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.
SUPPLEMENTAL WARRANT
AGREEMENT
To Purchase Shares of the
Series B Common Stock of
HEALTHCARE SERVICES, INC.
Dated as of
(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 desires to grant to Warrantholder the right to purchase
shares of its Class B Common Stock.
NOW, THEREFORE, in
consideration of the Warrantholder executing and delivering such
Restricted Stock Agreement and in consideration of mutual covenants
and agreements contained herein, 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 start-up 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 902,374 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 (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. 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 .
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(a)
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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 Effective Date; or (ii) the
effective date of the Company’s initial public
offering.
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(b)
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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 acquiring
entity actually exercises management control other than a
transaction involving an offering of the Company’s capital
stock in the public market.
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(c)
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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
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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.
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EXERCISE OF
THE PURCHASE RIGHTS .
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(a)
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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).
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(b)
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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)
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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:
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Where:
X = 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
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
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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.
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.
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
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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 Recapitalization is in a form other than cash
or marketable securities, then the
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