Fax: (000)000-0000
Title:______________________________
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SCHEDULE A
TO THE
SHAREHOLDER SERVICES AGREEMENT
TRUST PORTFOLIOS AND SHAREHOLDER SERVICE FEES
---------------------------------------------
PORTFOLIO: SERVICE FEE:
---------- ------------
E*TRADE Money Market Fund 0.25%
E*TRADE California Municipal Money Market Fund 0.25%
E*TRADE New York Money Market Fund 0.25%
E*TRADE Government Money Market Fund 0.25%
E*TRADE Municipal Money Market Fund 0.25%
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