Exhibit 10.1

 

E*TRADE FINANCIAL SWEEP DEPOSIT ACCOUNT

BROKERAGE AND SERVICING AGREEMENT

 

E*TRADE FINANCIAL SWEEP DEPOSIT ACCOUNT BROKERAGE AND SERVICING AGREEMENT, dated
as of September 12, 2003 (“Agreement”), between E*TRADE Bank, a federal savings
bank organized under the laws of the United States (the “Depository
Institution”) and E*TRADE Clearing LLC, a clearing broker-dealer organized under
the laws of Delaware (“Broker”).

 

WHEREAS, the Depository Institution desires to establish from time to time
deposit accounts (including interest-bearing transaction accounts as permitted
under 12 C.F.R. § 204.2(b)(3) for those persons eligible to own NOW accounts
(“NOW Accounts”), and money market deposit accounts or “MMDAs” as that term is
defined in 12 C.F.R. § 204.2(d)(2)) (and at some future date, non-interest
bearing transaction accounts (“Business Transaction Accounts”) for those persons
that are not eligible to own NOW Accounts) as authorized by applicable
regulations and on the terms and conditions hereinafter provided (each such
account individually an “Account” and all such accounts collectively the
“Accounts”);

 

WHEREAS, Broker is willing to act as agent for (i) its customers and (ii)
customers of broker-dealers (“Approved Brokers”) whose accounts Broker carries
on a fully disclosed basis (all such customers being referred to herein as
“Customers”);

 

WHEREAS, Depository Institution and Broker desire to establish the NOW accounts
through one omnibus account, and MMDAs through a second omnibus account (and at
some future date, Business Transaction Accounts through a third omnibus
account,) (each, an “Omnibus Account”), with portions of the subaccounting
regarding the individual Customer NOW accounts and MMDAs to be performed on the
Depository Institution’s behalf by Broker as agent; and

 

WHEREAS, Broker will add MMDA and NOW Accounts as cash sweep vehicles for its
Customer brokerage accounts and sweep available customer uninvested cash
balances and proceeds from the sales of securities (including, but not limited
to, sales, redemptions, and dividends) (“Funds”) in Customer brokerage accounts
into Customer Accounts (a NOW Account paired with an MMDA Account and linked to
a brokerage account is referred to herein as a “Sweep Deposit Account”)
maintained at Depository Institution on a daily basis, depending on the amount
of the Funds and according to a periodic sweep schedule mutually agreed upon by
Broker and Depository Institution;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Depository Institution and Broker agree as follows:

 

1. Role of Broker. The Depository Institution hereby acknowledges that Broker
will bring the availability of the Accounts to the attention of Customers either
directly or through an Approved Broker. Unless expressly provided to the
contrary

 

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herein, in all actions taken by Broker hereunder with respect to the Accounts it
is understood that Broker shall be acting as agent for Customers.

 

2. Establishment of Accounts. (a) During the term of this Agreement, the
Depository Institution agrees to accept deposits from, and establish Accounts
for, Customers in the amounts remitted to the Depository Institution by Broker,
as agent for Customers; provided that no Sweep Deposit Account shall be
established at the Depository Institution if after giving effect to the deposit
the aggregate amount of funds on deposit in all Sweep Deposit Accounts
established for that category of Account with the Depository Institution
hereunder would exceed the amount specified from time to time by Depository
Institution by written notice to Broker (it being understood that once a
Customer establishes a Sweep Deposit Account with the Depository Institution,
the Depository Institution will accept all additional funds remitted to the
Depository Institution by Broker, as agent for the Customer, for deposit to such
Account). Each of the customer NOW Accounts will be linked to an MMDA in the
name of the same customer, and the linked deposit accounts operated together as
subaccounts that comprise a single Sweep Deposit Account made available to
Broker’s eligible customers as a cash sweep option for holding available cash
balances in the customer’s brokerage account.

 

(b) Broker, as agent for the Customer, will remit to the Depository Institution
(i) the amount of a Customer’s initial deposit to its Account and (ii) the
amount of any subsequent deposits by such Customer to its Account. Broker may
notify the Depository Institution of any initial deposits and subsequent
deposits to Accounts in the form of a Notice of Net Withdrawal or Net Deposit
(“Notice of Net W/D”) for the Sweep Deposit Accounts. By the Depository
Institution’s acceptance of such notice, the Depository Institution shall be
deemed to have made the representations contained thereon. Each Business Day,
the Depository Institution shall transfer to Broker the net amount of all
withdrawals less new deposits specified in the Notice of Net Withdrawal for
Sweep Deposit Accounts, and Broker shall transfer to Depository Institution the
net amount of all deposits less withdrawals specified in the Notice of Net
Deposit for Sweep Deposit Accounts with actual wire transfer of funds (or such
other method of transfer as may be mutually agreed upon by the parties). The
Depository Institution shall debit or credit, as appropriate, the Omnibus
Accounts with the amounts thereto as of the date of receipt by the Depository
Institution from Broker of the funds in respect of such deposit.

 

(c) No minimum initial deposit will be required to establish an Account. If
withdrawals from a Customer’s Account cause the deposit balance therein to be
reduced to zero, the Depository Institution shall nevertheless continue to
maintain the Account unless Broker notifies the Depository Institution that the
Customer has instructed Broker to close the Account.

 

(d) Depository Institution will monitor each Customer’s MMDA for conformity with
the monthly transaction limits applicable to MMDA Accounts under Regulation D
(12 C.F.R. § 204), use a commercially available computer algorithm for
determining a portion of the Customer balance to keep in the NOW Account and
periodically rebalance this amount to optimize the balances in the two linked
customer Deposit Accounts, and transfer the balances in those Customer MMDA
Accounts

 

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exceeding transaction limits to the associated customer NOW Accounts for the
relevant month in a manner consistent with interpretations of the Federal
Reserve Board (and transfer back to the associated MMDA account for the
commencement of the next month), and notify the Broker of the aggregate balances
of the Accounts that are in NOW Accounts and the aggregate balances of Accounts
that are in MMDA Accounts, and the Depository Institution shall calculate,
report and maintain required reserves. For purposes of this Section 2, “month”
or “monthly” may mean a calendar month or a monthly statement cycle (which might
not correspond to a calendar month) as appropriate to conform to Regulation D
requirements.

 

The term “Business Day” shall mean a day on which Broker and the Depository
Institution are open for business, except with respect to the determination of
the LIBOR Rate, in which case a Business Day shall mean a day on which banks in
The City of London are open for business.

 

(e) Depository Institution shall administer Customer Accounts in accordance with
the following procedures: For most purposes, a Customer Account will be
considered as one account having one account number. For internal Depository
Institution accounting purposes, however, a Customer Account will be treated as
one Account consisting of two separate sub-accounts. One will be a transaction
account designated as “NOW Sub-Account,” and the other will be a savings account
designated as “MMDA Sub-Account.” (In the future, for Customers that are not
eligible under the Federal Deposit Insurance Act to own a NOW Account, the
transactions contemplated herein between a NOW Account and an MMDA Account will
instead be conducted through a Business Transaction Account and an MMDA Account
established in the Customer’s name).

 

For regulatory purposes, the NOW Sub-Account will be classified as an account
from which an unlimited number of transfers of funds may be made. The MMDA
Sub-Account, however, will be classified as a “time” deposit in which the number
of transfers from the account is limited to six (6) per statement cycle. The
regulatory limitation on transfers from the MMDA Sub-Account during a statement
cycle will be the determining factor for the procedure for transfers between the
sub-accounts described below.

 

Funds on deposit in the MMDA Sub-Account will be optimized during each monthly
statement cycle by automatic transfers between the NOW Sub-Account and the MMDA
Sub-Account. In order to accomplish this goal, Depository Institution will use a
commercially available computer algorithm for determining a portion of the
Customer balance to keep in the NOW Account and periodically rebalance this
amount to optimize the balances in the two linked customer Deposit Accounts, and
until such time in each monthly statement cycle that a total of six (6)
withdrawals or transfers have been made from the MMDA Sub-Account back to the
NOW Sub-Account to cover withdrawals made from the NOW Sub-Account. Upon the
sixth withdrawal or transfer from a Customer’s MMDA Sub-Account to the NOW
Sub-Account (excluding those transactions that are not subject under Regulation
D to the six-transaction limit) the balance in the Customer’s MMDA Sub-Account
will be transferred by Depository Institution to the Customer’s NOW Sub-Account
and no further such withdrawals or

 

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transfers will be made from the Customer’s MMDA Sub-Account until the beginning
of the next monthly statement cycle.

 

The Target Balance will be the designated balance (to be identified using
commercial available software selected by Depository Institution for this
purpose) that will be maintained in the NOW Sub-Account when possible by
automatic transfer of funds from the MMDA Sub-Account. The Target Balance may
change from time to time without notice to the customer. All transfers of funds
between the sub-accounts will be made automatically by Depository Institution.
The Customer will notice no change in the Account as a result of these
transfers. The structure of the Account will have no impact on FDIC insurance.

 

The balance in the NOW Omnibus Account shall be determined by the Depository
Institution as the sum of the balances in the NOW Sub-Accounts. The balance in
the MMDA Omnibus Account shall be determined by the Depository Institution as
the sum of the balances in the MMDA Sub-Accounts.

 

3. Fee to Broker. In consideration of Broker’s services hereunder, the
Depository Institution agrees to pay Broker fees that shall be agreed upon by
Broker and the Depository Institution from time to time. Such fees shall not be
due or payable until such time as the board of directors of the Depository
Institution has approved the fee structure under this agreement in conformity
with the requirements of the affiliate transaction policies and procedures of
the Depository Institution. Such fees shall be payable monthly on such day as
Depository Institution shall designate in respect of the average daily balance
of all MMDA Accounts and in respect of the average daily balance of all NOW
Accounts for such month. Broker may, in its sole discretion, pay all or any
portion of its fee with respect to any Customer’s Account to any Approved
Broker. Any fees paid by the Depository Institution to Broker pursuant to this
provision shall comply in all respects with Section 23B of the Federal Reserve
Act, 12 U.S.C. § 371c-1, Regulation W as promulgated by the Board of Governors
of the Federal Reserve System, 12 C.F.R. Part 223, and 12 C.F.R. § 563.42 and
shall be subject to periodic review and revision by mutual agreement of the
Depository Institution and Broker to ensure such compliance.

 

4. Interest Rate. The Depository Institution shall pay interest to the
Customers’ respective Accounts on the amount on deposit in a NOW Account and in
an MMDA Account at a rate per annum determined from time to time by the
Depository Institution, calculated according to the methods established in the
form of depositary agreement and truth-in-savings disclosure in use at the
Depository Institution.

 

5. Book-Entry. (a) Customer Accounts established at the Depository Institution
pursuant to this Agreement shall be established in book-entry form only. Each
Customer Account established at the Depository Institution shall (i) have a
separate account number on the account records of the Depository Institution
maintained by the Broker and Depository Institution and (ii) be included in an
Omnibus Account registered on the books and records of the Depository
Institution as follows: “E*TRADE Clearing LLC, as agent and nominee for others,
including trusts, pension and retirement plans and

 

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accounts, custodians, fiduciaries, or agents and nominees for other persons.”
There shall be two such Omnibus Accounts, one for NOW Accounts, and the other
for MMDA Accounts. Broker, acting as agent and record-keeper of the Depository
Institution, shall be responsible for assigning a separate Account number for
each Customer Account, and maintaining all books and records in respect of the
Account (other than Sub-Account information, which shall be maintained by the
Depository Institution), including the Account title, address, ownership,
signatory power, social security number or other tax identification number, and
the crediting of interest from the Omnibus Account to each Account, and all
deposits, withdrawals and other transactions, in each Account. Broker shall
maintain such Account records on Depository Institution’s behalf at a location
or locations mutually agreed on from time to time by the parties hereto, and
shall make such records available upon request to the Depository Institution,
the Office of Thrift Supervision, the FDIC and the examiners of other state and
federal banking agencies that have supervisory jurisdiction over the Depository
Institution.

 

(b) Promptly upon establishment of an Account, the Depository Institution and
Broker will communicate (electronically or otherwise) information regarding the
establishment of the Account and the registration of such Account on the books
and records of the Depository Institution as set forth in Section 5(a) above.

 

(c) If a Customer terminates its brokerage account relationship with Broker but
instructs Broker that it wishes to maintain the deposit account with Depository
Institution, and Broker shall so advise the Depository Institution, the
Depository Institution shall register the Customer’s Account on the books and
records of the Depository Institution in the name of the Customer provided that
Broker shall have furnished the Depository Institution with confirmation of the
Customer’s instructions. To facilitate such registration in the name of the
Customer, Broker shall reasonably cooperate with the Depository Institution in
establishing the identity of any Customer that terminates its brokerage account
relationship with Broker, including without limitation, the name, address and
taxpayer identification number of such Customer. Upon registration of an Account
in the name of a Customer, the provisions of this Agreement shall no longer
govern the terms of such Account and the Depository Institution shall deal with
the Customer directly with respect to such Account.

 

(d) So long as an Account is registered in the name of Broker as agent for a
Customer, Broker will, as the Depository Institution’s record keeper, maintain
the following account details for such Account. Broker shall maintain records on
behalf of the Depository Institution reflecting (i) an account number for each
Customer that established an Account at the Depository Institution, (ii) the
dollar amount of each Account established at the Depository Institution on each
day during the preceding calendar month, and (iii) the aggregate amount of
deposits and withdrawals from the Accounts at the Depository Institution on each
day during the preceding calendar month. Subject to compliance with Section 18
hereof, Broker shall promptly make such records available upon request to the
Depository Institution, the FDIC or Office of Thrift Supervision.

 

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(e) Broker shall maintain on its records the name, address and taxpayer
identification number of each Customer that has established an Account at the
Depository Institution.

 

6. Restrictions on Account Transfers and Withdrawals. (a) Broker will handle the
process of arranging for issuance of checks for brokerage accounts linked to
Sweep Deposit Accounts, which checks may be cleared through a third-party bank
or the Depository Institution as agreed from time-to-time between Broker and
Depository Institution. No checks shall be furnished by the Depository
Institution to the Customers for check writing purposes without the prior
written approval of Broker on an Account-by-Account basis.

 

(b) All withdrawals from an Account of a Customer shall be effected by Broker,
as agent and messenger for the Customer. Broker, as agent for a Customer, may
make an unlimited number of withdrawals from such Customer’s Account to satisfy
obligations of the Customer in connection with the Customer’s brokerage account.

 

7. Disclosure. (a) The Depository Institution shall provide Broker with all
disclosure information that the Depository Institution is required by federal or
applicable state banking law to provide to depositors establishing Accounts
directly with the Depository Institution and shall advise Broker from time to
time concerning such disclosure information. In making the Accounts available,
Broker shall directly or through an Approved Broker supply to Customers
materials that shall contain information with respect to Accounts, including the
Account agreement and terms in a form and format approved by Depository
Institution and any information furnished to Broker by the Depository
Institution that the Depository Institution informs Broker is required by law to
be disclosed. Broker shall not have any responsibility for an omission on the
part of the Depository Institution to notify Broker, or for any delay by the
Depository Institution in notifying Broker, unless such delay is caused by
Broker’s negligent act or negligent omission to act, of any disclosure that the
Depository Institution advises Broker is required by applicable law or
regulation.

 

(b) Broker shall provide the Customer with information regarding the date of the
initial deposit to the Account, the name of the Depository Institution, and the
fact that Broker, or Broker and the Approved Broker, may receive from the
Depository Institution a fee for providing the services contemplated by this
Agreement. The information may be furnished by Broker in the form of a trade
confirmation, a monthly customer transaction statement, or other reasonable
means; provided, however, that quarterly statements may be provided if there are
no transactions in the Customer’s Account during the first two months of a
particular quarter.

 

(c) Broker shall provide each Customer with a monthly transaction statement in a
form and format acceptable to the Depository Institution that shall reflect all
activity in such Customer’s Account during the previous interest period, the
closing balance of the Account at the end of the previous interest period, and
the amount of interest earned on funds in the Account during the previous
interest period; provided,

 

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however, that quarterly statements may be provided if there are no transactions
in the Customer’s Account during the first two months of a particular quarter.

 

8. Reservation of Notice Before Withdrawal or Transfer. The Depository
Institution reserves the right to require seven days’ prior notice before
allowing a withdrawal or transfer from a NOW or MMDA Account established
pursuant to this Agreement.

 

9. Representations and Warranties and Covenants of Broker. Broker represents and
warrants to and covenants with the Depositary Institution as follows:

 

(a) Broker is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware.

 

(b) Broker has full corporate power to execute, deliver and perform this
Agreement.

 

(c) This Agreement constitutes a legal, valid and binding obligation of Broker
enforceable against Broker in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency, liquidation or other similar laws
affecting generally the enforcement of creditors’ rights.

 

(d) Broker agrees to comply with any federal, state or local tax information or
other reporting requirements applicable to Broker in connection with Accounts
established in the name of Broker as agent for Customers as such information is
reported to Broker by the Depository Institution. In the event that any amounts
payable with respect to the Accounts become subject to any federal, state or
local income tax withholding provisions, Broker agrees to comply with any
provisions of such law requiring Broker to maintain information sufficient to
meet reporting requirements under the applicable tax law or to withhold any
amounts in respect of Accounts established in the name of Broker as agent for
Customers.

 

(e) Broker will make available to each Customer who establishes an Account all
information and disclosure statements required under the Truth in Savings Act
and 12 C.F.R. §§ 230; 330.14(h) or any successor statutes or regulations
thereto, or applicable state laws as directed and provided by the Depository
Institution.

 

(f) Broker shall file any required currency transaction reports in respect of
Accounts and shall take reasonable steps to ensure that the funds received from
Customers and deposited in the Accounts do not constitute the proceeds from
activities that would be subject to Federal money laundering statutes and
regulations applicable to banks or broker-dealers and shall obtain the customer
information and create and maintain records in respect of the Accounts as
required by 12 U.S.C. § 1829(b), the USA Patriot Act of 2001, Treasury
Department Regulations and other applicable laws. Broker shall have in place and
adhere to comprehensive anti-money laundering and customer identification
policies and procedures as required by applicable law and self-regulatory
organization rules. Broker shall verify the identity of each of its Customers
who establishes an Account, in conformity to such requirements and shall conduct
an

 

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appropriate screen of such Customers as required by applicable laws and SRO
rules. Broker shall certify to Depository Institution not less than annually its
conformity to such requirements.

 

(g) Broker is the authorized representative, agent (or sub-agent) and nominee
(or sub-nominee) for each of the Customers for whom an Account is established
and carried on the books and records required herein, and is authorized to give
the Depository Institution instructions on behalf of the Customer and with
respect to the Account; and the Depository Institution may conclusively rely
without further inquiry on such instructions given by Broker on behalf of
Customers or otherwise in connection with this Agreement.

 

(h) Broker agrees not to, and shall instruct Approved Brokers not to, offer the
Accounts to Customers in any State or jurisdiction in which the Depository
Institution has instructed it in writing from time-to-time not to offer
Accounts.

 

(i) Broker agrees to comply with federal and state securities laws and
regulations applicable to performance hereunder as broker of Accounts, and will
not take any action or offer the Accounts to any person or in any jurisdiction
that would require the registration of the Accounts under the Securities Act of
1933 or the securities laws of the jurisdiction.

 

(j) Broker is a member firm of the NASD and of the New York Stock Exchange, and
is registered or licensed as a securities broker-dealer with the U.S. Securities
and Exchange Commission, the securities regulators of the states of California
and Virginia and each other state in which it is required to be so registered by
the nature of its business.

 

(k) Broker will only make NOW Accounts available to Customers that are in the
categories listed in Exhibit A as modified from time-to-time by Depository
Institution.

 

10. Representations and Warranties and Covenants of the Depository Institution.
The Depository Institution represents and warrants to Broker as follows:

 

(a) The Depository Institution is a federal savings bank duly organized, validly
existing and in good standing under the laws of the United States.

 

(b) The Depository Institution has full corporate power to execute, deliver and
perform this Agreement and to issue and perform its obligations under the
Accounts. The execution, delivery and performance of this Agreement and the
issuance of the Accounts and the performance by the Depository Institution of
its obligations in respect hereof has been duly authorized by the Depository
Institution.

 

(c) This Agreement constitutes a legal, valid and binding obligation of the
Depository Institution enforceable against the Depository Institution in
accordance with its terms except as enforcement may be limited by bankruptcy,
insolvency,

 

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receivership, conservatorship, liquidation or other similar laws affecting
generally the enforcement of creditors’ rights.

 

(d) Each Account issued as contemplated hereby will constitute a legal, valid
and binding obligation of the Depository Institution, enforceable against the
Depository Institution in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency, receivership, conservatorship, liquidation or
other similar laws affecting generally the enforcement of creditors’ rights.

 

(e) The deposit accounts of the Depository Institution are insured by the
Federal Deposit Insurance Corporation to the full extent provided under the
Federal Deposit Insurance Act and the Rules of the Federal Deposit Insurance
Corporation (“FDIC”). The obligation of the Depository Institution in respect of
each Account is entitled to the priority provided to “deposit liabilities” by
Section 11(d)(11) of the Federal Deposit Insurance Act (12 U.S.C. §
1821(d)(11)).

 

(f) Each Account established as contemplated hereby will be eligible for deposit
insurance of the FDIC subject to the maximum limits on such insurance afforded
to a depositor and further subject to Broker complying with applicable record
keeping requirements as set forth in this Agreement with respect to the
Accounts.

 

(g) The Depository Institution is authorized under appropriate law and
regulation to pay interest on each Account at the interest rate determined in
accordance with Section 4 hereof.

 

(h) No applicable law or regulation of the Commonwealth of Virginia imposes any
state or local income or franchise tax with respect to any Account established
by a nonresident of such state.

 

(i) Neither the execution and delivery of this Agreement, the consummation of
the transactions herein contemplated, the fulfillment of, or compliance with,
the terms and provisions hereof, nor the issuance and performance of its
obligations under the Accounts will conflict with, or result in a breach of any
of the terms, conditions or provisions of any federal banking law, regulation or
rule of any federal governmental agency applicable to the Depository Institution
or of any Virginia law concerning depository institutions, or Virginia rules or
regulations governing the acceptance of deposits, or of the charter or bylaws of
the Depository Institution or of any agreement to which the Depository
Institution is now a party or by which it may be bound.

 

(j) Prior to offering any Accounts pursuant to this Agreement, the Depository
Institution will have obtained or made any consent, approval or other
authorization of or by, or filing or registration with, any court,
administrative or regulatory agency or other federal or Virginia governmental
authority that is required to be obtained by the Depository Institution in
connection with the execution, delivery or performance by the Depository
Institution of, or the consummation by the Depository Institution of, the
transactions contemplated by this Agreement including, without limitation, the
issuance, offer and establishment of the Accounts.

 

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(k) On any date on which an Account deposit is made, the Depository Institutions
will furnish a representation in accordance with 12 C.F.R. § 330.14(h)(2), on
the Notice of Net W/D with respect to such deposit (i) as to the Depository
Institution’s capital category as of such date and (ii) that any deposits made
by employee benefit plans would be eligible for “pass-through” deposit insurance
as of such date subject to the maximum benefits allowed under FDIC insurance and
further subject to Broker, the employee benefit plan, and any intermediate
nominee, custodian or other fiduciary complying with applicable recordkeeping
requirements as set forth in this Agreement with respect to Accounts.

 

(l) On any date on which (i) Broker informs the Depository Institution that
Broker has received a request from an employee benefit plan depositor, the
Depository Institution will furnish the notice required under 12 C.F.R. §
330.14(h)(l) and (ii) any deposit made by an employee benefit plan would no
longer be eligible for “pass-through” deposit insurance, the Depository
Institution will furnish a notice to that effect to Broker pursuant to 12 C.F.R.
§ 330.14(h)(3).

 

11. Indemnification. (a) The Depository Institution agrees to indemnify and hold
harmless Broker and any Approved Broker for and against (i) any and all
liability and costs to Customers who have established Accounts caused by the
fault or negligence of the Depository Institution, its employees or authorized
representatives, arising out of the performance or non-performance of the
covenants and obligations of the Depository Institution under this Agreement,
and (ii) any and all loss, cost, damage or expense (including court costs and
reasonable attorneys’ fees and disbursements) to Broker, or any Approved Broker
resulting from the breach by the Depository Institution of any of its
representations, covenants, obligations or warranties contained in this
Agreement.

 

(b) Broker agrees to indemnify and hold harmless the Depository Institution for
and against (i) any and all liability and costs to Customers who have
established Accounts caused by the fault or negligence of Broker, its employees
or authorized representatives or Approved Brokers, arising out of the
performance or nonperformance of the covenants and obligations of Broker under
this Agreement, and (ii) any and all loss, costs, damage or expenses (including
court costs and reasonable attorneys’ fees and disbursements) to the Depository
Institution resulting from the breach by Broker of any of its representations,
warranties, covenants or obligations contained in this Agreement and any and all
loss, costs, damage or expenses (including court costs and attorneys’ fees and
disbursements) to the Depository Institution resulting from the negligent acts
or negligent omissions of any Approved Brokers related to Accounts.

 

In any case where a party shall seek indemnification under this Agreement (the
“Indemnified Party”), for a third party claim, suit or proceeding (“Third Party
Claim”), such indemnification shall be conditioned on such Indemnified Party’s
compliance with the following procedures:

 

(i) the Indemnified Party will give prompt written notice to the party from whom
such indemnification is sought (the “Indemnifying Party”) of each claim for
indemnification under this Agreement, specifying the amount and nature of the

 

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claim (a “Notice”). Provided that such Notice is given (unless the failure to
provide such Notice does not prejudice the interests of the Indemnifying Party),
and the Indemnifying Party has not contested in writing the Indemnified Party’s
right to indemnification as set forth below, the Indemnifying Party, at its own
expense and using counsel of its own choosing, shall promptly defend, contest
and otherwise protect against any such claim, suit or proceeding. If within a
reasonable time period following the receipt of a Notice, the Indemnifying Party
contests in writing the Indemnified Party’s right to indemnification with
respect to the Third Party Claim described in the Notice, the Indemnified Party
shall defend against and contest such Third Party Claim.

 

(ii) If the Indemnifying Party is defending against the Third party Claim, the
Indemnified Party may, but will not be obligated to, participate in the defense
of any such Third Party Claim, suit or proceeding, at its own expense and using
counsel of its own choosing, but the Indemnifying Party shall be entitled to
control the defense thereof unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular matter. The
Indemnified Party shall cooperate and provide such assistance as the
Indemnifying Party reasonably may request in connection with the Indemnifying
Party’s defense and shall be entitled to recover from the Indemnifying Party the
reasonable costs of providing such assistance. The Indemnifying Party shall
inform the Indemnified Party on a regular basis of the status of such claim,
suit or proceeding and the Indemnifying Party’s defense thereof.

 

(iii) In any Third Party Claim the defense of which is controlled by the
Indemnifying Party, the Indemnifying Party shall not, without the Indemnified
Party’s prior written consent, compromise or settle such claim, suit or
proceeding if: (a) such compromise or settlement would impose an injunction or
other equitable relief upon the Indemnified Party; or (b) such compromise or
settlement does not include the third party’s release of the Indemnified Party
from all liability relating to such claim, suit or proceeding for which the
Indemnified Party is entitled to be indemnified.

 

(iv) If the Indemnifying Party fails to timely defend, contest or otherwise
protect against any such claim, suit or proceeding, and fails to contest in
writing the Indemnified Party’s right to indemnification, the Indemnified Party
may, but will not be obligated to, defend, contest or otherwise protect against
the same, and make any compromise or settlement thereof and recover the entire
costs thereof from the Indemnifying Party, including reasonable fees and
disbursements of counsel and all amounts paid as a result of such claim, suit or
proceeding and the compromise or settlement thereof.

 

(v) The obligation to indemnify a party’s officers, directors, employees and
agents in accordance with this Section 11 may be enforced exclusively by such
party and nothing herein shall be construed to grant such officers, directors,
employees and agents any individual rights, remedies, obligations or liabilities
with respect to the parties to this Agreement. The parties to this Agreement may
amend or modify this Agreement in any respect without the consent of such
officers, directors, employees and agents.

 

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12. Litigation. (a) Broker will promptly advise the Depository Institution of
any legal or administrative action of which Broker obtains knowledge by any
state or federal court, agency or authority taken or threatened to be taken that
would preclude, limit or otherwise restrict the offering of the Accounts as
contemplated by the Agreement.

 

(b) The Depository Institution will promptly advise Broker of any legal or
administrative action of which the Depository Institution obtains knowledge by
any state or federal court, agency or authority, taken or threatened to be taken
that would preclude or limit or otherwise restrict the offering of the Accounts
as contemplated by this Agreement.

 

13. Duration of Agreement. (a) This Agreement shall expire on the date that is
one year from the date of this Agreement; provided that unless the Depository
Institution or Broker shall give the other written notice at least six (6)
months prior to the initial expiration date or prior to any date to which the
term of this Agreement shall have been extended, this Agreement shall continue
to be extended one additional year.

 

(b) This Agreement may be terminated by either party at any other time by giving
six (6) months prior written notice to the other party. Upon the Agreement’s
termination, the Depository Institution shall follow the instructions of Broker,
as agent for Customers, as to the disposition of the funds then on deposit in
the Accounts.

 

(c) Notwithstanding any other provision of this Agreement, the Depository
Institution may terminate this Agreement upon the issuance or effective date of
any statute, regulation, administrative or regulatory action or judicial
decision that, in the reasonable opinion of the Depository Institution, renders
the operation of the program illegal.

 

(d) Notwithstanding any termination or expiration of this Agreement, the
provisions of Sections 7, 8-13, and 18-27 hereof shall survive any such
termination.

 

(e) Upon the expiration date of this Agreement, the Depository Institution shall
follow the instructions of Broker, as agent for Customers, as to disposition of
the funds then on deposit in the Accounts.

 

14. Expenses. Each party hereto shall pay any costs or expenses incurred by it
in connection with the preparation, execution and performance of this Agreement,
except as otherwise provided in Sections 11 and 12 hereof.

 

15. Nonexclusive Operation. The Depository Institution recognizes that Broker
may enter into agreements similar to this Agreement with other depository
institutions. The Depository Institution agrees that the selection of other
depository institutions to participate in the offering of NOW accounts and MMDAs
to Customers shall be in the sole determination of Broker. The effectiveness of
this Agreement shall in no way be conditioned upon the participation with Broker
by other designated or undesignated depository institutions in the offering of
NOW accounts or MMDAs to

 

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Customers. Broker recognizes that the Depository Institution may enter into
agreements similar to this Agreement with other broker-dealers. Broker
recognizes that the Depository Institution may offer NOW accounts, money market
deposit accounts, and other deposit accounts to any persons without restriction,
directly or through other broker-dealer firms.

 

16. Notice and Places of Payment. (a) All notices, requests, and demands given
to or made upon the Depository Institution or Broker shall be made in writing by
certified or registered mail, postage prepaid, or telex, and addressed as
follows: If to the Depository Institution, to E*TRADE Bank, 671 North Glebe
Road, Arlington, Virginia, 22203, Attention: Steve Gutterman, with a copy to
John A. Buchman, General Counsel, and if to Broker, to E*TRADE Clearing LLC,
10877 White Rock Road, Rancho Cordova, CA 95670, Attention: Wade Cooperman, with
a copy to Laura Singer, General Counsel, 671 North Glebe Road, Arlington,
Virginia, 22203. Such notices, requests and demands may also be made to such
other persons or place as either party shall advise the other party in writing
in the manner aforesaid.

 

(b) All payments to be made to the Depository Institution or to Broker hereunder
shall be made in immediately available funds.

 

17. Performance Through Subsidiaries or Affiliates. It is understood and agreed
that the services required to be performed by Broker hereunder, may, at Broker’s
option, be performed by a subsidiary or an affiliate of Broker; provided,
however, that notwithstanding the provisions of this Section 17, Broker shall
remain accountable to the Depository Institution for the services required to be
performed by Broker hereunder.

 

18. Confidentiality and Privacy. (a) Neither the Depository Institution nor
Broker will disclose the terms of this Agreement to any person except Approved
Brokers, Customers and examiners of state, federal or securities self-regulatory
organizations having jurisdiction over Depository Institution or Broker, or as
otherwise required of the Depository Institution or Broker by applicable laws or
regulations. Broker and the Depository Institution acknowledge that all
information disclosed by the Depository Institution to Broker and all
information disclosed by Broker to the Depository Institution in connection with
this Agreement and designated by Broker or the Depository Institution, as the
case may be, as confidential (“Confidential Information”) shall be treated as
set forth in this Section 18 and that any information sharing between the
Depository Institution and Broker shall comply with all applicable federal and
state privacy laws, including, but not limited to, 17 C.F.R. Part 248 (2003) and
12 C.F.R. Part 573 (2003). Any Confidential Information received by Broker or
the Depository Institution shall be used by Broker or the Depository
Institution, as the case may be, solely for purposes of this Agreement and shall
not be published, disseminated or disclosed in any manner to any person;
provided, however, that Broker and the Depository Institution (i) may, subject
to (b) hereof, disclose any Confidential Information pursuant to a request by
any governmental or regulatory agency or securities self-regulatory organization
having jurisdiction over Broker or the Depository Institution, as the case may
be, pursuant to a request or order under applicable laws or regulations, or
pursuant to subpoena or other legal process, or where otherwise required by law,
and

 

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(ii) shall have the right to disclose any Confidential Information to regulatory
examiners, its affiliates, auditors, and counsel in connection with the
transactions contemplated hereby. Except with respect to the Customer
information herein defined as Confidential Information, (A) the foregoing
obligation of confidentiality shall not relate to any such Confidential
Information that was known to Broker or the Depository Institution, as the case
may be, prior to the time it received such Confidential Information from the
other pursuant to this Agreement, and (B) the foregoing obligation of
confidentiality shall not apply to any such Confidential Information that
becomes a part of the public domain, or when identical or substantially similar
information is received by Broker or the Depository Institution, as the case may
be, without restriction as to its disclosure. Broker also acknowledges that the
Depository Institution has a responsibility to its customers to keep Customers’
records confidential. Except as provided in Section 5 hereof, Broker shall treat
as Confidential Information (1) the name, address and taxpayer identification
number of any Customer, (2) the status, nature and existence of the deposit
relationship established in accordance with the terms of this Agreement, (3) any
other information concerning the Customers’ records of the Depository
Institution designated by the Depository Institution as Confidential
Information; and (4) any information covered by applicable federal or state
privacy law, including, but not limited to, 17 C.F.R. Part 248 (2003) and 12
C.F.R. Part 573 (2003). The Depository Institution also acknowledges that
Broker, as a broker-dealer, has a responsibility to Customers to keep Customers’
records confidential. The Depository Institution shall treat as Confidential
Information any information concerning any Customer designated as such by
Broker.

 

(b) In the event a subpoena or other legal process concerning Confidential
Information disclosed by the Depository Institution to Broker or Broker to the
Depository Institution is served upon Broker or the Depository Institution, as
the case may be, Broker or the Depository Institution, as the case may be,
agrees that it will notify the other immediately upon receipt of such subpoena
or other legal process and will reasonably cooperate with the other in any
lawful effort by the other to contest the legal validity of such subpoena or
other legal process.

 

(c) Each party shall comply with applicable state and federal customer privacy
laws in respect of the Sweep Deposit Accounts, and shall implement commercially
reasonable policies and procedures designed to assure protection of confidential
customer information in compliance with all applicable laws, regulations and
best practices, including, but not limited to, 17 C.F.R. Part 248 (2003) and 12
C.F.R. Part 573 (2003).

 

19. Attorneys’ Fees. In the event of suit by either party to enforce this
Agreement, the prevailing party shall be entitled to such attorneys’ fees and
expenses as the court deems reasonable.

 

20. No Consequential Damages. Neither party shall be liable to the other for any
special, indirect or consequential damages, including, but not limited to, lost
profits, even if the parties have knowledge of the possibility of such damages.

 

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21. Entire Agreement. This Agreement is the exclusive statement of the agreement
between the parties with respect to its subject matter and as of its date
supersedes all prior agreements, negotiations, representations and proposals,
written or oral, relating to its subject matter. The terms and provisions in
this Agreement cannot be modified, supplemented or rescinded except by an
instrument in writing signed by both parties. Neither party shall be bound by or
liable to the other party for any representation, promise or inducement made by
any agent or person in the other’s employ that is not embodied in this
Agreement.

 

22. Severability. If any provision or condition of this Agreement is held
invalid or unenforceable by any court or by any regulatory or self-regulatory
agency or body, such invalidity or unenforceability shall attach only to such
provisions or condition, and the validity of the remaining provisions and
conditions hereof shall remain unaffected.

 

23. Binding Effect. This Agreement shall be binding upon all successors, assigns
or transferees of either party, irrespective of any change with regard to the
name of or the personnel of either party. No assignment of this Agreement shall
be valid unless the non-assigning party consents to such an assignment in
writing. Neither this Agreement nor any operation hereunder is intended to give
rise to or be construed as a general or limited partnership, association or
joint venture between Broker and the Depository Institution.

 

24. Counterparts. This Agreement may be executed in separate counterparts, each
of which shall be considered one and the same Agreement.

 

25. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Virginia without
reference to principles of conflicts of laws and any legal suit, action or
proceeding arising under this Agreement shall be instituted only in a court of
proper jurisdiction located in the Commonwealth of Virginia.

 

26. Limited Effect. This Agreement shall govern only the services set forth
herein and is in no way intended to affect any other arrangements, agreements or
understandings that exist between the Depository Institution and Broker.

 

27. No Recourse to Broker. It is understood and agreed that Broker is not a
guarantor of, and shall in no way be liable to perform, the obligations of the
Depository Institution under the Accounts.

 

28. Allocation of Deposits. It is understood and agreed that Broker, as agent
for Customers, shall be entitled to allocate to the Depository Institution the
funds of such Customers as Broker shall in its sole discretion determine
appropriate; provided, that the Depository Institution reserves the right to
require seven (7) days prior notice before the amount of funds on deposit with
the Depository Institution may be withdrawn in accordance with this Section 28.

 

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IN WITNESS WHEREOF, the Depository Institution and Broker have executed this
Agreement as of the day and year first above written.

 

   

E*TRADE BANK

        E*TRADE CLEARING LLC By:  

    /s/    ARLEN W. GELBARD        

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   By:   

/s/    WADE J. COOPERMAN        

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    Arlen W. Gelbard         Wade J. Cooperman     President         President

 

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Exhibit A          

to                

Brokerage and      

Servicing Agreement

 

List of Eligible Account Types

 

In general, only individuals (including IRA-type accounts) will be permitted to
have the Sweep Deposit Account as the Sweep Deposit Account is not available to
partnerships and corporations under banking regulations. The following account
types will not be eligible:

 

Sweep Account Restricted Type List

OL Rep Code

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Account Type Description

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BSG Retail

   Corporation

BSG Retail

   Estate

BSG Retail

   Partnership

Non-BSG Retail

   Bank or Trust Company

Non-BSG Retail

   Broker Dealer

Non-BSG Retail

   Corporation

Non-BSG Retail

   Estate

Non-BSG Retail

   Foreign Corporation

Non-BSG Retail

   Foreign Individual

Non-BSG Retail

   Investment Club

Non-BSG Retail

   Numbered Accounts

Non-BSG Retail

   Partnership

Non-BSG Retail

   Pension, Profit Sharing, Retirement Fund, Trusts

Non-BSG Retail

   Religious, Fraternal, Charitable, Trust

 

Note: If an investment club is able to demonstrate that neither the investment
club nor any of its members is a partnership or a corporation, such investment
club will be permitted to open the Sweep Deposit Account as its sweep option.

 

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