THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.
SECOND AMENDED AND RESTATED
SUPPLEMENTAL WARRANT AGREEMENT
To Purchase Shares of the
Series B Common Stock of
HEALTHCARE SERVICES, INC.
Dated as of September 30, 2007
(the “Effective Date”)
WHEREAS, Ascension
Health, a Missouri not-for-profit corporation (the
“Warrantholder”) has entered into a Restricted Stock
Agreement dated as of November 7, 2004 (the “Restricted
Stock Agreement”) with Healthcare Services, Inc. d/b/a
Accretive Health, a Delaware corporation (the
“Company”); and
WHEREAS, the
Company granted to Warrantholder the right to purchase shares of
its Class B Common Stock pursuant to the terms of that certain
Supplemental Warrant Agreement entered into by and between the
Company and the Warrantholder on or about November 7, 2004;
and
WHEREAS, the
Company and the Warrantholder have entered into that certain
Subscription Agreement between them dated May 15, 2007;
and
WHEREAS, the
Company and Warrantholder seek to Amend and Restate the terms of
that Supplemental Warrant Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained
herein, and in consideration of the Subscription Agreement between
them, the Company and Warrantholder agree as follows:
1.
GRANT OF THE RIGHT TO PURCHASE SERIES B COMMON STOCK. In
consideration of Warrantholder and its affiliates’ agreement
to provide services to the Company in the form of an
“operational laboratory” and related consulting
services relative to the services which Company is developing for
its prospective clients, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms
and subject to the conditions
hereinafter set
forth, to subscribe for and purchase from the Company from time to
time, up to 446,190 fully paid and non-assessable shares of the
Company’s Series B Common Stock, par value $0.01 per
share (“Common Stock”), in accordance with
Exhibit A attached hereto and incorporated herein by this
reference, at a purchase price per share equal to the most recent
price per share paid for a Common Equivalent Share in a capital
raising transaction by the Company at the time the new Agreement,
as defined in Appendix A, giving rise to the right to purchase
is executed (the “Exercise Price”); provided, however,
that if within six (6) months of the date that additional
shares are issuable pursuant to this Supplemental Warrant Agreement
there has not been a capital raising transaction for the Company
then the Exercise Price shall be the price at which the Company has
most recently granted options to its employees at the time the new
Agreement giving rise to the right to purchase is executed. The
number of shares and the Exercise Price shall be adjusted as
provided in Section 8 hereof. The Company and the
Warrantholder will from time to time indicate on Appendix A
the number of shares for which this Supplemental Warrant Agreement
is exercisable and the applicable Exercise Prices
therefore.
2. TERM OF
THE SUPPLEMENTAL WARRANT AGREEMENT.
(a) Except
as otherwise provided for herein, the term of this Supplemental
Warrant Agreement and the right to purchase Common Stock as granted
herein shall continue for a period commencing on the Effective Date
and shall continue until the earliest of (i) 5:00 p.m. Chicago
time on the (i) tenth anniversary of the last Award Date (as
defined in Exhibit A); or (ii) the effective date of the
Company’s initial public offering.
(b) Change
of Control Recapitalization, Merger or Sale. Notwithstanding
the term of this Supplemental Warrant Agreement fixed pursuant to
Section 2(a) hereof, the right to purchase Common Stock as granted
herein shall expire, if not previously exercised, immediately upon
(i) a capital reorganization of the shares of the
Company’s stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for in
Sections 8(b), 8(c) and 8(d)) involving a “Change of
Control” of the Company (a “Change of Control
Recapitalization”), the closing of a merger or consolidation
of the Company with or into another corporation when the Company is
not the surviving corporation, or a reverse triangular merger in
which the Company is the surviving entity but the shares of the
Company’s capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (a
“Merger”), or the sale of all or substantially all of
the Company’s properties and assets to any other person (a
“Sale”); provided, however, if the acquiring company
requires the Warrantholder to exercise this Supplemental Warrant
Agreement, then the Warrantholder shall exercise this Supplemental
Warrant Agreement pursuant to the terms hereunder. In the event of
a Change of Control Recapitalization, Merger or Sale, the Company
will provide the Warrantholder at least thirty (30) days
notice of such event and thereafter the Company and Warrantholder
will discuss in good faith what portion of the number of shares
issuable hereunder have been earned or should be awarded in
accordance with Appendix A. “Change of Control” as
used herein shall refer to an acquisition of 50% or more of the
Company’s voting stock ordinarily having voting rights if
the
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acquiring
entity actually exercises management control other than a
transaction involving an offering of the Company’s capital
stock in the public market.
(c) The
Company shall notify the Warrantholder , in accordance with the
terms of Section 13(e) hereof, if an Initial Public Offering,
Change of Control Recapitalization, Merger or Sale is proposed not
less than thirty (30) days prior to such event. Such notice
also shall contain such details of the proposed Initial Public
Offering, or Change of Control Recapitalization or Merger or Sale
as are reasonable in the circumstances, including the anticipated
effective date thereof, and notice that this Supplemental Warrant
Agreement is expected to expire upon closing thereof. If such
closing does not take place, the Company shall promptly notify the
Warrantholder that such proposed transaction has been terminated.
Notwithstanding anything to the contrary in this Supplemental
Warrant Agreement, the Warrantholder may rescind any exercise of
its purchase rights promptly after such notice of termination of
the proposed transaction if the exercise of this Supplemental
Warrant Agreement occurred after the Company notified the
Warrantholder that the Initial Public Offering, Change of Control
Recapitalization, Merger or Sale was proposed or if the exercise
was otherwise precipitated by such proposed Initial Public
Offering, Change of Control Recapitalization, Merger or Sale. In
the event of such recission, the Supplemental Warrant Agreement
will thereafter continue to be exercisable on the same terms and
conditions contained herein.
3. EXERCISE
OF THE PURCHASE RIGHTS .
(a) The
purchase rights set forth in this Supplemental Warrant Agreement
are exercisable by the Warrantholder, in whole or in part, at any
time, or from time to time, prior to the expiration of the term set
forth in Section 2 above or as modified by any other provision
of this Agreement, by tendering to the Company at its principal
office a notice of exercise duly completed and executed in the form
attached hereto as Exhibit I (the “Notice of
Exercise”). This Supplemental Warrant Agreement shall be
deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided
herein, and the Warrantholder (or such other person as the
Warrantholder shall designate to receive the shares issuable upon
exercise) shall be treated as the holder of record of such shares
as of the close of business on that date. Within three (3) days of
receipt of the Notice of Exercise, the Company shall deliver to
Warrantholder the acknowledgment of exercise duly completed and
executed in the form attached hereto as Exhibit II (the
“Acknowledgment of Exercise”). Promptly upon receipt of
the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later
than twenty-one (21) days thereafter, the Company shall issue
to the Warrantholder a certificate for the number of shares of
Common Stock purchased if Warrantholder has only partially
exercised this Supplemental Warrant Agreement, and a new
Supplemental Warrant Agreement pursuant to
Section 3(d).
(b) The
Exercise Price may be paid at the Warrantholder’s election
either (i) in cash, by check or by wire transfer or
(ii) in the manner provided by Section 3(c) of this
Supplemental Warrant Agreement or a combination of (i) and
(ii).
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(c) Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of Common
Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of exercising this
Supplemental Warrant Agreement for cash, the Warrantholder may
elect to receive shares equal to the value (as determined below) of
this Supplemental Warrant Agreement (or the portion thereof being
canceled) by surrender of this Supplemental Warrant Agreement at
the principal office of the Company together with the properly
endorsed Notice of Exercise (“Net Issuance”) in which
event the Company shall issue to the Warrantholder a number of
shares of Common Stock computed using the following
formula:
A
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Where: X =
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the
number of shares of Common Stock to be issued to the
Warrantholder.
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Y
=
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the
number of shares of Common Stock requested to be exercised under
this Supplemental Warrant Agreement.
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A
=
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the
fair market value of one (1) share of the Company’s
Series B Common Stock (at the date of such
calculation).
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B
=
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the
Exercise Price (as adjusted as of the date of
calculation).
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For purposes of
the above calculation, fair market value of the Common Stock shall
mean with respect to each share of Common Stock:
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(i)
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if
the exercise is in connection with an Initial Public Offering, and
if the Company’s Registration Statement relating to such
Initial Public Offering has been declared effective by the
Commission, then the fair market value per share shall be the
product of (x) the “Initial Price to Public”
specified in the final prospectus with respect to the Initial
Public Offering and (y) the number of shares of Common Stock
into which each share of Common Stock is convertible at the time of
such exercise;
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(ii)
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if
this Supplemental Warrant Agreement is exercised after, and not in
connection with an Initial Public Offering, and:
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(A)
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if
the Company’s Common Stock is traded on a national securities
exchange, the fair market value shall be deemed to be the product
of (x) the average of the closing prices over a twenty-one
(21) day period ending three days before the day the fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Common
Stock is convertible at the time of such exercise;
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(B)
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if
the Company’s Common Stock is traded over-the-counter,
the
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fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices of the Company’s Common Stock
quoted on Nasdaq (or similar system) over the twenty-one
(21) day period ending three days before the day the fair
market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Common
Stock is convertible at the time of such exercise;
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(iii)
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if
at any time the Common Stock is not listed on any securities
exchange or quoted over-the-counter, the fair market value of
Common Stock shall be the product of (x) the highest price per
share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in
good faith by the Company’s Board of Directors and (y) the
number of shares of Common Stock into which each share of Common
Stock is convertible at the time of such exercise; or
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(iv)
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Notwithstanding the provisions of
Section 3(c)(i), (ii) and (iii), if the Company shall
become subject to a Merger or Sale, the fair market value of Common
Stock shall be deemed to be the value received by the holders of
the Company’s Common Stock on a common equivalent basis
pursuant to such Merger or Sale.
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(d) Upon
partial exercise by any method, the Company, at its expense, shall
promptly but not more than three (3) days after surrender of
the Supplemental Warrant Agreement, issue an amended Supplemental
Warrant Agreement to Warrantholder representing the remaining
number of shares purchasable hereunder. All other terms and
conditions of such amended Supplemental Warrant Agreement shall be
identical to those contained herein, including, but not limited to
the Effective Date hereof.
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4.
RESERVATION OF SHARES. The Company covenants that the Common
Stock issuable, or other securities from time to time issuable
hereunder, upon exercise of the Warrantholder’s rights, has
been duly and validly reserved and, when issued in accordance with
the provisions of this Supplemental Warrant Agreement, will be,
upon exercise of this Supplemental Warrant Agreement and payment of
the then applicable Exercise Price, validly issued, fully paid and
non-assessable, and will be free of any taxes, liens, charges or
encumbrances of any nature whatsoever (other than taxes in respect
of any transfer occurring contemporaneously or otherwise specified
herein). The Company agrees that its issuance of this Supplemental
Warrant Agreement shall constitute full authority to its officers
who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common
Stock upon the exercise of this Supplemental Warrant Agreement. The
Company shall not be required to pay any tax which may be payable
in respect of any transfer involved and the issuance and delivery
of any certificate in a name other than that of the
Warrantholder.
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5. NO
FRACTIONAL SHARES OR SCRIP . No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
the Supplemental Warrant Agreement, but in lieu of such fractional
shares the Company shall make a cash payment to Warrantholder
therefor upon the basis of the Exercise Price in effect with
respect to such shares.
6. NO RIGHTS
AS SHAREHOLDER . This Supplemental Warrant Agreement does not
entitle the Warrantholder to any voting rights or other rights as a
shareholder of the Company in its capacity as a Warrantholder prior
to the exercise of the Warrant.
7.
WARRANTHOLDER REGISTRY . The Company shall maintain a
registry showing the name and address of the registered holders of
this Supplemental Warrant Agreement. The Warrantholder or any
transferee hereof (subject to the provisions of Section 11
hereof) may change its or his address as shown on the registry by
written notice to the Company. Any notice or written communications
required or permitted to be given to the Warrantholder shall be
made in accordance with the provisions of Section 13(e) hereof to
the Warrantholder shown on the registry. The Company shall treat
the holder(s) in the registry as the absolute owner(s) of the
Supplemental Warrant Agreement for all purposes until such time as
the Warrantholder sends notice to the Company to change such
registry.
8.
ADJUSTMENT RIGHTS . The Exercise Price(s) and the number of
shares of Common Stock purchasable hereunder are subject to
adjustment, as follows from time to time:
(a)
Non-Change of Control Recapitalization . If at any time
there shall be a capital reorganization of the shares of the
Company’s stock (other than a Change of Control
Recapitalization or a combination, reclassification, exchange or
subdivision of shares otherwise provided for in Sections 8(b),
8(c) and 8(d) herein) (a “Non-Change of Control
Recapitalization”) lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon
exercise of its rights under the Supplemental Warrant Agreement, in
lieu of the shares originally issuable pursuant hereto, the number
of shares of stock or other securities issuable as a result of such
Non-Change of Control Recapitalization, all subject to further
adjustment as otherwise provided in this Section 8. In any
such case, appropriate adjustment (as determined in good faith by
the Company’s Board of Directors) shall be made in the
application of the provisions of this Supplemental Warrant
Agreement with respect to the rights and interests of the
Warrantholder after the Non-Change of Control Recapitalization to
the end that the provisions of this Supplemental Warrant Agreement
(including adjustments of number of shares of Common Stock
purchasable) shall be applicable after the next Non-Change of
Control Recapitalization to the greatest extent possible, in
relation to any shares or other property deliverable after that
Non-Change of Control Recapitalization upon exercise of this
Supplemental Warrant Agreement. If the per share consideration
payable to the holder hereof for shares in connection with any such
Non-Change of Control Reca
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