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.
PROTECTION 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 . For value
received, 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, that number of fully paid and non-assessable
shares of the Company’s Series B Common Stock, par value
$0.01 per share (“Common Stock”), which will permit the
Warrantholder to continue to own a five percent (5%) interest in
the Company on a fully diluted basis, at a purchase price of $0.01
per share (the “Exercise Price”), subject to the
limitations and adjustments as provided in Section 8
hereof.
2.
TERM OF THE PROTECTION WARRANT AGREEMENT .
(a) Except as
otherwise provided for herein, the term of this Protection 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 earlier 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)
Acceleration of Term Upon Recapitalization, Merger or Sale .
Notwithstanding the term of this Protection 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 a capital reorganization of the shares of the
Company’s stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein (a
“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
Protection Warrant Agreement, then the Warrantholder shall exercise
this Protection Warrant Agreement pursuant to the terms
hereunder.
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(c)
The Company shall notify the Warrantholder, in accordance with the
terms of Section 13(e) hereof, if an Initial Public Offering,
Recapitalization, Merger or Sale is proposed. Such notice also
shall contain such details of the proposed Initial Public Offering,
or Recapitalization or Merger or Sale as are reasonable in the
circumstances, including the anticipated effective date thereof,
and notice that this Protection Warrant Agreement is expected to
expire upon closing thereof. “Initial Public Offering”
as used herein shall refer to any transaction involving an offering
of the Company’s capital stock in the public market. 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 Protection 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 Protection Warrant
Agreement occurred after the Company notified the Warrantholder
that the Initial Public Offering, Recapitalization, Merger or Sale
was proposed or if the exercise was otherwise precipitated by such
proposed Initial Public Offering, Recapitalization, Merger or Sale.
In the event of such recision, the Protection Warrant Agreement
will thereafter continue to be exercisable on the same terms and
conditions contained herein.
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3.
EXERCISE OF THE PURCHASE RIGHTS .
(a) The purchase
rights set forth in this Protection 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
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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
Protection 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
Protection Warrant Agreement, and a new Protection 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 Protection Warrant
Agreement or a combination of (i) and (ii).
(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 Protection Warrant Agreement for cash, the
Warrantholder may elect to receive shares equal to the value (as
determined below) of this Protection Warrant Agreement (or the
portion thereof being canceled) by surrender of this Protection
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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X =
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Y(A-B)
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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
Protection 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.
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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
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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 Protection 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 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
Protection Warrant Agreement, issue an amended Protection Warrant
Agreement to Warrantholder representing the remaining number of
shares purchasable hereunder. All other terms and conditions of
such amended Protection
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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 Protection Warrant
Agreement, will be, upon exercise of this Protection Warrant
Agreement and payment of the 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
Protection 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 Protection 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 Protection 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.
6. NO RIGHTS
AS SHAREHOLDER . This Protection 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 Protection 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
Protection Warrant Agreement for all purposes until such time as
the Warrantholder sends notice to the Company to change such
registry.
8.
ADJUSTMENT RIGHTS . The number of shares of Common Stock
purchasable hereunder are subject to adjustment, as follows from
time to time:
(a)
Reclassification of Shares . If the Company at any time
during the term of this Protection Warrant Agreement shall, by
combination, reclassification, exchange or subdivision of
securities or otherwise, change any of the securities as to which
purchase rights under this Protection Warrant Agreement exist into
the same or a different number of securities of any other class or
classes, this Protection Warrant Agreement shall thereafter
represent the right to acquire such number and kind of securities
as would have been issuable as the result of such
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change with
respect to the securities which were subject to the purchase rights
under this Protection Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other
change, all subject to further adjustment as provided in this
Section 8.
(b) Split,
Subdivision or Combination of Shares . If the Company at any
time during the term of this Protection Warrant Agreement shall
combine, split or subdivide the securities as to which purchase
rights under this Protection Warrant Agreement exists into a
different number of securities of the same class, all subject to
further adjustment as provided in this Section 8.
(c) Stock
Dividends . If during the term of this Protection Warrant
Agreement the Company shall at any time declare or make a dividend
payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (b) or
(c)) of the Company’s stock, then the number of shares
issuable hereunder shall be adjusted, from and after the record
date of such dividend or distribution, to take into account such
dividend or distribution.
(d)
Antidilution Rights . The purpose of this Protection Warrant
Agreement is to provide the Warrantholder with antidilution
protection during the term of
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