FORM OF AUTHORIZED PARTICIPANT AGREEMENT
FORM OF
THIS AUTHORIZED PARTICIPANT AGREEMENT (this “Agreement”) is entered into by and between SEI
Investments Distribution Co. (“Distributor”) and (the “Participant”)
and is subject to acceptance by State Street Bank and Trust Company, as transfer agent (the
“Transfer Agent”) for Schwab Strategic Trust (the “Trust”).
WHEREAS, Distributor serves as the principal underwriter of the Trust in connection with the sale
and distribution of shares of beneficial interest (“Shares”) of each portfolio or series of the
Trust (each, a “Fund” and collectively, the “Funds”); and
WHEREAS, Transfer Agent serves as the transfer agent for each Fund of the Trust, and is an Index
Receipt Agent as that term is defined in the rules of the National Securities Clearing Corporation
(“NSCC”); and
WHEREAS, the Shares of any Fund (excepting any Fund listed on Exhibit A to this Agreement) may be
purchased or redeemed only by or through an authorized participant, such as Participant, who has
entered into an authorized participant agreement substantially in the form hereof.
NOW, THEREFORE, the parties hereto, in consideration of the premises and of the mutual agreements
contained herein, and intending to be legally bound hereby, agree as follows:
ARTICLE 1 DEFINED TERMS
The capitalized terms used in this Agreement are defined as set forth herein. Any capitalized
terms used herein that are not defined shall have the meaning set forth in the Prospectus.
1.01 “1933 Act” means the Securities Act of 1933, as amended.
1.02 “1934 Act” means the Securities Exchange Act of 1934, as amended.
1.03 “1940 Act” means the Investment Company Act of 1940, as amended.
1.04 “Affiliated Person” shall have the meaning given to it by Section 2(a) of the 1940
Act, subject to such exemptions as may be granted by the SEC by any rule, regulation or order.
1.05 “AML Program” shall have the meaning set forth in Section 3.01(v).
1.06 “Authorized Person” shall have the meaning set forth in ARTICLE 5.
1.07 “Balancing Amount” will be an amount equal to the differential, if any, between the
total aggregate market value of the Deposit Securities and the NAV per Creation Unit next
determined.
1.08 “Beneficial Owner” shall have the meaning given to it by Rule 16a-1(a)(2) of the 1934
Act.
1.09 “Business Day” shall mean each day the New York Stock Exchange is open for regular
trading and the Trust and the Custodian are open for business.
1.10 “Cash” shall mean same day funds in United States dollars.
1.11 “Cash Amount” means the Balancing Amount plus the applicable transaction fee.
1.12 “CEA” means the Commodity Exchange Act, as amended.
1.13 “CNS Process” means the Continuous Net Settlement clearing processes of NSCC, as such
processes have been enhanced to effect purchases and redemptions of Creation Units.
1.14 “CNS System” means the Continuous Net Settlement clearing processes of NSCC.
1.15 “Code” means the Internal Revenue Code of 1986, as amended.
1.16 “Contractual Settlement Date” means the date as specified in the Prospectus and the
Procedures Handbook upon which delivery of Deposit Securities must be made to the Fund.
1.17 “Creation Unit” shall have the meaning set forth in Section 2.01.
1.18 “Custodian” means the Trust’s custodian, State Street Bank and Trust Company.
1.19 “Deposit Securities” means an in-kind deposit of a designated portfolio of securities
selected by or on behalf of the Fund.
1.20 “DTC Participant” shall have the meaning set forth in Section 3.01.
1.21 “DTC Process” means the process for effecting purchases orders or redemption requests
of Creation Units through DTC other than through the use of the CNS System.
1.22 “DTC” means The Depository Trust Company.
1.23 “FinCEN” shall have the meaning set forth in Section 3.01(iv).
1.24 “FINRA” means the Financial Industry Regulatory Authority.
1.25 “Fund Deposit” means the Deposit Securities plus or minus the “Balancing Amount”.
1.26 “Fund Securities” means in-kind redemption proceeds of a designated portfolio of
securities selected by the Adviser.
1.27 “Indemnified Party” shall have the meaning set forth in Section 6.01.
1.28 “Intraday Indicative Value” means the value of a Fund, as calculated and published by
the New York Stock Exchange or any similar exchange or widely recognized industry organization,
throughout the trading day based on the last sale prices of the securities specified for creation
and redemption plus any estimated cash amounts associated with the creation unit, on a per share
basis.
1.29 “Listing Exchange” shall have the meaning set forth in Section 8.01.
1.30 “NAV” shall have the meaning set forth in Section 6.02.
1.31 “OFAC” shall have the meaning set forth in Section 3.01(iv).
1.32 “Orders” shall have the meaning set forth in Section 2.02.
1.33 “Participant Client” means any party on whose behalf the Participant acts in
connection with an Order (whether a customer or otherwise).
1.34 “Participating Party” shall have the meaning set forth in Section 3.01.
1.35 “PIN Number” shall have the meaning set forth in ARTICLE 5.
1.36 “Procedures Handbook” shall have the meaning set forth in Section 2.02.
1.37 “Prospectus” means a Fund’s then current prospectus and statement of additional
information included in its effective registration statement, as supplemented or amended from time
to time.
1.38 “Purchase Order” shall have the meaning set forth in Section 2.02.
1.39 “Redemption Request” shall have the meaning set forth in Section 2.02.
ARTICLE 2 ORDERS FOR PURCHASE AND REDEMPTION
2.01 Creation Units. The Shares of any Fund may be purchased or redeemed only in
aggregations of a specified number of Shares, as stated in the Prospectus, referred to herein as a
“Creation Unit”. The Participant is hereby authorized to purchase and redeem Creation
Units of any Fund listed in the Prospectus, which may be revised by the Fund from time to time.
2.02 Procedures for Orders. The Participant may purchase and/or redeem Creation Units of
Shares through (i) the CNS Process or (ii) the DTC Process. The procedures for placing and
processing an order to purchase Shares (each a “Purchase Order”) and a request to redeem
Shares (each a “Redemption Request”) (as used herein, Purchase Orders and Redemption
Requests are collectively referred to as “Orders”) are described in the Fund’s Prospectus
and in the then current procedures handbook as prepared by the Distributor and made available to
the Participant (“Procedures Handbook”). All Orders shall be made in accordance with the
terms and procedures set forth in this Agreement, the Prospectus and Procedures Handbook; provided
that in the event of a conflict, the terms and procedures of the Prospectus shall control. Each
party hereto agrees to comply with the provisions of such documents to the extent applicable to it.
Each of the Trust and the Distributor reserves the right to issue additional or other procedures
relating to the manner of purchasing or redeeming Creation Units, and the Participant agrees to
comply with such procedures as may be issued from time to time, upon reasonable notice thereon. To
the extent that a provision of the Procedures Handbook, as revised, conflicts with any provision of
this Agreement, as amended, the terms of the Procedures Handbook shall control.
2.03 NSCC Authorization. Solely with respect to Orders through the CNS Process, the
Participant, hereby authorizes the Fund or its designee to transmit to the NSCC on behalf of the
Participant such instructions, including amounts of the Deposit Securities and the Cash Amount
consistent with such Orders. The Participant agrees to be bound by the terms of such instructions
issued by the Fund or its designee and reported to NSCC as though such instructions were issued by
the Participant directly to NSCC.
2.04 Consent to Recording. It is contemplated that the phone lines used by the
Distributor, the Transfer Agent, the Trust or their Affiliated Persons will be recorded, and the
Participant hereby consents to the recording of all calls with any of those parties.
2.05 Irrevocability. The Participant acknowledges and agrees on behalf of itself and any
party for which it is acting (whether as a customer or otherwise) that delivery of a Order shall be
irrevocable; provided that the Trust and its agents reserve the absolute right to reject any Order.
2.06 Prospectus and Trade Confirmation Delivery. The Participant consents to the delivery
of Fund Prospectuses and trade confirmations electronically, and understands that unless this
consent is revoked, the Participant can only obtain access to Prospectuses and delivery of trade
confirmations from the Distributor electronically. The Participant understands that current
Prospectuses and all required reports for each applicable Fund are available at the Trust’s website
at
. The Participant can revoke this consent to delivering a
Prospectus electronically at any time by calling [1-800-xxx-xxxx]. The Participant agrees to
maintain a valid e-mail address, and further agrees to promptly notify the Distributor if its
e-mail address changes. The Participant understands that it must have regular and continuous
Internet access to access all documents relating to a Prospectus.
2.07 Sub-Custodian Account. The Participant understands and agrees that in the case of
each international Fund, the Trust has caused the Custodian, acting in its capacity as the Trust’s
custodian, to maintain with the applicable sub-custodian (“Sub-Custodian”) for such Fund an account
in the relevant foreign jurisdiction to which the Participant shall deliver or cause to be
delivered in connection with the purchase of a Creation Unit the securities and any other cash
amount (or the cash value of all or a part of such securities, in the case of a permitted or
required cash purchase or “cash in lieu” amount) on behalf of itself or any party for which it is
acting (whether or not a customer), with any appropriate adjustments as advised by such Fund, in
accordance with the terms and conditions applicable to such account in such jurisdiction.
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARTICIPANT
3.01 Representations, Warranties and Covenants of Participant. The Participant hereby
represents, warrants and covenants the following:
(i) The Participant (i) is and will continue to be a member in good standing of the NSCC so
long as this Agreement is in full force and effect and (ii) with respect to (x) all orders of
Creation Units of Shares of any Fund, it is a “DTC Participant,” and (y) any order of
Creation Units of Shares of any Fund initiated through the CNS Process, it is a member of NSCC and
a participant in the CNS System of NSCC (a “Participating Party”). If any change in the
foregoing status of the Participant occurs the Participant shall give prompt written notice to the
Distributor and the Trust of such change. Upon such notice, the Distributor, in consultation with
the Trust, may terminate this Agreement.
(ii) Unless Section 3.01(iii) applies, the Participant either (i) is registered as a
broker-dealer under the 1934 Act and is a member in good standing of FINRA, or (ii) is qualified to
act as a broker or dealer in the states or other jurisdictions where the nature of its business so
requires. In connection with the purchase or redemption of Creation Units and any related offers or
sales of Shares, the Participant will maintain any such registrations, qualifications and
membership in good standing and in full force and effect throughout the term of this Agreement. The
Participant will comply with all applicable federal laws, the laws of the states or other
jurisdictions concerned, and the rules and regulations promulgated thereunder, and with the FINRA
By-Laws and NASD Conduct Rules (or of comparable FINRA Conduct Rules, if such NASD Conduct Rules
are subsequently renamed, repealed, rescinded, or are otherwise replaced by FINRA Conduct Rules) if
it is a FINRA member, in each case, to the extent applicable to its role acting as Participant
hereunder and will not offer or sell Shares in any state or jurisdiction where they may not
lawfully be offered and/or sold.
(iii) If the Participant is offering or selling Shares in jurisdictions outside the several
states, territories and possessions of the United States and is not otherwise required to be
registered, qualified or a member of FINRA as set forth in Section 3.01(ii) above, the
Participant will, in connection with such offers and sales, (i) observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, (ii) comply with the prospectus delivery and
other requirements of the 1933 Act, and the regulations promulgated thereunder, and (iii) conduct
its business in accordance with the NASD Conduct Rules (or with comparable FINRA Conduct Rules, if
such NASD Conduct Rules are subsequently renamed, repealed, rescinded, or are otherwise replaced by
FINRA Conduct Rules), to the extent the foregoing relates to the Participant’s transactions in, and
activities with respect to, Shares.
(iv) The Participant is and will continue to be in compliance with all applicable laws and
regulations aimed at the prevention and detection of money laundering and/or the financing of
terrorism activities, including the Bank Secrecy Act, as amended by USA
PATRIOT Act; rules and regulations issued by the U.S. Treasury Department, including the
Office of Foreign Asset Control (“OFAC”), the Financial Crimes and Enforcement Network
(“FinCEN”), the SEC and FINRA.
(v) The Participant has and will continue to have an anti-money laundering program (“AML
Program”), that at minimum includes, i) an AML compliance officer designated to administer and
oversee the AML Program, ii) ongoing training for appropriate personnel, iii) internal controls and
procedures reasonably designed to prevent and detect suspicious activity monitoring and terrorist
financing activities; iv) procedures to comply with know your customer requirements and to verify
the identity of all customers; and v) appropriate record keeping procedures. In addition,
Participant agrees to fully cooperate with requests from the government regulators and Distributor
and Transfer Agent for information relating to customers and/or transactions involving the Shares,
as permitted by law, in order for Distributor and/or Transfer Agent to comply with its regulatory
requirements. Without in any way limiting the foregoing, Participant acknowledges that Distributor
is authorized to take any action necessary to restrict distribution activities to the extent
necessary to comply with regulatory obligations applicable to it.
(vi) The Participant acknowledges that in addition to satisfying the prospectus delivery and
disclosure requirements of the 1933 Act, it and any other participant in the distribution of the
Shares purchased by the Participant may have an obligation to comply with all applicable provisions
and rules and regulations promulgated pursuant to the CEA, including applicable disclosure delivery
requirements thereunder.
(vii) The Participant will not make, or permit any of its representatives to make, any
representations concerning the Shares or any Indemnified Party other than representations contained
(A) in the then-current Prospectus of the Fund, (B) in printed information approved by the Fund as
information supplemental to such Prospectus or (C) in any promotional materials or sales literature
furnished to the Participant by the Fund.
(viii) The Participant will not furnish or cause to be furnished to any person or display or
publish any information or material relating to the Shares, any Indemnified Party or a Fund that
have not been approved by the Fund.
(ix) The Participant agrees to abide by the terms of the then current click-through agreement
set forth on the applicable website, which terms are hereby incorporated herein.
(x) The Participant agrees to maintain records of all sales of Shares made by or through it in
accordance with and to the extent required by applicable law and to furnish copies of such records
to the Trust, Distributor and/or Transfer Agent upon request of the Trust, Distributor or Transfer
Agent, subject to applicable privacy laws, including, without limitation SEC Regulation S-P.
ARTICLE 4 STATUS OF PARTICIPANT
4.01 General. The Participant acknowledges and agrees that for all purposes of this
Agreement, the Participant will be deemed to be an independent contractor, and (a) the Participant
shall have no authority to act as agent for the Trust, the Distributor or the Transfer Agent in any
matter or in any respect; (b) the Participant will make itself and its employees available, upon
reasonable request, during normal business hours to consult with the Distributor, Transfer Agent or
their designees concerning the performance of the Participant’s responsibilities under this
Agreement; (c) the Participant, as a DTC Participant, agrees that it shall be bound by all of the
obligations of a DTC Participant in addition to any obligations that it undertakes hereunder or in
accordance with the Prospectus or the Procedures Handbook and (d) the Participant agrees, subject
to any privacy, confidentiality or other obligations it may have to its customers arising under
federal or state securities laws or the applicable rules of any self-
regulatory organization, to assist the Distributor in ascertaining certain information regarding
sales of Shares made by or through the Participant upon request of the Trust or the Distributor
that is necessary for the Trust to comply with its obligations to distribute information to its
shareholders under applicable state or federal securities laws; provided that consistent with
market practice, the Participant may undertake to deliver prospectuses, proxy material, annual and
other reports of the Trust or other similar information that the Trust is obligated to deliver to
its shareholders to the Participant’s customers that custody Shares with the Participant, after
receipt from the Trust of sufficient quantities to allow mailing thereof to such customers.
4.02 Treatment as Underwriter. The Participant understands and acknowledges that the
method by which Creation Units will be created and traded may raise certain issues under applicable
securities laws. For example, because new Creation Units of Shares may be issued and sold by the
Trust on an ongoing basis, at any point a “distribution”, as such term is used in the 1933 Act, may
occur. The Participant understands and acknowledges that some activities on its part, depending on
the circumstances, may result in its being deemed a participant in a distribution in a manner which
could render it a statutory underwriter and subject it to the prospectus delivery and liability
provisions of the 1933 Act. The Participant also understands and acknowledges that dealers who are
not “underwriters” but are effecting transactions in Shares, whether or not participating in the
distribution of Shares, are generally required to deliver a prospectus.
4.03 Creditworthiness. The Participant understands that it will be required from time to
time to satisfy certain creditworthiness criteria established and approved by the Trust.
4.04 Qualified Institutional Buyer Status. The Participant represents, covenants and
warrants that it currently is, and will continue to be throughout the term of this Agreement, a
“qualified institutional buyer” as such term is defined in Rule 144A of the 1933 Act. Any change
in the foregoing status of Participant shall terminate this Agreement and Participant shall give
prompt notice to the Distributor, Transfer Agent and the Trust of such change.
4.05 No Affiliation. The Participant represents, covenants and warrants that, during the
term of this Agreement, it will not be an affiliated person of a Fund, a promoter or a principal
underwriter of a Fund or an affiliated person of such persons, except to the extent that the
Participant may be deemed to be an affiliated person under 2(a)(3)(A) or 2(a)(3)(C) of the 1940
Act, due to ownership of Shares. The Participant shall give prompt notice to the Distributor,
Transfer Agent and the Trust of any change to the foregoing status.
4.06 Privacy. The Participant represents that it has procedures in place that are
reasonably designed to protect the privacy of non-public personal consumer/customer financial
information to the extent required by applicable U.S. federal and state laws, rules and regulations
and will continue to do so throughout the term of this Agreement.
ARTICLE 5 AUTHORIZED PERSONS
Concurrently with the execution of this Agreement and upon request from the Distributor from time
to time thereafter, the Participant shall deliver to the Distributor, with a copy to the Transfer
Agent, notarized, and duly certified as appropriate by its secretary or other duly authorized
official, a certificate in the form of Exhibit B setting forth the names and signatures of all
persons authorized to give instructions relating to activity contemplated hereby or by any other
notice, request or instruction given on behalf of the Participant (each, an “Authorized Person”).
The Distributor and Transfer Agent may accept and rely upon such certificate as conclusive evidence
of the facts set forth therein and shall consider such certificate to be in full force and effect
until the Distributor and Transfer Agent, as applicable, receives a superseding certificate bearing
a subsequent date. Upon the termination or revocation of authority of any formerly Authorized
Person by the Participant, the Participant shall give immediate written notice of such fact to the
Distributor, with a copy to the Transfer Agent, and such notice shall be effective upon receipt by
the Distributor. The Distributor shall issue to each Authorized Person a unique personal
identification number (the “PIN Number”) by which such Authorized Person shall be identified and by
which instructions issued by the Participant hereunder shall be authenticated. The PIN Number shall
be kept confidential by the Participant and shall only be provided to the Authorized Person. If,
after issuance, the Authorized Person’s PIN Number is changed, the new PIN Number shall become
effective on a date mutually agreed upon by the Participant and the Distributor. Notwithstanding
the foregoing, delivery, maintenance and use of the PIN Number shall be governed by the terms and
conditions set forth in the Procedures Handbook.
ARTICLE 6 INDEMNIFICATION AND LIMITATION OF LIABILITY
6.01 Indemnification. The Participant hereby agrees to indemnify, defend and hold harmless
the Distributor, the Trust, the Transfer Agent, the Custodian and each of their respective
subsidiaries, Affiliated Persons, directors, officers, employees and agents, and each person, if
any, who is under common control, controls or is controlled by such persons within the meaning of
Section 15 of the 1933 Act (each an “Indemnified Party”) from and against any loss,
liability, cost and expense (including attorneys’ fees) incurred by such Indemnified Party
resulting from, in connection with or arising out of (i) any breach by the Participant (or an
affiliate of the Participant) of any provision of this Agreement; (ii) any failure on the part of
the Participant to perform any of its obligations set forth in the Agreement; (iii) any failure by
the Participant to comply with applicable laws, including rules and regulations of self-regulatory
organizations; (iv) actions of such Indemnified Party in reliance upon any instructions issued by
Participant reasonably believed by such Indemnified Party to be genuine and to have been given by
the Participant, or (v) (A) any representation by the Participant, its employees or its agents or
other representatives about the Shares, any Indemnified Party or a Fund that is not consistent with
the Fund’s Prospectus made in connection with the offer or the solicitation of an offer to buy or
sell Shares and (B) any untrue statement or alleged untrue statement of a material fact contained
in any research reports, marketing material and sales literature related to a Fund or any alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent that such statement or omission relates to the
Shares, any Indemnified Party or a Fund, made by the Participant or an Affiliate of the Participant
unless, in either case, such representation, statement or omission was made or included by the
Participant or an Affiliate of the Participant at the written direction of the Distributor or is
based upon any omission or alleged omission by the Distributor to state a material fact in
connection with such representation, statement or omission necessary to make such representation,
statement or omission not misleading.
6.02 Limitation of Liability (Distributor). The Distributor shall not be liable to the
Participant for any damages arising out of (i) mistakes or errors in data provided in connection
with Orders except to the extent arising out of data provided by the Distributor; (ii) mistakes or
errors arising out of interruptions or delays of communications (iii) mistakes or errors of the
Transfer Agent, or (iv) differences in performance between the Fund’s Net Asset Value
(“NAV”), the Intraday Indicative Value, the Deposit Securities, or the underlying index
benchmark of any Fund. In no event and under no circumstances will either party to this Agreement
be liable to anyone, including, without limitation, the other party, for consequential damages for
any act or failure to act under any provision of this Agreement.
ARTICLE 7 CONFIDENTIAL INFORMATION
7.01 General. Distributor and the Trust (in such capacity, the “Receiving Party”)
acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter
defined) provided by Participant (in such capacity, the “Disclosing Party”) in connection
with this Agreement. The Receiving Party shall not disclose or disseminate the Disclosing Party’s
Confidential Information to any Person other than (a) those employees, agents, contractors,
subcontractors and licensees of the Receiving Party, or (b) with respect to Distributor as a
Receiving Party, to those employees, agents, contractors, subcontractors and licensees of any
agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing
its obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In
addition, the Receiving Party (a) shall take all reasonable steps to prevent unauthorized access to
the Disclosing Party’s Confidential Information, and (b) shall not use the Disclosing Party’s
Confidential Information, or authorize other Persons to use the Disclosing Party’s Confidential
Information, for any purposes other than in connection with performing its obligations or
exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes
to protect its own, similarly confidential or proprietary information of a similar nature, which
steps shall in no event be less than a reasonable standard of care.
7.02 Definition of Confidential Information. The term “Confidential Information,”
as used herein, shall mean all business strategies, plans and procedures, proprietary information,
methodologies, data and trade secrets, and other confidential information and materials (including,
without limitation, any non-public personal information as defined in Regulation S-P) of the
Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom
they do business, that may be obtained by the Receiving Party from any source or that may be
developed as a result of this Agreement.
7.03 Exclusions. The provisions of this ARTICLE 7 respecting Confidential
Information shall not apply to the extent, but only to the extent, that such Confidential
Information: (a) is already known to the Receiving Party free of any restriction at the time it is
obtained from the Disclosing Party, (b) is subsequently learned from an independent third party
free of any restriction and without breach of this Agreement; (c) is or becomes publicly available
through no wrongful act of the Receiving Party or any third party; (d) is independently developed
by or for the Receiving Party without reference to or use of any Confidential Information of the
Disclosing Party; or (e) is required to be disclosed pursuant to an applicable law, rule,
regulation, government requirement or court order, or the rules of any stock exchange (provided,
however, that the Receiving Party shall advise the Disclosing Party of such required disclosure
promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to
contest, limit and/or assist the Receiving Party in crafting such disclosure).
7.04 Disclosure of Confidential Information. The Receiving Party shall advise its
employees, agents, contractors, subcontractors and licensees, and shall require its agents and
affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the
Receiving Party’s obligations of confidentiality and non-use under this ARTICLE 7, and
shall be responsible for ensuring compliance by its and its affiliates’ employees, agents,
contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party
shall require all persons that are provided access to the Disclosing Party’s Confidential
Information, other than the Receiving Party’s accountants and legal counsel, to execute
confidentiality or non-disclosure agreements containing provisions substantially similar to those
set forth in this ARTICLE 7. The Receiving Party shall promptly notify the Disclosing
Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s
Confidential Information by such persons.
7.05 Obligations Upon Termination. Upon the Disclosing Party’s written request following
the termination of this Agreement, the Receiving Party promptly shall return to the Disclosing
Party, or destroy, all Confidential Information of the Disclosing Party provided under or in
connection with this Agreement, including all copies, portions and summaries thereof.
Notwithstanding the foregoing sentence, (a) the Receiving Party may retain one copy of each item of
the Disclosing Party’s Confidential Information for purposes of identifying and establishing its
rights and obligations under this Agreement, for archival or audit purposes and/or to the extent
required by applicable law, and (b) Distributor shall have no obligation to return or destroy
Confidential Information of the Trust that resides in save tapes of Distributor; provided, however,
that in either case all such Confidential Information retained by the Receiving Party shall remain
subject to the provisions of this ARTICLE 7 for so long as it is so retained. If requested
by the Disclosing Party, the Receiving Party shall certify in writing its compliance with the
provisions of this paragraph.
| Authorized Participant Agreement | 8 |
ARTICLE 8 ORDERS
8.01 Listing Exchange. The Participant understands and agrees that an Order may be
submitted only on days that the national securities exchange which is the primary exchange or other
market on which with Shares are traded (the “Listing Exchange”) is open for trading or
business.
8.02 Purchase Orders. The Participant agrees that all Purchase Orders will be made in
accordance with the terms and procedures set forth in this Agreement, the Prospectus and Procedures
Handbook; provided that in the event of a conflict, the terms and procedures of the Prospectus
shall control. To affect a purchase of a Creation Unit of a particular Fund, the Participant
agrees on behalf of itself, and any Participant Client, to deliver to the Fund a Fund Deposit plus
a purchase transaction fee as described in the Prospectus and/or the Procedures Handbook. The
amount of such purchase transaction fee shall be determined by the Fund, or the investment adviser
to the Fund (the “Adviser”), in its sole discretion and may be changed from time to time.
The Fund Deposit shall consist of the requisite Deposit Securities plus or minus a Balancing
Amount. The Balancing Amount will be payable to or receivable from the Fund depending on the net
asset value of Shares of the Fund next determined after the Order has been placed. The Fund may
permit or require the substitution of an amount of cash to be added to the Balancing Amount to
replace any Deposit Securities (i.e., the cash value of all or a part of such securities, in the
case of a permitted or required cash purchase or “cash in lieu” amount). The Participant
understands that a Creation Unit will not be issued until the requisite cash and/or Deposit
Securities, as applicable, transaction fees and taxes are transferred to the Trust on or before the
settlement date in accordance with the Prospectus and the Procedures Handbook and in accordance
with any instructions provided by the Trust, the Custodian and/or Sub-Custodian with respect to
cash payments, delivery and settlement.
(i) Title to Securities; Restricted Securities. The Participant shall deliver the
Deposit Securities to the Custodian free and clear of all liens, restrictions, charges, duties,
encumbrances and not subject to any adverse claims, including, without limitation, any restriction
upon sale or transfer arising out of (i) any agreement or arrangement entered into by the
Participant or any Participant Client (ii) any provision of the 1933 Act, and any regulations there
under (except that portfolio securities of issuers other than U.S. issuers shall not be required to
have been registered under the 1933 Act if exempt from such registration), or the applicable laws
or regulations of any other applicable jurisdiction or (iii) such securities being designated
“restricted securities” as such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act.
(ii) Corporate Actions. The Participant acknowledges that with respect to a Purchase
Order of a particular Fund, the Fund acknowledges and agrees to return to the Participant any
dividend, distribution or other corporate action paid to the Fund in respect of any Deposit
Security transferred to the Fund that, based on the valuation of such Deposit Security at the time
of transfer, should have been paid to the Participant.
8.03 Redemption Request. The Participant understands and agrees that Redemption Requests
may be submitted only on days that the Fund is open for business, as required by Section 22(e) of
the 0000 Xxx. and that Participant will not attempt to place an Order for purchasing or redeeming
any Creation Unit, except as set forth in this Agreement, the Prospectus and Procedures Handbook of
the Fund.
(i) Title to Securities; Restricted Securities. In connection with each Redemption
Request, the Participant agrees to ascertain that the Shares to be redeemed have not been loaned or
pledged to another party and are not the subject of a repurchase agreement, securities lending
agreement or any other arrangement that would preclude the delivery of such Shares to the Fund in
accordance with the Prospectus or as otherwise required by the Fund. In addition, the Participant
agrees that the Fund will acquire good and unencumbered title to Shares, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any
| Authorized Participant Agreement | 9 |
adverse claims, including without limitation, any restriction upon the sale or transfer of
such Shares. The Participant understands and agrees that in the event collateral or Shares are not
transferred to the Fund as set forth in the Procedures Handbook, the Redemption Request trade may
be broken by the Fund and the Participant will be solely responsible for all costs incurred by the
Fund or the Distributor related to breaking the trade. The Distributor will only process Redemption
Requests upon verification from the Fund or its designee of the Fund’s receipt of such collateral
or shares. The Participant understands that shares may be redeemed only when one or more Creation
Units of Shares of a Beneficial Owner are held in the account of a single Participant.
(ii) Corporate Actions. With respect to any Redemption Request, the Participant on
behalf of itself and any Participant Client acknowledges and agrees to return to the applicable
Fund any dividend, interest, distribution or other corporate action paid to it or a Participant
Client in respect of any Fund Security that is transferred to the Participant or any Participant
Client that, based on the valuation of such Fund Security at the time of transfer, should have been
paid to the Fund. A Fund is entitled to reduce the amount of proceeds due to the Participant or any
Participant Client by an amount equal to any dividend, interest, distribution or other corporate
action paid to the Participant or the Participant Client in respect of any Fund Security that is
transferred to the Participant or any Participant Client that, based on the valuation of such Fund
Security at the time of transfer, should have been paid to the Fund.
8.04 Beneficial Ownership Limitation. The Participant represents and warrants to the
Distributor and the Trust that, any portfolio securities deposited with a Fund will have an
adjusted tax basis equal to the fair market value of such securities at the time of the
contributions. The Participant agrees and represents that with regard to any Order for one or more
Creation Units of Shares of a Fund that, after giving effect to the purchase of Shares, it will not
hold more than eighty percent (80%) or more of the outstanding Shares of the relevant Fund and that
it will not treat such purchase as eligible for tax-free treatment under section 351 of the Code.
Such representation and warranty shall be deemed repeated with respect to each creation order and
accuracy of the representation is a condition to validity of the creation order. The Trust and its
Transfer Agent and Distributor shall have the right to require, as a condition to the acceptance of
a deposit of Deposit Securities, supporting information from the Participant regarding Share
ownership of each Fund, and shall be entitled to rely thereon to the extent necessary to make a
determination regarding ownership of eighty percent (80%) or more of the currently outstanding
Shares of any Fund by a Beneficial Owner.
ARTICLE 9 IRREVOCABLE PROXY
9.01 Appointment of Irrevocable Proxy. The Participant, from time to time, may be a Beneficial
Owner or an owner of record of a Fund. To the extent that it is a Beneficial Owner of a Fund, the
Participant does hereby irrevocably appoint the Distributor as its attorney and proxy with full
authorization and power to vote (or abstain from voting) the Participant’s beneficially owned
shares of a Fund which the Participant is or may be entitled to vote at any meeting of a Fund held
after the date this Agreement is executed, whether annual or special and whether or not an
adjourned meeting, or, if applicable, to give written consent with respect thereto. The Distributor
shall mirror vote (or abstain from voting) the Participant’s beneficially owned shares in the same
proportion as the votes (or abstentions) of other holders of the corresponding Fund on any matter,
question or resolution submitted to the vote of shareholders of such Fund and with complete
independence from and without any regard to any views, statements or interests of the Participant,
its affiliates or any other person.
9.02 Powers of Attorney and Proxy. The Distributor, as attorney and proxy for the Participant under
this paragraph: (i) is hereby given full power of substitution and revocation; (ii) may act through
such agents, nominees or substitute attorneys as it may from time to time appoint; (iii) may
provide voting instructions to such agents, nominees or substitute attorneys in any lawful manner
deemed appropriate by it, including in writing, by telephone, telex, facsimile, electronically
| Authorized Participant Agreement | 10 |
(including through the Internet) or otherwise. The powers of the Distributor as attorney and proxy
under this paragraph shall include (without limiting its general powers hereunder) the power to
receive and waive any notice of any meeting on behalf of the Participant.
9.03 Term of Attorney and Proxy. The Distributor shall serve as an irrevocable attorney and proxy
for the Participant under this paragraph for so long (and only so long) as this Agreement remains
in effect. This irrevocable proxy automatically shall terminate with respect to any Fund or the
Trust as a whole, if the Distributor ceases to act as Distributor to any Fund or the Trust, as
applicable. The Distributor may terminate this irrevocable proxy with sixty (60) days written
notice to the Participant.
ARTICLE 10 MISCELLANEOUS
10.01 Termination, and Amendment. This Agreement may be terminated (i) at any time by any
party upon unanimous agreement of the parties; (ii) upon thirty days prior written notice by any
party to the other parties (iii) upon written notice of the Distributor in the event of a breach by
the Participant of any provision of this Agreement, the Prospectus or the Procedures Handbook; (iv)
automatically upon assignment (as defined under the 0000 Xxx) or termination of the Distribution
Agreement currently in place between the Trust and Distributor. This Agreement supersedes any prior
such agreement between or among the parties. This Agreement may be amended by the Trust or the
Distributor from time to time without the consent of the Participant or any Beneficial Owner by
mailing a copy of such amendment to the Participant and the Transfer Agent. For purposes of this
Agreement, mail will be deemed received by the Participant on the fifth Business Day following the
deposit of such mail into the U.S. Postal system. If the Participant fails to object in writing to
the amendment within five days after its receipt, the amendment will become part of this Agreement
in accordance with its terms.
10.02 Third Party Beneficiary. The Participant and the Distributor understand and agree
that the Trust and each Fund, each as a third party beneficiary to this Agreement, is entitled and
intends to proceed directly against the Participant in the event that the Participant fails to
honor any of its obligations pursuant to this Agreement that benefit the Trust or such Fund.
10.03 Incorporation by Reference. The Participant acknowledges receipt of the Prospectus
and Procedures Handbook, represents that it has reviewed such documents and understands the terms
thereof, and further acknowledges that the procedures contained therein pertaining to the creation
and redemption of Shares are incorporated herein by reference.
10.04 Notices. All notices provided for or permitted under this Agreement shall be deemed
effective upon receipt, and shall be in writing and (a) delivered personally, (b) sent by
commercial overnight courier with written verification of receipt, or (c) sent by certified or
registered U.S. mail, postage prepaid and return receipt requested, to the party to be notified, at
the address for such party set forth below. Notices to Distributor shall be sent to the attention
of: General Counsel, SEI Investments Distribution Co., 0 Xxxxxxx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxxxx
00000. Notices to the Participant shall be sent to . Notices to the Trust
shall be sent to Schwab Strategic Trust, Attn: Legal Department, 000 Xxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, with copies sent to: State Street Bank and Trust Company, 000 Xxxxxxxxx Xxxxxx,
00xx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xxxxxx XxXxxxxx, Transfer Agent Vice President;
and: State Street Bank and Trust Company, 0 Xxxxxx xx Xxxxxxxxx, 0xx Xxxxx (XXX/0), Xxxxxx, XX
00000-0000, Attn: Xxxx Xxxxx Zeven, Esq.
10.05 Commencement of Trading. The Participant may not submit an Order pursuant to this
Agreement until five Business Days after effectiveness of this Agreement (which shall not take
effect until this Agreement is accepted by the Transfer Agent) or such earlier date agreed upon
between the Distributor and the Participant after such time as this Agreement is accepted by the
Transfer Agent.
| Authorized Participant Agreement | 11 |
10.06 Dispute Resolution. Whenever either party desires to institute legal proceedings
against the other concerning this Agreement, it shall first provide written notice to that effect
to such other parties. The party providing such notice shall refrain from instituting said legal
proceedings for a period of thirty days following the date of provision of such notice. During
such period, the parties shall attempt in good faith to amicably resolve their dispute by
negotiation among their executive officers.
10.07 Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws or
choice of laws rules or principles thereof. To the extent that the applicable laws of the
Commonwealth of Pennsylvania, or any of the provisions of this Agreement, conflict with the
applicable provisions of the 1933 Act, 1934 Act, or 1940 Act, the relevant Act shall control.
10.08 Counterparts. This Agreement may be executed in two or more counterparts, all of
which shall constitute one and the same instrument. Each such counterpart shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart. This Agreement shall be deemed executed by all parties when any
one or more counterparts hereof or thereof, individually or taken together, bears the original or
facsimile signatures of each of the parties.
10.09 Force Majeure. No breach of any obligation of a party to this Agreement (other than
obligations to pay amounts owed) will constitute an event of default or breach to the extent it
arises out of a cause, existing or future, that is beyond the control and without negligence of the
party otherwise chargeable with breach or default, including without limitation: work action or
strike; lockout or other labor dispute; flood; war; riot; theft; act of terrorism, earthquake or
natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default
or breach will, when the cause arises, give to the other party prompt notice of the facts which
constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other
party. This provision shall also apply to the Transfer Agent to the extent the Transfer Agent
shall have been deemed to have obligations hereunder.
10.10 Severability. Any provision of this Agreement that is determined to be invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining
provisions of this Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement
to be invalid or unenforceable, the parties agree that the court making such determination shall
have the power to reduce the scope, duration, or area of the provision, to delete specific words or
phrases, or to replace the provision with a provision that is valid and enforceable and that comes
closest to expressing the original intention of the parties, and this Agreement shall be
enforceable as so modified.
10.11 Assignment. No party may assign its rights or obligations under this Agreement (in
whole or in part) without the prior written consent of the parties, which shall not be unreasonably
withheld.
10.12 The Participant and Distributor each understand and agree that the Transfer Agent, by
accepting this Agreement, has not agreed to undertake any obligations nor made any representations
or warranties under this Agreement.
| Authorized Participant Agreement | 12 |
IN WITNESS WHEREOF, the Participant and Distributor have each duly executed this Agreement, as of
the day and year above written.
[PARTICIPANT]
|
SEI INVESTMENTS DISTRIBUTION CO. | |||||
By:
|
By: | |||||
Name:
|
Name: | |||||
Title:
|
Title: |
ACCEPTED BY:
[TRANSFER AGENT] |
By: |
Name: |
Title: |
| Authorized Participant Agreement | 13 |
EXHIBIT A
FUNDS
EXHIBIT B
CERTIFIED AUTHORIZED PERSONS OF AUTHORIZED PARTICIPANT
The following are the names, titles and signatures of all persons (each, an “Authorized
Person”) authorized to give instructions relating to any activity contemplated by the
Authorized Participant Agreement (the “Agreement”), dated
between and among SEI
Investments Distribution Co. (“Distributor”),
(the
“Participant”),
(the “Transfer Agent”) and
(the “Trust”) or any other notice, request or instruction on behalf of the Participant
pursuant to the Agreement. In addition, Distributor is requesting that one authorized trader is
designated as the primary contact; this will enable Distributor to relay information efficiently to
the authorized participants. Please complete and return to Distributor.
AP Firm Name: |
||||
Desk Name: |
||||
| Authorized Persons: | ||||
The undersigned, [name],
[title] of
[company], does hereby certify that the persons listed above have been duly
elected to the offices set forth beneath their names, that they presently hold such offices, that
they have been duly authorized to act as Authorized Persons pursuant to the Participant Agreement
by and between
[Participant],
[Trust] and
, as Transfer Agent, [dated], and that their signatures set forth
above are their own true and genuine signatures.
In Witness Whereof, the undersigned has hereby set his/her hand and the seal of [company] on the
date set forth below.
Subscribed and sworn to before me this day of
, 20
|
By: | |||||
| Name: | ||||||
| Title: | ||||||
| Date: | ||||||
