AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (the "Agreement") is dated for reference purposes and entered into as of October 1, 2005 (the "Effective Date"), by and between Bank of Internet USA, a federal savings bank (the "Bank”), and Patrick Dunn, an individual (the "Employee"). Bank and Employee are sometimes collectively referred to in this Agreement as the "Parties" and individually as a “Party.”

A.    Employee is currently employed by Bank pursuant to the terms of an Employment Agreement, dated July 1, 2003, a true and correct copy of which is attached as Exhibit A (the “2003 Agreement”).

B.    Effective as of the Effective Date, the Parties desire to amend and restate the 2003 Agreement to reflect the terms set forth in this Agreement and the terms of Employee’s employment by Bank shall thereafter be governed by this Agreement.

The Parties therefore agree as follows:

On and as of the Effective Date the Parties agree that by entering into this Agreement the terms of Employee’s employment by the Bank shall be governed exclusively by the terms of this Agreement and the terms of the 2003 Agreement are amended and restated accordingly. Terms of the 2003 Agreement that are omitted from this Agreement are no longer in force or effect and the terms of this Agreement supersede and control any terms of the 2003 Agreement that are inconsistent or in conflict with this Agreement.

The Bank hereby employs Employee to perform the duties described in this Agreement, and Employee hereby accepts such employment on an “at will” basis, subject to the terms of Paragraph 6 (TERMINATION), below. Paragraph A. (TERM OF EMPLOYMENT) of the 2003 Agreement is deleted in its entirety and replaced by this Paragraph 2.

Paragraph B. (DUTIES OF EXECUTIVE) of the 2003 Agreement is deleted and replaced in its entirety by this Paragraph 3. Employee shall have the titles of “Vice President and Chief Credit Officer for Multi-Family Lending.” Employee shall be responsible for (i) managing the identification and acquisition of whole loans secured by Multi-Family property, (ii) managing the origination of the Bank’s Multi-Family Loans for Sale Program, pursuant to which the Bank will originate Multi-Family loans for the purpose of resale, (iii) Managing the purchase of Multi-Family and conventional first trust deed loans from other lenders (pools) (iv) Managing the origination efforts of specific employees in their Multi-Family origination efforts (v) assisting the Bank in its efforts to orient and integrate into the Bank’s operations a new executive lending officer upon his hiring by the Bank to replace Employee (a “Replacement Lending Officer”), (vi) assisting Bank in complying with the requirements of the Community Reinvestment Act and (vii) performing such other duties and responsibilities as Bank may reasonably request from time to time. The authority of Employee shall be as set forth above or as specifically delegated to Employee. Employee acknowledges, agrees and accepts that the Bank retains all discretion to specify the scope of Employee’s duties and authority pursuant to this Agreement, including but not limited to, Employee’s duties and authority with respect to loan products, geographic areas and staff. Employee shall not have any authority as a “policy-making” or “executive officer” of the Bank, nor shall anything in this Agreement be construed so as to give Employee such authority as may result in Employee being considered a “policy-making” or “executive officer” of the Bank under applicable federal securities laws and federal banking laws and the regulations of the appropriate regulators thereunder. Employee shall report to the Replacement Leading Officer, when such officer is appointed.

Paragraph C. (COMPENSATION) of the 2003 Agreement is deleted and superseded in its entirety by this Paragraph 4, except as provided in Subparagraphs 4.c. and 4.d., below.

a.     Base Salary . In consideration of Employee's services to be performed under this Agreement, Bank shall pay or cause to be paid to Employee a base salary in the following amounts, commencing as of the Effective Date, payable periodically in accordance with the Bank's normal payroll policies and practices:

b.     Basis Point Override . In addition to base salary at the annual rate of $90,000.00 per annum , the Bank shall pay Employee incentive compensation on all loans and loan pools closed after January 1, 2006, calculated and paid as follows (the “Basis Point Override”): 

(1)    Employee will receive incentive compensation for Multi-Family loans originated by staff under Employee’s supervision and for loan pools Originated/sourced by and processed by Employee. For arranging the origination and sale of the Bank’s Multi-Family loans (“Apartment Loans”), whether by Employee or by employees under Employee’s supervision the Bank shall pay Employee a Basis Point Override equal to (i) the gross amount of the Apartment Loan or Loans sold in any transaction, multiplied by (ii) a factor of six basis points, i.e., six-hundredths of one percent (0.006 or 0.06%); provided, however, that Employee shall not be eligible for Basis Point Override with respect to Apartment Loans originated and sold by any employees under the supervision of the Replacement Lending Officer. The Basis Point Override provided in this subparagraph is one fee and encompasses Employee’s supervision of the arranging of both the origination and the sale of Apartment Loans as provided herein.

(2)    For managing the identification and origination of loans that are ultimately made by the Bank (“Portfolio Loans”) by those under Employee’s supervision, the Bank shall pay Employee a Basis Point Override equal to (i) the gross amount of the Portfolio Loan or Loans made, multiplied by (ii) a factor of six basis points, i.e., six- hundredths of one percent (0.0006 or 0.06%); provided, however, that Employee shall not be eligible for a Basis Point Override with respect to Portfolio Loans identified and originated by any employees under the direct sales supervision of the Replacement Lending Officer, or any other employees of the Bank .

(3)    For arranging purchases of, and completing due diligence on pools of single family and Apartment Loans from third parties (“Loan Pools”), the Bank shall pay Employee a Basis Point Override equal to (i) the gross amount of the Loan Pool or Pools purchased in any transaction, multiplied by (ii) a factor of three basis points, i.e., three-hundredths of one percent (0.0003 or 0.03%).

(4)    Employee shall be considered to have earned the Basis Point Override on the date of the final closing of the sale of Apartment Loans the funding of the Portfolio Loans and the purchase of the Loan Pools, as the case may be, by the Bank (in each case, the “Earned Date”), it being understood that the Bank shall have complete discretion to agree to the conditions precedent to closing of any such transaction. Notwithstanding anything in this Agreement, Employee shall not be entitled to Basis Point Override with respect to (i) any loans determined by Bank to be fraudulent or which are returned to Bank for any reason, and (ii) loans that are a refinance of or a modification of a then-existing Bank loan. In the event that the Bank has paid Employee a Basis Point Override and it is subsequently determined that the Employee is not entitled to such Basis Point Override for any reason under this Agreement (an “Unearned BPO”), the Bank may, in its sole discretion, take either or both of the following actions: (a) offset the amount of such Unearned BPO against any compensation otherwise payable to Employee for any reason under this Agreement, and (b) present Employee with an invoice for such Unearned BPO and Employee shall promptly reimburse the Bank for such Unearned BPO, but in no event later than 30 days after presentation of such invoice.

(5)    The Bank shall pay to Employee any Basis Point Override earned on the next Payroll Payment Date following the Earned Date, if possible, or as promptly as possible thereafter, but in no event later than two Payroll Payment Dates after the satisfaction of all conditions precedent to the final closing of such transaction.

c.     One-Time Deferred Compensation . Paragraph C.2 of the 2003 Agreement, providing Employee One-Time Deferred Compensation, remains effective verbatim as between the Parties and the terms of said paragraph are incorporated in this Agreement as if set forth in full. Employee acknowledges that effective July 1, 2004 his deferred compensation account under the Deferred Comp Plan (as defined in the 2003 Agreement) was credited with all amounts to which he was entitled under the 2003 Agreement. One-Time Deferred Compensation shall remain subject to the terms of the Deferred Comp Plan, as more particularly provided in the 2003 Agreement, including, but not limited to, the investment provisions of the Deferred Comp Plan and any amendments of the Deferred Comp Plan whenever adopted.

d.     Special Discretionary Contribution . Paragraph C.4 of the 2003 Agreement, providing Employee with “Special Discretionary Contribution” as defined and described in Exhibit B to the 2003 Agreement, remains effective as between the Parties in accordance with the terms set forth in the 2003 Agreement. The Bank agrees and acknowledges that the Employee has met all required performance standards that would entitle Employee to the benefits described in Exhibit B to the 2003 Agreement. Employee understands that he can no longer defer any income under the 2003 Agreement.

e.     Existing Deferred Compensation . Employee is not entitled to the annual deferred performance bonus provided in EXHIBIT A of the 2003 Agreement and said paragraph is hereby expressly terminated. However, the existing deferrals from the 2004 and 2005 vesting schedules remain unaltered.

Paragraph D. (EXECUTIVE BENEFITS) of the 2003 Agreement is deleted in its entirety and replaced by this Paragraph 5.

a.     Vacation . Employee shall be entitled to vacation as prescribed in the Bank's “Employee Manual,” as the same may be amended from time to time and maintained on the Bank's Intranet. Bank reserves the right to require Employee to take any unused vacation time prior to the Date of Termination (as defined in Paragraph 6).

b.     Group Insurance Benefits . Employee shall participate, at the expense of the Bank, in all group insurance plans provided by Bank for other such employees of the Bank.

Paragraph E. (BUSINESS EXPENSES AND REIMBURSEMENT) of the 2003 Agreement is deleted in its entirety and replaced with this Paragraph 6.

a.     Location and Equipment . The Parties understand and agree that under this Agreement Employee will work remotely from his home in Colorado. At its expense, the Bank will provide or reimburse Employee for the costs of telephone, facsimile, Internet access, computer, printers and such other equipment and services as the Parties may mutually agree upon as necessary or desirable for Employee to perform services under this Agreement from his home. At his own expense Employee shall maintain a safe working environment in his home and except as expressly provided above the Bank shall not be liable for the costs of insurance or any other costs or expenses in connection with setting up and operating a home office for Employee. Employee shall be entitled to reimbursement for travel and travel-related expenses in accordance with the Bank’s policy and practices for reimbursement and payment of travel and travel-related expenses generally.

Paragraph F. (TERMINATION) of the 2003 Agreement is deleted in its entirety and replaced with this Paragraph 7. Nothing in this Agreement shall be construed as, nor shall this Agreement have the effect of, causing a termination of the 2003 Agreement or of triggering any consequences of a termination (for any reason) of the 2003 Agreement. This Agreement may be terminated by either Party with or without cause at any time without advance notice and the date on which this Agreement is terminated is referred to as the “Date of Termination.” From and after the Date of Termination neither Party shall have any further obligation or liability to the other, except:

a.    The Bank shall pay Employee all base salary to which Employee is entitled through the Date of Termination, which base salary shall be paid in accordance with the Bank’s normal policy and procedures upon termination of any employee;

b.    Subject to the terms of Subparagraph 4.b(4), the Bank shall pay Employee, at the times specified in Subparagraph 4.b, above, any Basis Point Override (i) that as of the Date of Termination has been earned but not paid, and (ii) that the Employee would earn after the Date of Termination (but for the Date of Termination) with respect to a transaction that is pending as of the Date of Termination, it being understood that for Employee to be considered to have earned Basis Point Override with respect to a transaction pending as of the Date of Termination, all work with respect to the transaction to be performed by Employee or those under Employee’s direction or supervision (such as underwriting, appraising, document review, obtaining of insurance and the like) Employee must have been completed on or before the Date of Termination and the only contingency with respect to the final closing of such transaction is the passage of time or the occurrence of other contingencies for which the Bank determines the Employee’s work, supervision or involvement is not required for the transaction to close;

c.    The Employee shall be entitled to receive and shall be paid all amounts due Employee under the Deferred Comp Plan in accordance with and to the extent provided in the Deferred Comp Plan, it being understood that the Bank will not make any further contributions to or deferrals under the Deferred Comp Plan;

d.    The Employee shall be entitled to receive and shall be paid all amounts due Employee with respect to the Special Discretionary Contribution, in accordance with and to the extent provided in this Agreement and Exhibit B to the 2003 Agreement;

e.    Employee shall have no right to defer any Special Discretionary Contribution; and

f.    For any obligations that expressly survive this Agreement.

Paragraph G. (GENERAL PROVISIONS) of the 2003 Agreement is deleted in its entirety and replaced with this Paragraph 8.

a.     Return of Property . Employee expressly agrees that all manuals, documents, files, reports, studies, instruments, equipment and other materials and property used and/or developed by Bank or Employee (whether on his personal time or while performing services for the Bank) while this Agreement is in effect ("Preparatory Work") are the sole property of Bank, and that Employee has no right, title or interest in such property. Employee further agrees that, subject to the execution of this Agreement, all Preparatory Work is the sole property of Bank, and that Employee has no right, title or interest, legal or beneficial, in such Preparatory Work or in any benefits that may arise from such Preparatory Work. Upon termination of this Agreement for any reason, Employee or Employee's representative shall promptly deliver possession of all of said property to Bank in original or good, operating condition, normal wear and tear excepted.

b.     Applicable Law . Except to the extent governed by the laws of the United States, this Agreement is to be governed by and construed under the laws of the State of California.

c.    Notices. Any notice, request, demand or other communication required or permitted hereunder shall be considered to be properly given when personally served in writing, when deposited in the United States mail, postage prepaid, or when delivered to a generally recognized overnight courier service (such as, for example, Federal Express or United Parcel Service) addressed to the Party at such Party’s address as such Party may specify in writing from time to time. Either Party may change its address by written notice in accordance with this paragraph.

d.     Captions and Paragraphs Headings . Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in constructing it.

e.     Entire Agreement . This Agreement contains the entire agreement of the Parties. It supersedes any and all other agreements or understandings, whether oral or written, between the Parties with respect to the employment of employee by Bank. It does not supersede any agreements pertaining to stock options which are subject to the agreements and plans under which such stock options may have been granted. Each Party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any Party, or anyone acting on behalf of any Party, which are not embodied in this Agreement, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding. This Agreement, may be modified or amended only in a written document signed by the Party against whom enforcement is sought.

f.     Attorney’s Fees . Each Party shall bear his or its own attorneys’ fees and costs incurred in connection with the negotiation, preparation and delivery of this Agreement. However, if any action is instituted to enforce or interpret any of the obligations set forth in this Agreement, the prevailing Party(ies) shall be entitled to recover its (their) reasonable attorneys’ fees and costs incurred in connection with the enforcement or interpretive action.

g.     Trade Secrets . To the extent that during the term of this Agreement Bank develops any trade secrets, as that term is defined under California law, the Parties agree that such trade secrets belong to and are the property of the Bank. Employee agrees that for a period of one (1) year after the termination of this Agreement, Employee shall not disclose any of Bank’s trade secrets, directly or indirectly, or use them in any way in contravention of the rights of the Bank to such trade secrets, including soliciting the customers of the Bank.

h.     Invalid Provisions . Should any provision of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed without the invalid, void or unenforceable provision.

i.     Benefit of Agreement; Assignment . This Agreement shall inure to the benefit of and be binding upon the Parties and their respective executors, administrators, successors and assigns. This Agreement is for the personal services of Executive and may not be assigned by Executive.

The Parties execute this Agreement as of the Effective Date first above written.