AUTHORIZED PARTICIPANT AGREEMENT

FOR

HEALTHSHARES ,INC.

                This Authorized Participant Agreement (the Agreement) is entered into by and between ALPS Distributor, Inc. (the Distributor) and                                                              (the Authorized Participant or AP) and is subject to acceptance by The Bank of New York (BNY ETF Administrator or the Transfer Agent).  The Transfer Agent serves as the transfer agent for the Healthshares, Inc.  (the Company ) and is an Index Receipt Agent as that term is defined in the rules of the National Securities Clearing Corporation (NSCC).  The Distributor, the Transfer Agent and the Authorized Participant acknowledge and agree that the Company shall be a third party beneficiary of this Agreement, and shall receive the benefits contemplated by this Agreement, to the extent specified herein.  The Distributor has been retained to provide services as principal underwriter of the Company acting on an agency basis in connection with the sale and distribution of shares of beneficial interest, par value $.0001 per share (sometimes referred to as Shares), of each of the separate investment portfolios of the Company (each such portfolio a Fund and collectively, the Funds) named on Annex I to this Agreement. Healthshares, Inc. has created a proprietary, rules-based methodology as described in the Companys Prospectus and Statement of Additional Information (SAI) incorporated therein (collectively, the Prospectus) included as part of its registration statement, as amended, on Form N-1A (No. 811-21855) (Registration Statement) to define the dividend-paying segments of the U.S.  and foreign stock markets and to serve as indexes for use by the Funds and other equity income investors (each an Index and collectively the Indexes). The Funds will be based on domestic and international underlying equity Indexes which seek to measure and monitor the performance of public-listed healthcare companies as further described herein.

As specified in the Companys Prospectus, the Shares of any Fund offered thereby may be purchased or redeemed only in aggregations of a specified number of Shares referred to therein and herein as a Creation Unit.  All references to cash shall refer to US Dollars (USD).  The number of Shares constituting a Creation Unit of each Fund is set forth in the Prospectus.  Creation Units of Shares may be purchased only by or through an Authorized Participant that has entered into an Authorized Participant Agreement with the Company and the Distributor. The Prospectus provides that Creation Units generally will be sold in exchange for an in-kind deposit of a designated portfolio of equity securities (the Deposit Securities) and an amount of cash computed as described in the Prospectus (the Cash Component), plus a purchase Transaction Fee as described in the Prospectus, delivered to the Company by the Authorized Participant for its own account or acting on behalf of another party.  Together, the Deposit Securities and the Cash Requirement constitute the Creation Deposit, which represents the minimum initial and subsequent investment amount for Shares of any Fund of the Company.  References to the Prospectus are to the then current Prospectus as it may be supplemented or amended from time to time.  Capitalized terms not otherwise defined herein are used herein as defined in the Prospectus.

This Agreement is intended to set forth certain premises and the procedures by which the Authorized Participant may purchase and/or redeem Creation Units of Shares (i) through the Continuous Net Settlement (CNS) clearing processes of NSCC as such processes have been enhanced to effect purchases and redemptions of Creation Units, such processes being

1

referred to herein as the CNS Clearing Process, or (ii) outside the CNS Clearing Process (i.e., through the manual process of The Depository Company Company (DTC) (DTC Process).  The procedures for processing an order to purchase Shares (each a Purchase Order) and an order to redeem Shares (each a Redemption Order) are described in the Companys Prospectus and in Annex II to this Agreement.  All Purchase and Redemption Orders must be made pursuant to the procedures set forth in the Prospectus and Annex II hereto, as each may be amended by the Company from time to time.  An Authorized Participant may not place a Purchase Order before the fifth (5th) Business Day (as defined below) following execution and delivery to the Distributor of this Agreement and notification by the Distributor of the Authorized Participants status. An Authorized Participant may not cancel a Purchase Order or a Redemption Order after an order is placed by the Authorized Participant.

The parties hereto in consideration of the premises and of the mutual

agreements contained herein agree as follows:

1.   STATUS OF AUTHORIZED PARTICIPANT.

(a) The Authorized Participant hereby represents, covenants and warrants that with respect to Purchase Orders or Redemption Orders of Creation Units of Shares of any Fund (i) through the CNS Clearing Process, it is a member of NSCC and an Authorized Participant in the CNS System of NSCC (as defined in the Funds Prospectus, a Participating Party), and/or (ii) outside the CNS Clearing Process, it is a DTC Participant (as defined in the Funds Prospectus, a DTC Participant). The Authorized Participant may place Purchase Orders or Redemption Orders for Creation Units either through the CNS Clearing Process or outside the CNS Clearing Process, subject to the procedures for purchase and redemption set forth in this Agreement, the Prospectus and Annex II hereto (Execution of Orders). Any change in the foregoing status of the Authorized Participant shall terminate this Agreement and the Authorized Participant shall give prompt written notice to the Distributor, the Company and the Transfer Agent of such change.

(b) The Authorized Participant hereby represents and warrants that, unless the following paragraph is applicable to it, (i) it is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, (ii) is qualified to act as a broker or dealer in the states or other jurisdictions where it transacts business, and (iii) is a member in good standing of the National Association of Securities Dealers, Inc. (the NASD), and the Authorized Participant agrees that it will maintain such registrations, qualifications, and membership in good standing and in full force and effect throughout the term of this Agreement. The Authorized Participant agrees to comply with all applicable United States federal laws, the laws of the states or other jurisdictions concerned, and the rules and regulations promulgated thereunder and with the Constitution, By-Laws and Conduct Rules of the NASD, and that it will not offer or sell Shares of any Fund of the Company in any state or jurisdiction where they may not lawfully be offered and/or sold.

(c) If the Authorized Participant is offering or selling Shares of any Fund of the Company in jurisdictions outside the several states, territories and possessions of the United States (US) and is not otherwise required to be registered, qualified, or a member of the NASD as set forth above, the Authorized Participant nevertheless agrees (i) to observe the applicable laws of the jurisdiction in which such offer and/or sale is made, (ii) to comply with the full disclosure requirements of the Securities Act of 1933, as amended (the 1933 Act) and

2

the regulations promulgated thereunder and (iii) to conduct its business in accordance with the spirit of the NASD Conduct Rules.

(d) The Authorized Participant represents, covenants and warrants that it has established and presently maintains an anti-money laundering program (the Program) reasonably designed to prevent the Authorized Participant from being used as a conduit for money laundering or other illicit purposes or the financing of terrorist activities, and is in compliance with the Program and all anti-money laundering laws, regulations and rules now or hereafter in effect that are applicable to it, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the USA PATRIOT ACT).

Home        Intelligence        Services        Subscriptions        News        About Us

Contact Us       Terms of Use       Resend Documents       Shopping Cart

Copyright © 2008 The Consus Group LLC