Accretive Health, Inc. (Form: S-1/A, Received: 04/26/2010 09:19:58)

(Affiliate)

As filed with the Securities and Exchange Commission on April 26, 2010

Registration No. 333-162186

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 4

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

ACCRETIVE HEALTH, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		7389 (Primary Standard Industrial Classification Code No.)		02-0698101 (I.R.S. Employer Identification No.)

401 North Michigan Avenue

Suite 2700

Chicago, Illinois 60611

(312) 324-7820

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mary A. Tolan

Founder, President and Chief Executive Officer

401 North Michigan Avenue

Suite 2700

Chicago, Illinois 60611

(312) 324-7820

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


David A. Westenberg, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000		Gregory A. Fernicola, Esq. Jennifer A. Bensch, Esq. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 (212) 735-3000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) please check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated April 26, 2010

Common Stock

This is an initial public offering of shares of common stock of Accretive Health, Inc.

Accretive Health is offering of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering shares. Accretive Health will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . We have applied to list our common stock on the New York Stock Exchange under the symbol “AH”.

See “Risk Factors” beginning on page 10 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total

Initial public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to Accretive Health	$	$
Proceeds, before expenses, to the selling stockholders	$	$

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from Accretive Health and up to an additional shares from the selling stockholders at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on , 2010.


Goldman, Sachs & Co.	Credit Suisse


J.P. Morgan	Morgan Stanley


Baird	William Blair & Company

Prospectus dated , 2010.

ACCRETIVE HEALTH results providers trust Delivering Results Through: People A talented team with revenue cycle management skills an a focus on outstanding customer service. Process Standardized implementation process and continuing analysis using sophisticated analytics and proprietary algorithms. Technology Integrated proprietary technology suite delivered as a web interface. Helping Our Customers Achieve: Improved Net Revenue Yield Increased Charge Capture More Efficient Revenue Cycle Operations

TABLE OF CONTENTS

Prospectus


	Page

Prospectus Summary		1
Summary Consolidated Financial Data		7
Risk Factors		10
Special Note Regarding Forward-Looking Statements		24
Industry and Market Data		24
Use of Proceeds		25
Dividend Policy		26
Capitalization		27
Dilution		29
Selected Consolidated Financial Data		31
Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Business		61
Management		86
Related Person Transactions		108
Principal and Selling Stockholders		115
Description of Capital Stock		119
Shares Eligible for Future Sale		124
Certain U.S. Federal Tax Consequences to Non-U.S. Holders		127
Underwriting		130
Legal Matters		134
Experts		134
Where You Can Find More Information		134
Index to Consolidated Financial Statements		F-1
EX-3.2
EX-3.4
EX-4.1
EX-10.1
EX-10.3
EX-10.8
EX-10.21
EX-10.22
EX-10.23
EX-10.24
EX-10.25
EX-21.1
EX-23.1

Through and including , 2010 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 10, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms “Accretive Health”, “our company”, we”, “us” and “our” in this prospectus to refer to Accretive Health, Inc. and its subsidiaries.

Accretive Health

Overview

Accretive Health is a leading provider of healthcare revenue cycle management services. Our business purpose is to help U.S. healthcare providers to more efficiently manage their revenue cycle operations, which encompass patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections.

Our customers typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent ambulatory clinics, and their affiliated physician practice groups. Our integrated technology and services offering, which we refer to as our solution, helps our customers realize sustainable improvements in their operating margins and improve the satisfaction of their patients, physicians and staff. Our solution is adaptable to the evolution of the healthcare regulatory environment, technology standards and market trends, and requires no up-front cash investment by our customers. As of March 31, 2010, we provided our integrated revenue cycle service offerings to 21 customers representing 53 hospitals and $11.6 billion in annual net patient revenue, as well as physicians’ billing organizations associated with several of these customers. Based on managed service contracts to which we were a party as of March 31, 2010, during the second quarter of 2010 we will be providing integrated revenue cycle services for customers with annual net patient revenue of $13.6 billion.

The revenue cycle operations of a typical healthcare provider often fail to capture and collect the total amounts contractually owed to it from third-party payors and patients for medical services rendered. Our solution spans our customers’ entire revenue cycle, unlike competing services that we believe address only a portion of the revenue cycle or focus solely on cost reductions. Through the implementation of our distinctive operating model that includes people, process and technology, our customers have historically achieved significant improvements in cash collections measured against the contractual amount due for medical services, which we refer to as net revenue yield, within 18 to 24 months of implementing our solution. Customers operating under mature managed service contracts typically realize 400 to 600 basis points in yield improvements in the third or fourth contract year. All of a customer’s yield improvements during the period we are providing services are attributed to our solution because we assume full responsibility for the management of the customer’s revenue cycle. Our methodology for measuring yield improvements excludes the impact of external factors such as changes in reimbursement rates from payors, the expansion of existing services or addition of new services, volume increases and acquisitions of hospitals or physician practices.

In assuming responsibility for the management and cost of a customer’s revenue cycle operations, we supplement the existing staff involved in the customer’s revenue cycle operations with seasoned Accretive Health personnel. We also seek to embed our technology, personnel, know-how and culture within each customer’s revenue cycle activities with the expectation that we will serve as the customer’s on-site operational manager beyond the contract’s initial term. To date, we have experienced a contract renewal rate of 100% (excluding exploratory new services offerings, a consensual termination following a change of control and a customer reorganization). Coupled with the long-term nature of our managed service contracts and the fixed nature of the base fees under each contract, our historical renewal experience provides a core source of recurring revenue.

Our net services revenue consists primarily of base fees and incentive fees. We receive base fees for managing our customers’ revenue cycle operations, net of any cost savings we share with those customers. Incentive fees represent our portion of the increase in our customers’ net revenue yield. We and our customers share financial gains resulting from our solution, which directly aligns our objectives and interests with those of our customers. We believe that over time, this alignment of interest fosters greater innovation and incentivizes us to improve our customer’s revenue cycle operations.

A customer’s net revenue improvements and cost savings generally increase over time as we deploy additional programs and as the programs we implement become more effective, which in turn provides visibility into our future revenue and profitability. In 2009, for example, approximately 87% of our net services revenue, and nearly all of our net income, was derived from customer contracts that were in place as of January 1, 2009. In 2009, we had net services revenue of $510.2 million, representing growth of 28.0% over 2008 and a compound annual growth rate of 46.4% since January 1, 2005. In addition, we were profitable for the years ended December 31, 2007, 2008 and 2009, and our profitability increased in each of those years.

Market Opportunity

We believe that current macroeconomic conditions will continue to impose financial pressure on healthcare providers and will increase the importance of managing their revenue cycles effectively and efficiently. We estimate that the market opportunity for our services — which we define as the total amount of net patient revenue collected annually by U.S. hospitals and physicians’ billing organizations — exceeds $750 billion. We expect this market opportunity will continue to grow. In addition, the continued operating pressures facing U.S. hospitals coupled with some of the themes underlying current healthcare reform proposals make the efficient management of the revenue cycle and collection of the full amount of payments due for patient services among the most critical challenges facing healthcare providers today.

We believe that the inability of healthcare providers to capture and collect the total amounts owed to them for patient services are caused by the following trends:


	•	Complexity of Revenue Cycle Management. At most hospitals, there is a lack of standardization across operating practices, payor and patient payment methodologies, data management processes and billing systems.

	•	Lack of Integrated Systems and Processes. Although interrelated, the individual steps in the revenue cycle are not operationally integrated across revenue cycle departments at many hospitals.

	•	Increasing Patient Financial Responsibility for Healthcare Services. Hospitals are being forced to adapt to the need for direct-to-patient billing and collections capabilities as patients bear payment responsibility for an increasing portion of healthcare costs; however, we believe most hospitals are not very well prepared to address consumer needs regarding the patient’s payment obligation.

	•	Outdated Systems and Insufficient Resources to Upgrade Them. Many hospitals suffer from operating inefficiencies caused by outdated technology, increasingly complex billing requirements, a general lack of standardization of process and information flow, costly in-house services that could be more economically outsourced, and an increasingly stringent regulatory environment.

The Accretive Health Solution

Our solution is intended to address the full spectrum of revenue cycle operational issues faced by healthcare providers. We believe that our proprietary and integrated technology, management experience and well-developed processes are enhanced by the knowledge and experience we gain

working with a wide range of customers and improve with each payor reimbursement or patient pay transaction. We deliver improved operating margins to our customers by helping them to improve their net revenue yield; increase their charge capture, which involves ensuring that all charges for medical treatment are included in the associated bill; and make their revenue cycle operations more efficient by implementing advanced technologies, streamlining operations and avoiding unnecessary re-work. While improvements in net revenue yield generally represent the majority of a customer’s operating margin improvement, we are able to deliver additional margin improvement through improvements in charge capture and through revenue cycle cost reductions. We typically achieve revenue cycle cost reductions by implementing our proprietary technology and procedures, which reduce manual processes and duplicative work; migrating selected tasks to our shared operating facilities; and transferring certain third-party services, such as Medicaid eligibility review, to our own operations center, which allows us to leverage centralized processing capabilities to perform these tasks more efficiently. Improvements in charge capture are typically attributable to reduced payment denials by payors and identification of additional items that can be billed to payors based on the actual procedures performed. Because our managed service contracts align our interests with those of our customers, we have been able, over time, to improve our margins along with those of our customers.

We employ a variety of techniques intended to achieve our objectives for our customer:


	•	Gathering Complete Patient and Payor Information. We focus on gathering complete patient information and educating the patient as to his or her potential financial responsibilities before receiving care so the services can be recorded and billed to the appropriate parties. Our systems automatically measure the completeness and accuracy of up-front patient profile information and other data, as well as billing and collections throughout the lifecycle of each patient account. Our analyses of these data show that hospitals employing our services have increased the percentage of non-emergency in-patient admissions with complete information profiles to more than 90%, enabling fewer billing delays and reduced billing cycles.

	•	Improving Claims Filing and Third-Party Payor Collections. We implement sophisticated analytics designed to improve claims filing and collection of claims from third-party insurance payors. By employing proprietary algorithms and modeling to determine how hospital staff involved in the revenue cycle should allocate time and resources across a pool of outstanding claims prioritized by level of risk, we can increase the likelihood that patient services will be reimbursed.

	•	Identifying Alternative Payment Sources. We use various methods to find payment sources for uninsured patients and reimbursement for services not covered by third-party insurance. After a typical implementation period, we have been able to help our customers find a third-party payment source for approximately 85% of all admitted patients who identified themselves as uninsured.

	•	Employing Proprietary Technology and Algorithms. Our service offerings employ a variety of proprietary data analytics and predictive modeling algorithms. Our systems are designed to streamline work processes through the use of proprietary algorithms that focus effort on those accounts deemed to have the greatest potential for improving net revenue yield or charge capture.

	•	Using Analytical Capabilities and Operational Excellence. We draw on the experience that we have gained from working with many of the best healthcare provider systems in the United States to train hospital staffs about new and innovative revenue cycle management practices.

Our Strategy

Health System and the Dartmouth-Hitchcock Medical Center. Going forward, our goal is to continue to expand the scope of our services to hospitals within our existing customers’ systems as well as to leverage our strong relationships with reference customers to continue to attract business from new customers. Key elements of our strategy include the following:


	•	delivering tangible, long-term results for our customers by providing services that span the entire revenue cycle;

	•	continuing to develop innovative approaches to increase the collection rate on patient-owed obligations for medical services received;

	•	enhancing and developing proprietary algorithms to identify potential errors and to make process corrections in the collection of reimbursements from third-party payors;

	•	expanding our shared services program;

	•	hiring, training and retaining our personnel;

	•	continuing to diversify our customer base; and

	•	developing enhanced service offerings that offer us long-term opportunities.

Risks Associated with Our Business

Our business is subject to a number of risks which you should be aware of before making an investment decision. Those risks are discussed more fully in “Risk Factors” beginning on page 10. For example:


	•	we may not be able to maintain or increase our profitability, and our recent growth rates may not be indicative of our future growth rates;

	•	hospitals affiliated with Ascension Health account for a majority of our net services revenue;

	•	we face competition from the internal revenue cycle management staff of hospitals as well as from a variety of external participants in the revenue cycle market;

	•	if we are unable to retain our existing customers, or if our customers fail to renew their managed service contracts with us upon expiration, our financial condition will suffer; and

	•	existing and prospective government regulation of the healthcare industry creates risks and challenges for our business.

Corporate Information

We were incorporated in Delaware under the name Healthcare Services, Inc. in July 2003 and changed our name to Accretive Health, Inc. in August 2009. Our principal executive offices are located at 401 North Michigan Avenue, Suite 2700, Chicago, Illinois 60611, and our telephone number is (312) 324-7820. Our website address is www.accretivehealth.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.

Accretive Health, the Accretive Health logo, AHtoAccess, AHtoCharge, AHtoContract, AHtoLink, AHtoPost, AHtoRemit, AHtoScribe, AHtoScribe Administrator, AHtoTrac, A2A, Charge Integrity Services, Medicaid Eligibility Hub, YBFU, Yield-Based Follow Up and other trademarks or service marks of Accretive Health appearing in this prospectus are the property of Accretive Health.

The Offering


Common stock offered by Accretive Health		shares

Common stock offered by the selling stockholders		shares

Common stock to be outstanding after this offering		shares

Use of proceeds		We intend to use approximately $ million of our net proceeds of this offering to pay the preferred stock liquidation preferences that will be paid in cash to the holders of our outstanding preferred stock concurrently with the conversion of such shares into shares of our common stock upon the closing of this offering. We intend to use the remainder of our net proceeds of this offering for general corporate purposes, which may include financing our growth, developing new services and funding capital expenditures, acquisitions and investments. We will not receive any proceeds from the shares sold by the selling stockholders. See “Use of Proceeds” for more information.

Risk Factors		You should read the “Risk Factors” section and other information included in this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

Proposed New York Stock Exchange symbol		“AH”

The number of shares of our common stock to be outstanding after this offering is based on shares of common stock outstanding as of March 31, 2010 after giving effect to the assumptions in the following paragraph, and excludes:


	•	833,334 shares of common stock issuable upon the exercise of warrants outstanding and exercisable as of March 31, 2010 at a weighted-average exercise price of $1.12 per share, which will remain outstanding after this offering if not exercised prior to this offering;


	•	3,897,406 shares of common stock issuable upon the exercise of stock options outstanding and exercisable as of March 31, 2010 at a weighted-average exercise price of $35.43 per share (assuming that options to purchase 1,325,831 shares granted after January 1, 2010 with an exercise price equal to the higher of $57.66 per share or the initial public offering price per share will have an exercise price of $57.66 per share), of which 1,394,008 shares with a weighted average exercise price of $11.88 per share would be vested if purchased upon exercise of these options as of March 31, 2010; and


	•	2,314,571 shares of common stock available for future issuance under our equity compensation plans as of March 31 2010.

Except as otherwise noted, all information in this prospectus:


	•	assumes no exercise by the underwriters of their option to purchase up to an additional shares from us and up to an additional shares from the selling stockholders;


	•	assumes that the shares to be sold in this offering are sold at the initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus;


	•	gives effect to a -for-one split of our common stock to be effected prior to the closing of this offering;

	•	gives effect to the conversion of all outstanding shares of non-voting common stock into shares of voting common stock on a share-for-share basis prior to the closing of this offering;

	•	gives effect to the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus;


	•	gives effect to our issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus;


	•	gives effect to our issuance of shares of common stock to Financial Technology Partners LP and/or FTP Securities, LLC, whom we collectively refer to as FT Partners, contemporaneously with the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering; and


	•	gives effect to the restatement of our certificate of incorporation and amendment and restatement of our bylaws upon the closing of this offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables summarize our consolidated financial data for the periods presented. The summary statements of operations for the three years ended December 31, 2009 and the summary balance sheet as of December 31, 2009 are derived from our audited financial statements for the three years ended December 31, 2009 included elsewhere in this prospectus.

The pro forma balance sheet data as of December 31, 2009 give effect to (1) the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, (2) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (3) the mandatory preferred stock preference payment of $16.1 million payable to the holders of outstanding preferred stock upon the completion of this offering, to be satisfied (based on payment elections received from such holders) through the payment of an aggregate of $ million in cash and the issuance of an aggregate of shares of common stock, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. The pro forma as adjusted balance sheet data as of December 31, 2009 give effect to (1) the items described in the preceding sentence, (2) our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us and the application of the net proceeds therefrom as described in “Use of Proceeds”, (3) our issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, and (4) our issuance of shares of common stock to FT Partners contemporaneously with the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering.

You should read this data together with our consolidated financial statements and related notes included elsewhere in this prospectus and the information under “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.


	Fiscal Year Ended December 31,
	2007			2008			2009
	(In thousands, except share and per share data)

Statement of Operations Data:
Net services revenue	$	240,725		$	398,469		$	510,192
Costs of services		197,676			335,211			410,711

Operating margin		43,049			63,258			99,481

Operating expenses:
Infused management and technology		27,872			39,234			51,763
Selling, general and administrative		15,657			21,227			30,153

Total operating expenses		43,529			60,461			81,916

Income (loss) from operations		(480	)		2,797			17,565
Net interest income (expense)		1,710			710			(9	)

Income before provision for income taxes		1,230			3,507			17,556
Provision for income taxes		456			2,264			2,966

Net income	$	774		$	1,243		$	14,590

Net income (loss) per common share:
Basic:	$	0.04		$	(0.75	)	$	0.68
Diluted:		0.03			(0.75	)	$	0.57


	Fiscal Year Ended December 31,
	2007		2008		2009
	(In thousands, except share and per share data)

Weighted-average shares used in computing net income (loss) per common share:
Basic:		8,410,226		9,214,916		9,368,672
Diluted:		10,296,011		9,214,916		11,213,053


	Fiscal Year Ended December 31,
	2007		2008		2009
Other Operating Data (unaudited):
Adjusted EBITDA (in thousands)(1)	$	6,842	$	12,220	$	32,912

Net patient revenue under management (at period end) (in billions)	$	6.7	$	9.2	$	12.0


	As of December 31, 2009
							Pro Forma
	Actual			Pro Forma			As Adjusted
	(Unaudited)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	43,659		$	43,659
Working capital		(4,122	)		(20,189	)
Total assets		103,472			103,472
Total stockholders’ equity		21,279			5,212


(1)		We define adjusted EBITDA as net income (loss) before net interest income (expense), income tax expense (benefit), depreciation and amortization expense and share-based compensation expense. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net income, operating income and any other measure of financial performance calculated and presented in accordance with GAAP.

		We believe adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:


	•	adjusted EBITDA and similar non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired;

	•	securities analysts often use adjusted EBITDA and similar non-GAAP measures as supplemental measures to evaluate the overall operating performance of companies; and

	•	by comparing our adjusted EBITDA in different historical periods, our investors can evaluate our operating results without the additional variations of interest income (expense), income tax expense (benefit), depreciation and amortization expense and share-based compensation expense.


		Our management uses adjusted EBITDA:


	•	as a measure of operating performance, because it does not include the impact of items that we do not consider indicative of our core operating performance;

	•	for planning purposes, including the preparation of our annual operating budget;


	•	to allocate resources to enhance the financial performance of our business;

	•	to evaluate the effectiveness of our business strategies; and

	•	in communications with our board of directors and investors concerning our financial performance.


		We understand that, although measures similar to adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Some of these limitations are:


	•	adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments;

	•	adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

	•	adjusted EBITDA does not reflect share-based compensation expense;

	•	adjusted EBITDA does not reflect cash requirements for income taxes;

	•	adjusted EBITDA does not reflect net interest income (expense);

	•	although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for these replacements; and

	•	other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.


		To properly and prudently evaluate our business, we encourage you to review the GAAP financial statements included elsewhere in this prospectus, and not to rely on any single financial measure to evaluate our business.

		The following table presents a reconciliation of adjusted EBITDA to net income (loss), the most comparable GAAP measure:


	Fiscal Year Ended December 31,
	2007			2008			2009
	(In thousands)

Net income	$	774		$	1,243		$	14,590
Net interest (income) expense		(1,710	)		(710	)		9
Provision for income taxes		456			2,264			2,966
Depreciation and amortization expense		1,307			2,540			3,921

EBITDA	$	827		$	5,337		$	21,486
Stock compensation expense(b)		934			3,551			6,917
Stock warrant expense(b)		5,081			3,332			4,509

Adjusted EBITDA	$	6,842		$	12,220		$	32,912

(a) Interest income results from earnings associated with our cash and cash equivalents. Interest income declined subsequent to 2007 due to reductions in market interest rates. No debt or other interest-bearing obligations were outstanding during any of the periods presented. Interest expense for 2009 is a result of a $150 origination fee paid in connection with establishing our new revolving line of credit and has been shown net of interest income earned during the year.

(b) Stock compensation expense and stock warrant expense collectively represent the share-based compensation expense reflected in our financial statements. Of the amounts presented above, $928, $921 and $1,736 was classified as a reduction in net services revenue for the years ended December 31, 2007, 2008 and 2009, respectively.

RISK FACTORS

An investment in our common stock involves a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment. When deciding whether to invest in our common stock, you should also refer to the other information in this prospectus, including our consolidated financial statements and related notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.

Risks Related to Our Business and Industry

We may not be able to maintain or increase our profitability, and our recent growth rates may not be indicative of our future growth rates.

We have been profitable on an annual basis only since the year ended December 31, 2007, and we incurred net losses in the quarters ended March 31, 2007, December 31, 2007, March 31, 2008, December 31, 2008 and March 31, 2009. We may not succeed in maintaining our profitability on an annual basis and could incur quarterly or annual losses in future periods. We expect to incur additional operating expenses associated with being a public company and we intend to continue to increase our operating expenses as we grow our business. We also expect to continue to make investments in our proprietary technology applications, sales and marketing, infrastructure, facilities and other resources as we expand our operations, thus incurring additional costs. If our revenue does not increase to offset these increases in costs, our operating results would be negatively affected. You should not consider our historic revenue and net income growth rates as indicative of future growth rates. Accordingly, we cannot assure you that we will be able to maintain or increase our profitability in the future. Each of the risks described in this “Risk Factors” section, as well as other factors, may affect our future operating results and profitability.

Hospitals affiliated with Ascension Health currently account for a majority of our net services revenue, and we have several customers that have each accounted for 10% or more of our net services revenue in past fiscal periods. The termination of our master services agreement with Ascension Health, or any significant loss of business from our large customers, would have a material adverse effect on our business, results of operations and financial condition.

We are party to a master services agreement with Ascension Health pursuant to which we provide services to its affiliated hospitals that execute separate managed service contracts with us. Hospitals affiliated with Ascension Health have accounted for a majority of our net services revenue each year since our formation. In the years ended December 31, 2007, 2008 and 2009, aggregate revenue from hospitals affiliated with Ascension Health were $214.2 million, $281.7 million and $307.5 million, respectively, representing 89.0%, 70.7% and 60.3% of our net services revenue in such years. In some fiscal periods, individual hospitals affiliated with Ascension Health have each accounted for 10% or more of our total net services revenue. For example, in the year ended December 31, 2009, revenue from St. John Health (an affiliate of Ascension Health) was $66.5 million, equal to 13.0% of our total net services revenue. In addition, another customer, which is not affiliated with Ascension Health, accounted for 10.6% of our total net services revenue in the year ended December 31, 2008 but less than 10% of our total net services revenue in the year ended December 31, 2009.

All of our managed service contracts with hospitals affiliated with Ascension Health will expire on December 31, 2012 unless renewed. Pursuant to our master services agreement with Ascension Health and our managed service contracts with hospitals affiliated with Ascension Health, our fees are subject to adjustment in the event quarterly cash collections at these hospitals deteriorate materially after we take over revenue cycle management operations. While these adjustments have never been

triggered, if they were, our future fees from hospitals affiliated with Ascension Health would be reduced. In addition, any of our other customers, including hospitals affiliated with Ascension Health, can elect not to renew their managed service contracts with us upon expiration. We intend to seek renewal of all managed service contracts with our customers, but cannot assure you that all of them will be renewed or that the terms upon which they may be renewed will be as favorable to us as the terms of the initial managed service contracts.

Our inability to renew the managed service contracts with hospitals affiliated with Ascension Health, the termination of our master services agreement with Ascension Health, the loss of any of our other large customers or their failure to renew their managed service contracts with us upon expiration, or a reduction in the fees for our services for these customers would have a material adverse effect on our business, results of operations and financial condition.

Our master services agreement with Ascension Health requires us to offer to Ascension Health’s affiliated hospitals service fees that are at least as low as the fees we charge any other similarly situated customer receiving comparable services at comparable volumes.

Our master services agreement with Ascension Health requires us to offer to Ascension Health’s affiliated hospitals fees for our services that are at least as low as the fees we charge any other similarly-situated customer receiving comparable services at comparable volumes. If we were to offer another similarly-situated customer receiving a comparable volume of comparable services fees that are lower than the fees paid by hospitals affiliated with Ascension Health, we would be obligated to offer such lower fees to hospitals affiliated with Ascension Health, which could have a material adverse effect on our results of operations and financial condition.

Our agreements with hospitals affiliated with Ascension Health and with some other customers include provisions that could impede or delay our ability to enter into managed service contracts with new customers.

Under the terms of our master services agreement with Ascension Health, we are required to consult with Ascension Health’s affiliated hospitals before undertaking services for competitors specified by them in the managed service contracts they execute with us. As a result, before we can begin to provide services to a specified competitor, we are required to inform and discuss the situation with the Ascension Health affiliated hospital that specified the competitor but are not required to obtain the consent of such hospital. In addition, we are required to obtain the consent of one customer not affiliated with Ascension Health before providing services to competitors specified by such customer. In another instance, our managed service contract with one other customer not affiliated with Ascension Health requires us to consult with such customer before providing services to competitors specified by such customer. The obligations described above could impede or delay our ability to enter into managed service contracts with new customers.

The market for integrated revenue cycle management services that span the entire revenue cycle may develop more slowly than we expect, which could adversely affect our revenue and our ability to maintain or increase our profitability.

Our success depends, in part, on the willingness of hospitals, physicians and other healthcare providers to implement integrated solutions that span the entire revenue cycle, which encompasses patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. Some hospitals may be reluctant or unwilling to implement our solution for a number of reasons, including failure to perceive the need for improved revenue cycle operations and lack of knowledge about the potential benefits our solution provides. Even if potential customers recognize the need for improved revenue cycle operations, they may not select an integrated, end-to-end revenue cycle solution such as ours because they previously have made investments in internally developed solutions and choose to continue to rely on their own internal revenue cycle management staff. As a result, the market for integrated, end-to-end revenue cycle

solutions may develop more slowly than we expect, which could adversely affect our revenue and our ability to maintain or increase our profitability.

We operate in a highly competitive industry, and our current or future competitors may be able to compete more effectively than we do, which could have a material adverse effect on our business, revenue, growth rates and market share.

The market for revenue cycle management solutions is highly competitive and we expect competition to intensify in the future. We face competition from a steady stream of new entrants, including the internal revenue cycle management staff of hospitals, as described above, and external participants. External participants that are our competitors in the revenue cycle market include software vendors and other technology-supported revenue cycle management business process outsourcing companies; traditional consultants; and information technology outsourcers. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, regulations or customer requirements. We may not be able to compete successfully with these companies, and these or other competitors may introduce technologies or services that render our technologies or services obsolete or less marketable. Even if our technologies and services are more effective than the offerings of our competitors, current or potential customers might prefer competitive technologies or services to our technologies and services. Increased competition is likely to result in pricing pressures, which could negatively impact our margins, growth rate or market share.

If we are unable to retain our existing customers, our financial condition will suffer.

Our success depends in part upon the retention of our customers, particularly Ascension Health and its affiliated hospitals. We derive our net services revenue primarily from managed service contracts pursuant to which we receive base fees and incentive payments. Customers can elect not to renew their managed service contracts with us upon expiration. If a managed service contract is not renewed or is terminated for any reason, including for example, if we are found to be in violation of any federal or state fraud and abuse laws or excluded from participating in federal and state healthcare programs such as Medicare and Medicaid, we will not receive the payments we would have otherwise received over the life of contract. In addition, financial issues or other changes in customer circumstances, such as a customer change in control, may cause us or the customer to seek to modify or terminate a managed service contract, and either we or the customer may generally terminate a contract for material uncured breach by the other. If we breach a managed service contract or fail to perform in accordance with contractual service levels, we may also be liable to the customer for damages. Any of these events could adversely affect our business, financial condition, operating results and cash flows.

We face a variable selling cycle to secure new managed service contracts, making it difficult to predict the timing of specific new customer relationships.

We face a variable selling cycle, typically spanning six to twelve months, to secure a new managed service contract. Even if we succeed in developing a relationship with a potential new customer, we may not be successful in entering into a managed service contract with that customer. In addition, we cannot accurately predict the timing of entering into managed service contracts with new customers due to the complex procurement decision processes of most healthcare providers, which often involves high-level or committee approvals. Consequently, we have only a limited ability to predict the timing of specific new customer relationships.

Delayed or unsuccessful implementation of our technologies or services with our customers or implementation costs that exceed our expectations may harm our financial results.

To implement our solution, we utilize the customer’s existing revenue cycle management and staff and layer our proprietary technology tools on top of the customer’s existing patient accounting system. Each customer’s situation is different, and unanticipated difficulties and delays may arise. If

the implementation process is not executed successfully or is delayed, our relationship with the customer may be adversely affected and our results of operations could suffer. Implementation of our solution also requires us to integrate our own employees into the customer’s operations. The customer’s circumstances may require us to devote a larger number of our employees than anticipated, which could increase our costs and harm our financial results.

Our quarterly results of operations may fluctuate as a result of factors that may impact our incentive and base fees, some of which may be outside of our control.

We recognize base fee revenue on a straight-line basis over the life of the managed service contract. Base fees for contracts which are received in advance of services delivered are classified as deferred revenue until services have been provided. Our managed service contracts generally allow for adjustments to the base fee. Adjustments typically occur at 90, 180 or 360 days after the contract commences, but can also occur at subsequent dates as a result of factors including changes to the scope of operations and internal and external audits. In addition, our fees from hospitals affiliated with Ascension Health are subject to adjustment in the event quarterly cash collections at these hospitals deteriorate materially after we take over revenue cycle management operations. While these adjustments have never been triggered, if they were, our future fees from hospitals affiliated with Ascension Health would be reduced. Further, estimates of the incentive payments we have earned from providing services to customers in prior periods could change because the laws, regulations, instructions, payor contracts and rule interpretations governing how our customers receive payments from payors are complex and change frequently. Any such change in estimates could be material. The timing of such adjustments is often dependent on factors outside of our control and may result in material increases or decreases in our revenue and operating margin. Any such changes or adjustments may cause our quarter-to-quarter results of operations to fluctuate.

If we lose key personnel or if we are unable to attract, hire, integrate and retain key personnel and other necessary employees, our business would be harmed.

Our future success depends in part on our ability to attract, hire, integrate and retain key personnel. Our future success also depends on the continued contributions of our executive officers and other key personnel, each of whom may be difficult to replace. In particular, Mary A. Tolan, our president and chief executive officer, is critical to the management of our business and operations and the development of our strategic direction. The loss of services of Ms. Tolan or any of our other executive officers or key personnel or the inability to continue to attract qualified personnel could have a material adverse effect on our business. The replacement of any of these key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives. Competition for the caliber and number of employees we require is intense. We may face difficulty identifying and hiring qualified personnel at compensation levels consistent with our existing compensation and salary structure. In addition, we invest significant time and expense in training each of our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring, integrating and training their replacements and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.

The imposition of legal responsibility for obligations related to our employees or our customers’ employees could adversely affect our business or subject us to liability.

Under our contracts with customers, we directly manage our customers’ employees engaged in revenue cycle activities. Our managed service contracts establish the division of responsibilities between us and our customers for various personnel management matters, including compliance with and liability under various employment laws and regulations. We could, nevertheless, be found to have liability with our customers for actions against or by employees of our customers, including under various employment laws and regulations, such as those relating to discrimination, retaliation, wage and hour matters, occupational safety and health, family and medical leave, notice of facility closings and

layoffs and labor relations, as well as similar liability with respect to our own employees, and any such liability could result in a material adverse effect on our business.

If we fail to manage future growth effectively, our business would be harmed.

We have expanded our operations significantly since inception and anticipate expanding further. For example, our net services revenue increased from $111.2 million in 2005 to $510.2 million in 2009, and the number of our full-time employees increased from 33 as of January 1, 2005 to 1,802 as of March 31, 2010. In addition, the number of customer employees whom we manage has increased from approximately 1,600 as of January 1, 2005 to approximately 6,300 as of March 31, 2010. This growth has placed significant demands on our management, infrastructure and other resources. To manage future growth, we will need to hire, integrate and retain highly skilled and motivated employees, and will need to effectively manage a growing number of customer employees engaged in revenue cycle operations. We will also need to continue to improve our financial and management controls, reporting systems and procedures. If we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements or maintain high-quality service offerings.

Disruptions in service or damage to our data centers and shared services centers could adversely affect our business.

Our data centers and shared services centers are essential to our business. Our operations depend on our ability to operate our shared service centers, and to maintain and protect our applications, which are located in data centers that are operated for us by third parties. We cannot control or assure the continued or uninterrupted availability of these third party data centers. In addition, our information technologies and systems, as well as our data centers and shared services centers, are vulnerable to damage or interruption from various causes, including (i) acts of God and other natural disasters, war and acts of terrorism and (ii) power losses, computer systems failures, Internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. We conduct business continuity planning and maintain insurance against fires, floods, other natural disasters and general business interruptions to mitigate the adverse effects of a disruption, relocation or change in operating environment at one of our data centers or shared services centers, but the situations we plan for and the amount of insurance coverage we maintain may not be adequate in any particular case. In addition, the occurrence of any of these events could result in interruptions, delays or cessations in service to our customers, or in interruptions, delays or cessations in the direct connections we establish between our customers and third-party payors. Any of these events could impair or prohibit our ability to provide our services, reduce the attractiveness of our services to current or potential customers and adversely impact our financial condition and results of operations.

In addition, despite the implementation of security measures, our infrastructure, data centers, shared services centers or systems that we interface with, including the Internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, denial-of-service attacks or other attacks by third parties seeking to disrupt operations or misappropriate information or similar physical or electronic breaches of security. Any of these can cause system failure, including network, software or hardware failure, which can result in service disruptions. As a result, we may be required to expend significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by such breaches.

If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as not being secure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.

Our services involve the storage and transmission of customers’ proprietary information and protected health, financial, payment and other personal information of patients. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information, and because of the sensitivity of this information, the effectiveness of such security efforts is very important. The systems currently used for transmission and approval of credit card transactions, and the technology utilized in credit cards themselves, all of which can put credit card data at risk, are determined and controlled by the payment card industry, not by us. If our security measures are breached or fail as a result of third-party action, employee error, malfeasance or otherwise, someone may be able to obtain unauthorized access to customer or patient data. Improper activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our computer systems. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, and we may be unable to anticipate these techniques or to implement adequate preventive measures. Our security measures may not be effective in preventing these types of activities, and the security measures of our third-party data centers and service providers may not be adequate. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.

We may be liable to our customers or third parties if we make errors in providing our services, and our anticipated net services revenue may be lower if we provide poor service.

The services we offer are complex, and we make errors from time to time. Errors can result from the interface of our proprietary technology tools and a customer’s existing patient accounting system, or we may make human errors in any aspect of our service offerings. The costs incurred in correcting any material errors may be substantial and could adversely affect our operating results. Our customers, or third parties such as our customers’ patients, may assert claims against us alleging that they suffered damages due to our errors, and such claims could subject us to significant legal defense costs and adverse publicity regardless of the merits or eventual outcome of such claims. In addition, if we provide poor service to a customer and the customer therefore realizes less improvement in revenue yield, the incentive fee payments to us from that customer will be lower than anticipated.

We offer our services in many jurisdictions and, therefore, may be subject to state and local taxes that could harm our business or that we may have inadvertently failed to pay.

We may lose sales or incur significant costs should various tax jurisdictions be successful in imposing taxes on a broader range of services. Imposition of such taxes on our services could result in substantial unplanned costs, would effectively increase the cost of such services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed. For example, in 2008 Michigan began to impose a tax based on gross receipts in addition to tax based on net income. For the year ended December 31, 2009, we recorded a tax provision of $3.0 million, of which $1.5 million was attributable to the Michigan gross receipts tax.

Our growing operations in India expose us to risks that could have an adverse effect on our costs of operations.

We employ a significant number of persons in India and expect to continue to add personnel in India. While there are cost advantages to operating in India, significant growth in the technology sector in India has increased competition to attract and retain skilled employees and has led to a commensurate increase in compensation costs. In the future, we may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure in India. In addition, our reliance on a workforce in India exposes us to disruptions in the business, political and economic environment in that region. Maintenance of a stable political environment is important to our operations, and terrorist attacks and acts of violence or war may directly affect our physical facilities and workforce or contribute to general instability. Our operations in India require us to comply with local laws and regulatory requirements, which are complex and of which we may not always be aware, and expose us to foreign currency exchange rate risk. Our Indian operations may also subject us to trade restrictions, reduced or inadequate protection for intellectual property rights, security breaches and other factors that may adversely affect our business. Negative developments in any of these areas could increase our costs of operations or otherwise harm our business.

Negative public perception in the United States regarding offshore outsourcing and proposed legislation may increase the cost of delivering our services.

Offshore outsourcing is a politically sensitive topic in the United States. For example, various organizations and public figures in the United States have expressed concern about a perceived association between offshore outsourcing providers and the loss of jobs in the United States. In addition, there has been recent publicity about the negative experience of certain companies that use offshore outsourcing, particularly in India. Current or prospective customers may elect to perform such services themselves or may be discouraged from transferring these services from onshore to offshore providers to avoid negative perceptions that may be associated with using an offshore provider. Any slowdown or reversal of existing industry trends towards offshore outsourcing would increase the cost of delivering our services if we had to relocate aspects of our services from India to the United States where operating costs are higher.

Legislation in the United States may be enacted that is intended to discourage or restrict offshore outsourcing. In the United States, federal and state legislation has been proposed, and enacted in several states, that could restrict or discourage U.S. companies from outsourcing their services to companies outside the United States. For example, legislation has been proposed that would require offshore providers to identify where they are located. In addition, legislation has been enacted in at least one state that requires that state contracts for services be performed within the United States, while several other states provide a preference to state contracts that are performed within the state. It is possible that legislation could be adopted that would restrict U.S. private sector companies that have federal or state government contracts, or that receive government funding or reimbursement, such as Medicare or Medicaid payments, from outsourcing their services to offshore service providers. Any changes to existing laws or the enactment of new legislation restricting offshore outsourcing in the United States may adversely affect our ability to do business, particularly if these changes are widespread, and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Regulatory Risks

The healthcare industry is heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business.

The healthcare industry is heavily regulated and is subject to changing political, legislative, regulatory and other influences. Many healthcare laws are complex, and their application to specific

services and relationships may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the services that we provide. There can be no assurance that our operations will not be challenged or adversely affected by enforcement initiatives. Our failure to accurately anticipate the application of these laws and regulations to our business, or any other failure to comply with regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business. Federal and state legislatures and agencies periodically consider proposals to revise aspects of the healthcare industry or to revise or create additional statutory and regulatory requirements. Such proposals, if implemented, could impact our operations, the use of our services and our ability to market new services, or could create unexpected liabilities for us. We are unable to predict what changes to laws or regulations might be made in the future or how those changes could affect our business or our operating costs.

Developments in the healthcare industry, including national healthcare reform, could adversely affect our business.

The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. The timing and impact of developments in the healthcare industry are difficult to predict. We cannot be sure that the markets for our services will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets. The federal healthcare reform legislation (known as the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010) that was enacted in March 2010 could, for example, encourage more companies to enter our market, provide advantages to our competitors and result in the development of solutions that compete with ours. Moreover, healthcare reform remains a major policy issue at the federal level, and additional healthcare legislation in the future could have adverse consequences for us or the customers we serve.

If a breach of our measures protecting personal data covered by the Health Insurance Portability and Accountability Act or Health Information Technology for Economic and Clinical Health Act occurs, we may incur significant liabilities.

The Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations that have been issued under it, which we refer to collectively as HIPAA, contain substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. In February 2009 HIPAA was amended by the Health Information Technology for Economic and Clinical Health, or HITECH, Act to add provisions that will, beginning in 2010, impose certain of the HIPAA privacy and security requirements directly upon business associates of covered entities. New regulations that took effect in late 2009 require both covered entities and their business associates to notify individuals and government authorities of data security breaches involving unsecured protected health information. We may be viewed as a business associate of a covered entity under HIPAA and the HITECH Act. We have implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security incidents. A knowing breach of the HITECH Act’s requirements could expose us to criminal liability. A breach of our safeguards and processes that is not due to reasonable cause or involves willful neglect could expose us to civil penalties and the possibility of civil litigation.

If we fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.

A number of federal and state laws, including anti-kickback restrictions and laws prohibiting the submission of false or fraudulent claims, apply to healthcare providers, physicians and others that make, offer, seek or receive referrals or payments for products or services that may be paid for through any federal or state healthcare program and, in some instances, any private program. These laws are complex and their application to our specific services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Federal and state regulatory and law enforcement authorities have recently increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other healthcare reimbursement laws and rules. From time to time, participants in the healthcare industry receive inquiries or subpoenas to produce documents in connection with government investigations. We could be required to expend significant time and resources to comply with these requests, and the attention of our management team could be diverted by these efforts. Furthermore, if we are found to be in violation of any federal or state fraud and abuse laws, we could be subject to civil and criminal penalties, and we could be excluded from participating in federal and state healthcare programs such as Medicare and Medicaid. The occurrence of any of these events could give our customers the right to terminate our managed service contracts with them and result in significant harm to our business and financial condition.

The federal anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Many states have adopted similar prohibitions against kickbacks and other practices that are intended to induce referrals, and some of these state laws are applicable to all patients regardless of whether the patient is covered under a governmental health program or private health plan. We evaluate our business relationships and activities to comply with the federal anti-kickback statute and similar laws, and we seek to structure our financial arrangements in a manner that is consistent with the requirements of applicable safe harbors to these laws. We cannot assure you, however, that our arrangements will be protected by such safe harbors or that such increased enforcement activities will not directly or indirectly have an adverse effect on our business financial condition or results of operations. Any determination by a federal or state agency that any of our activities or those of our vendors or customers violate any of these laws could subject us to civil or criminal penalties, could require us to change or terminate some portions of our operations or business, could disqualify us from providing services to healthcare providers doing business with government programs, could give our customers the right to terminate our managed service contracts with them and, thus, could have a material adverse effect on our business and results of operations.

There are also numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection with the submission and payment of physician claims for reimbursement. In particular, the federal False Claims Act, or the FCA, prohibits a person from knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval by an officer, employee or agent of the United States. In addition, the FCA prohibits a person from knowingly making, using, or causing to be made or used a false record or statement material to such a claim. Violations of the FCA may result in treble damages, significant monetary penalties, and other collateral consequences including, potentially, exclusion from participation in federally funded healthcare programs. The scope and implications of the recent amendments pursuant to the Fraud Enforcement and Recovery Act of 2009, or FERA, have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business. Pursuant to the healthcare reform legislation enacted in March 2010, a claim that includes items or

services resulting from a violation of the federal anti-kickback law constitutes a false or fraudulent claim for purposes of the FCA.

These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. Errors created by our proprietary tools or services that relate to entry, formatting, preparation or transmission of claim or cost report information may be determined or alleged to be in violation of these laws and regulations. Any failure of our proprietary tools or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our managed service contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our base fee revenues and incentive payment revenues, cause us to be disqualified from serving customers doing business with government payers, and give our customers the right to terminate our managed service contracts with them, any one of which could have an adverse effect on our business.

Our failure to comply with debt collection and consumer credit reporting regulations could subject us to fines and other liabilities, which could harm our reputation and business.

The U.S. Fair Debt Collection Practices Act, or FDCPA, regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed or asserted to be owed to another person. Certain of our accounts receivable activities may be subject to the FDCPA. Many states impose additional requirements on debt collection communications, and some of those requirements may be more stringent than the comparable federal requirements. Moreover, regulations governing debt collection are subject to changing interpretations that may be inconsistent among different jurisdictions. We are also subject to the Fair Credit Reporting Act, or FCRA, which regulates consumer credit reporting and which may impose liability on us to the extent that the adverse credit information reported on a consumer to a credit bureau is false or inaccurate. We could incur costs or could be subject to fines or other penalties under the FCRA if the Federal Trade Commission determines that we have mishandled protected information. We or our customers could be required to report such breaches to affected consumers or regulatory authorities, leading to disclosures that could damage our reputation or harm our business, financial position and operating results.

Potential additional regulation of the disclosure of health information outside the United States may increase our costs.

Federal or state governmental authorities may impose additional data security standards or additional privacy or other restrictions on the collection, use, transmission and other disclosures of health information. Legislation has been proposed at various times at both the federal and the state levels that would limit, forbid or regulate the use or transmission of medical information pertaining to U.S. patients outside of the United States. Such legislation, if adopted, may render our operations in India impracticable or substantially more expensive. Moving such operations to the United States may involve substantial delay in implementation and increased costs.

Risks Related to Intellectual Property

We may be unable to adequately protect our intellectual property.

Our success depends, in part, upon our ability to establish, protect and enforce our intellectual property and other proprietary rights. If we fail to establish or protect our intellectual property rights, we may lose an important advantage in the market in which we compete. We rely upon a combination of patent, trademark, copyright and trade secret law and contractual terms and conditions to protect our intellectual property rights, all of which provide only limited protection. We cannot assure you that our intellectual property rights are sufficient to protect our competitive advantages. Although we have filed four U.S. patent applications, we cannot assure you that any patents that will be issued from these applications will provide us with the protection that we seek or that any future patents issued to

us will not be challenged, invalidated or circumvented. We have also been issued one U.S. patent, but we cannot assure you that it will provide us with the protection that we seek or that it will not be challenged, invalidated or circumvented. Legal standards relating to the validity, enforceability and scope of protection of patents are uncertain. Any patents that may be issued in the future from pending or future patent applications or our one issued patent may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers. Also, we cannot assure you that any trademark registrations will be issued for pending or future applications or that any of our trademarks will be enforceable or provide adequate protection of our proprietary rights.

We also rely in some circumstances on trade secrets to protect our technology. Trade secrets may lose their value if not properly protected. We endeavor to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. The steps we have taken, however, may not prevent unauthorized use of our technology, and adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and proprietary technology. Moreover, others may reverse engineer or independently develop technologies that are competitive to ours or infringe our intellectual property.

Accordingly, despite our efforts, we may be unable to prevent third parties from infringing or misappropriating our intellectual property and using our technology for their competitive advantage. Any such infringement or misappropriation could have a material adverse effect on our business, results of operations and financial condition. Monitoring infringement of our intellectual property rights can be difficult and costly, and enforcement of our intellectual property rights may require us to bring legal actions against infringers. Infringement actions are inherently uncertain and therefore may not be successful, even when our rights have been infringed, and even if successful may require a substantial amount of resources and divert our management’s attention.

Claims by others that we infringe their intellectual property could force us to incur significant costs or revise the way we conduct our business.

Our competitors protect their intellectual property rights by means such as patents, trade secrets, copyrights and trademarks. We have not conducted an independent review of patents issued to third parties. Additionally, because patent applications in the United States and many other jurisdictions are kept confidential for 18 months before they are published, we may be unaware of pending patent applications that relate to our proprietary technology. Although we have not been involved in any litigation related to intellectual property rights of others, from time to time we receive letters from other parties alleging, or inquiring about, possible breaches of their intellectual property rights. Any party asserting that we infringe its proprietary rights would force us to defend ourselves, and possibly our customers, against the alleged infringement. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights or interruption or cessation of our operations. The software and technology industries are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Moreover, the risk of such a lawsuit will likely increase as our size and scope of our services and technology platforms increase, as our geographic presence and market share expand and as the number of competitors in our market increases. Any such claims or litigation could:


	•	be time-consuming and expensive to defend, whether meritorious or not;

	•	require us to stop providing the services that use the technology that infringes the other party’s intellectual property;

	•	divert the attention of our technical and managerial resources;

	•	require us to enter into royalty or licensing agreements with third parties, which may not be available on terms that we deem acceptable, if at all;


	•	prevent us from operating all or a portion of our business or force us to redesign our services and technology platforms, which could be difficult and expensive and may make the performance or value of our service offerings less attractive;

	•	subject us to significant liability for damages or result in significant settlement payments; or

	•	require us to indemnify our customers as we are required by contract to indemnify some of our customers for certain claims based upon the infringement or alleged infringement of any third party’s intellectual property rights resulting from our customers’ use of our intellectual property.

Intellectual property litigation can be costly. Even if we prevail, the cost of such litigation could deplete our financial resources. Litigation is also time-consuming and could divert management’s attention and resources away from our business. Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could significantly limit our ability to continue our operations and could harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our operating results and financial condition.

Risks Related to this Offering and Ownership of Shares of Our Common Stock

The trading price of our common stock is likely to be volatile, and you may not be able to sell your shares at or above the initial public offering price.

Our common stock has no prior trading history, and an active public market for these shares may not develop or be sustained after this offering. The initial public offering price for our common stock will be determined through negotiations with the representatives of the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, the trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors. In addition to the risks described in this section, factors that may cause the market price of our common stock to fluctuate include:


	•	fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

	•	changes in estimates of our financial results or recommendations by securities analysts;

	•	investors’ general perception of us; and

	•	changes in general economic, industry and market conditions.

In addition, if the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations.

Some companies that have had volatile market prices for their securities have had securities class actions filed against them. If a suit were filed against us, regardless of its merits or outcome, it would likely result in substantial costs and divert management’s attention and resources. This could have a material adverse effect on our business, operating results and financial condition.

Our securities have no prior market and our stock price may decline after the offering.

Prior to this offering, there has been no public market for shares of our common stock. Although we have applied to list our common stock on the New York Stock Exchange, an active public trading

market for our common stock may not develop or, if it develops, may not be maintained after this offering. For example, the New York Stock Exchange imposes certain securities trading requirements, including minimum trading price, minimum number of stockholders and minimum market capitalization. Our company and the representatives of the underwriters will negotiate to determine the initial public offering price. The initial public offering price may be higher than the trading price of our common stock following this offering. As a result, you could lose all or part of your investment.

Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual lock-up agreements described below expire and other restrictions on resale lapse, the trading price of our common stock could decline below the initial public offering price. Based on shares outstanding as of March 31, 2010, upon the closing of this offering, we will have outstanding shares of common stock. Of these shares, shares of common stock will be eligible for sale in the public market and shares of common stock will be subject to a 180-day contractual lock-up with the underwriters. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, acting as representatives of the underwriters, may permit our officers, directors, employees and current stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements. Upon expiration of the contractual lock-up agreements with the underwriters, and based on shares outstanding as of March 31, 2010, an additional shares will be eligible for sale in the public market.

Some of our existing stockholders have demand and incidental registration rights to require us to register with the SEC up to shares of our common stock. If we register these shares of common stock, the stockholders would be able to sell those shares freely in the public market.

See “Shares Eligible for Future Sale” for further details regarding the number of shares eligible for sale in the public market after this offering.

Insiders will continue to have substantial control over us after this offering and will be able to determine substantially all matters requiring stockholder approval.

Upon the closing of this offering, our directors and executive officers and their affiliates will beneficially own, in the aggregate, approximately % of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional shares. As a result, these stockholders will be able to determine substantially all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third-party from acquiring control over us. For information regarding the ownership of our outstanding stock by our executive officers and directors and their affiliates, see “Principal and Selling Stockholders”.

You will experience substantial dilution as a result of this offering and future equity issuances.

The initial public offering price per share is substantially higher than the pro forma net tangible book value per share of our common stock outstanding prior to this offering. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $ per share. In addition, we have issued options to acquire common stock at prices significantly below the initial public offering price. To the extent outstanding options are ultimately exercised, there will be further dilution to investors in this offering. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of common stock. In addition, if the underwriters exercise their option to purchase additional shares from us, if outstanding warrants to purchase our common stock are exercised or if we issue additional equity securities, you will experience additional dilution.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our restated certificate of incorporation and amended and restated bylaws, which will be in effect upon the closing of this offering:


	•	authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt;

	•	establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;

	•	require that directors only be removed from office for cause and only upon a supermajority stockholder vote;

	•	provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

	•	limit who may call special meetings of stockholders;

	•	prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and

	•	require supermajority stockholder voting to effect certain amendments to our restated certificate of incorporation and amended and restated bylaws.

For additional information regarding these and other anti-takeover provisions, see “Description of Capital Stock — Anti-Takeover Effects of Our Charter and Bylaws and Delaware Law”.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future following the closing of this offering.

Although we paid cash dividends on our capital stock in July 2008 and September 2009, we do not expect to pay cash dividends on our common stock in the foreseeable future following the closing of this offering. Any future dividend payments will be within the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. In addition, our revolving credit facility does not permit us to pay dividends without the lender’s prior consent. We may not generate sufficient cash from operations in the future to pay dividends on our common stock. See “Dividend Policy”.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:


	•	our ability to attract and retain customers;

	•	our financial performance;

	•	the advantages of our solution as compared to those of others;

	•	our new quality/cost service initiative;

	•	our ability to establish and maintain intellectual property rights;

	•	our ability to retain and hire necessary employees and appropriately staff our operations; and

	•	our estimates regarding capital requirements and needs for additional financing.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

INDUSTRY AND MARKET DATA

We obtained the industry and market data in this prospectus from our own research as well as from industry and general publications, surveys and studies conducted by third parties. Industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $ million, or $ million if the underwriters fully exercise their option to purchase additional shares from us, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, and after deducting the estimated underwriting discount and offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.

A $1.00 increase (decrease) in the assumed initial public offering price of $ , the midpoint of the estimated price range shown on the cover of this prospectus, would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.

We intend to use approximately $ million of our net proceeds of this offering to pay the preferred stock liquidation preferences that will be paid in cash to the holders of our outstanding preferred stock concurrently with the conversion of such shares into shares of our common stock upon the closing of this offering. See “Related Person Transactions — Preferred Stock Liquidation Preferences” for more information. We intend to use the remainder of our net proceeds of this offering for general corporate purposes, which may include financing our growth, developing new services and funding capital expenditures, acquisitions and investments. In addition, the other principal purposes for this offering are to:


	•	increase our visibility in the markets we serve;

	•	strengthen our balance sheet and increase the likelihood that we remain debt-free;

	•	create a public market for our common stock;

	•	facilitate our future access to the public capital markets;

	•	provide liquidity for our existing stockholders;

	•	improve the effectiveness of our equity compensation plans in attracting and retaining key employees; and

	•	enhance our ability to acquire complementary businesses or technologies.

Except for the preferred stock liquidation preference payments described above, we have not yet determined with any certainty the manner in which we will allocate our net proceeds. Our management will retain broad discretion in the allocation and use of our net proceeds of this offering. The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments, and the rate of growth, if any, of our business. For example, if we were to expand our operations more rapidly than anticipated by our current plans, a greater portion of the proceeds would likely be used for the development or enhancement of our proprietary technologies. Alternatively, if we were to engage in an acquisition that required a significant cash outlay, some or all of the proceeds might be used for that purpose.

Although we may use a portion of the proceeds for the acquisition of, or investment in, companies, technologies or assets that complement our business, we have no present understandings, commitments or agreements to enter into any acquisitions or make any material investments. We cannot assure you that we will make any acquisitions or investments in the future.

Pending specific utilization of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term investment grade and U.S. government securities.

DIVIDEND POLICY

We declared a cash dividend in the aggregate amount of $15.0 million, or $0.7203 per common-equivalent share, to holders of record as of July 11, 2008 of our common stock and preferred stock. We declared an additional cash dividend in the aggregate amount of $14.9 million, or $0.72 per common equivalent share, to holders of record as of September 1, 2009 of our common stock and preferred stock.

We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future following the closing of this offering. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments, provisions of applicable law, and other factors the board deems relevant. In 2009, we entered into a $15 million revolving line of credit, which does not permit us to pay any future dividends without the lender’s prior consent.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2009:


	•	on an actual basis;


	•	on a pro forma basis to reflect (1) the -for-one split of our common stock to be effected prior to the closing of this offering, (2) the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, (3) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (4) the mandatory preferred stock preference payment of $16.1 million payable to the holders of outstanding preferred stock upon the completion of this offering, to be satisfied (based on payment elections received from such holders) through the payment of an aggregate of $ million in cash and the issuance of an aggregate of shares of common stock, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.


	•	on a pro forma as adjusted basis to reflect (1) the items described in the preceding bullet, (2) our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us and the application of the net proceeds therefrom as described in “Use of Proceeds”, (3) our issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, and (4) our issuance of shares of common stock to FT Partners contemporaneously with the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering.

You should read this table together with our financial statements and the related notes appearing at the end of this prospectus and the “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.


	December 31, 2009
					Pro forma
	Actual		Pro forma		as adjusted
			(Unaudited)
	(In thousands, except share and per share amounts)
Cash and cash equivalents	$	43,659	$	43,659

Stockholders’ equity:
Convertible preferred stock, $0.01 par value; 1,350,000(1) shares authorized and issuable in series, 1,299,541 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		13		—		—

Preferred stock, $0.01 par value; no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted		—		—		—


	December 31, 2009
							Pro forma
	Actual			Pro forma			as adjusted
				(Unaudited)
	(In thousands, except share and per share amounts)
Common stock, $0.01 par value:
Voting common stock, 17,500,000 shares authorized, 8,203,299 shares issued and outstanding, actual; 17,500,000 shares authorized, no shares issued or outstanding, pro forma; no shares authorized, issued or outstanding, pro forma as adjusted		82			—
Non-voting common stock, 8,000,000 shares authorized, 1,341,257 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted		13			—			—

Common stock, $0.01 par value; no shares authorized, issued or outstanding, actual; shares authorized, shares issued and outstanding as of December 31, 2009, pro forma and pro forma as adjusted					108
Additional paid-in capital		51,777			35,710
Non-executive employee loans for stock option exercises		(120	)		(120	)
Accumulated deficit		(30,452	)		(30,452	)
Cumulative translation adjustment		(34	)		(34	)

Total stockholders’ equity		21,279			5,212

Total capitalization	$	21,279		$	5,212		$


(1)		Out of 1,350,000 shares of preferred stock authorized in our certificate of incorporation, 32,317 shares have been designated as Series A, 1,267,224 shares have been designated as Series D and the remaining 50,459 shares have neither been designated nor issued.

A $1.00 increase (decrease) in the assumed initial public offering price of $ , the midpoint of the estimated price range shown on the cover of this prospectus, would (1) increase (decrease) each of additional paid-in capital and total stockholders’ equity in the pro forma as adjusted column by $ million, and (2) decrease (increase) by the number of shares of common stock the holders of our outstanding preferred have elected to receive in respect of the liquidation preference payments required to be made by us upon the closing of this offering, in each case assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.

The table above is based on the number of shares of common stock outstanding as of December 31, 2009, and excludes:


	•	833,334 shares of common stock issuable upon the exercise of warrants outstanding and exercisable as of December 31, 2009 at a weighted-average exercise price of $1.12 per share, which will remain outstanding after this offering if not exercised prior to this offering;

	•	2,602,575 shares of common stock issuable upon the exercise of stock options outstanding and exercisable as of December 31, 2009 at a weighted-average exercise price of $24.13 per share, of which 1,313,883 shares with a weighted average exercise price of $10.71 per share would be vested if purchased upon exercise of these options as of December 31, 2009 and

	•	3,610,402 shares of common stock available for future issuance under our equity compensation plans as of December 31, 2009.

DILUTION

If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share you will pay in this offering and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our pro forma historical net tangible book value as of March 31, 2010 was $ million, or $ per share of common stock. Our pro forma net tangible book value per share set forth below represents our total tangible assets less total liabilities and convertible preferred stock, divided by the number of shares of our common stock outstanding on March 31, 2010, after giving effect to (1) the -for-one split of our common stock to be effected prior to the closing of this offering, (2) the conversion of all outstanding shares of non-voting common stock into shares of common stock prior to the closing of this offering, (3) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (4) the mandatory preferred stock preference payment of $16.1 million payable to the holders of outstanding preferred stock upon the completion of this offering, to be satisfied (based on payment elections received from such holders) through the payment of an aggregate of $ million in cash and the issuance of an aggregate of shares of common stock, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.

On a pro forma as adjusted basis, after giving effect to (1) the items described in the preceding paragraph, (2) our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us, (3) our issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, and (4) our issuance of shares of common stock to FT Partners contemporaneously with the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering, the pro forma as adjusted net tangible book value as of March 31, 2010 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value to existing stockholders of $ per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $ per share. The following table illustrates this per share dilution to the new investors purchasing shares of common stock in this offering without giving effect to the option to purchase additional shares from us granted to the underwriters:


Assumed initial public offering price per share				$
Pro forma net tangible book value per share as of March 31, 2010
Increase per share attributable to sale of shares of common stock in this offering

Pro forma as adjusted net tangible book value per share after the offering

Dilution per share to new investors				$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, would increase (decrease) the net tangible book value by $ million, the net tangible book value per share after this offering by $ per share and the dilution in net tangible book value per share to investors in this offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.

If the underwriters fully exercise their option to purchase additional shares from us, the pro forma as adjusted net tangible book value will increase to $ per share, representing an immediate

increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors. If any shares are issued upon exercise of outstanding options or warrants, you will experience further dilution.

The following table summarizes, on a pro forma basis as of March 31, 2010, the differences between the number of shares of common stock purchased from us, the total consideration paid to us, and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, before the deduction of the estimated underwriting discount and offering expenses payable by us:


	Shares Purchased				Total Consideration				Average Price
	Number	%			Amount	%			Per Share
	(In thousands)

Existing stockholders(1)				%	$			%	$
New investors									$

Total			100	%		$	100	%


(1)		Includes shares of common stock to be issued to FT Partners contemporaneously with the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering.

The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of March 31, 2010 after giving effect to (1) the -for-one split of our common stock to be effected prior to the closing of this offering, (2) the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, (3) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock and (4) the issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus:


	•	833,334 shares of common stock issuable upon the exercise of warrants outstanding and exercisable as of March 31, 2010 at a weighted-average exercise price of $1.12 per share, which will remain outstanding after this offering if not exercised prior to this offering;


	•	3,897,406 shares of common stock issuable upon the exercise of stock options outstanding and exercisable as of March 31, 2010 at a weighted-average exercise price of $35.43 per share (assuming that options to purchase 1,325,831 shares granted after January 1, 2010 with an exercise price equal to the higher of $57.66 per share or the initial public offering price per share will have an exercise price of $57.66 per share), of which 1,394,008 shares with a weighted average exercise price of $11.88 per share would be vested if purchased upon exercise of these options as of March 31, 2010; and


	•	2,314,571 shares of common stock available for future issuance under our equity compensation plans as of March 31, 2010.

The sale of shares of common stock to be sold by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to , or % of the total shares outstanding, and will increase the number of shares held by new investors to , or % of the total shares outstanding. If the underwriters exercise their option to purchase additional shares in full, the shares held by existing stockholders will further decrease to , or % of the total shares outstanding, and the number of shares held by new investors will further increase to , or % of the total shares outstanding.

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables summarize our consolidated financial data for the periods presented. You should read the following selected consolidated financial data in conjunction with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.

We derived the statement of operations data for the years ended December 31, 2007, 2008 and 2009 and the balance sheet data as of December 31, 2008 and 2009 from our audited consolidated financial statements, which are included in this prospectus. We derived the statement of operations data for the years ended December 31, 2005 and 2006 and the balance sheet data as of December 31, 2005, 2006 and 2007 from our audited consolidated financial statements, which are not included in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected for a full year or any future period.


	Fiscal Year Ended December 31,
	2005			2006			2007			2008			2009
	(In thousands, except share and per share data)

Statement of Operations Data:
Net services revenue	$	111,201		$	160,741		$	240,725		$	398,469		$	510,192
Costs of services		97,120			141,767			197,676			335,211			410,711

Operating margin		14,081			18,974			43,049			63,258			99,481

Operating expenses:
Infused management and technology		13,037			18,875			27,872			39,234			51,763
Selling, general and administrative		4,230			8,777			15,657			21,227			30,153

Total operating expenses		17,267			27,652			43,529			60,461			81,916

Income (loss) from operations		(3,186	)		(8,678	)		(480	)		2,797			17,565
Net interest income (expense)		626			1,359			1,710			710			(9	)

Income (loss) before provision for income taxes		(2,560	)		(7,319	)		1,230			3,507			17,556
Provision for income taxes		105			—			456			2,264			2,966

Net income (loss)	$	(2,666	)	$	(7,319	)	$	774		$	1,243		$	14,590

Net income (loss) per common share:
Basic:	$	(0.54	)	$	(1.11	)	$	0.04		$	(0.75	)	$	0.68
Diluted:		(0.54	)		(1.11	)		0.03			(0.75	)		0.57
Weighted-average shares used in computing net income (loss) per common share:
Basic:		4,935,104			6,611,975			8,410,226			9,214,916			9,368,672
Diluted:		4,935,104			6,611,975			10,296,011			9,214,916			11,213,053
Other Operating Data (unaudited):
Adjusted EBITDA(1)	$	(2,075	)	$	(7,125	)	$	6,842		$	12,220		$	32,912

Net patient revenue under management (at period end) (in billions)	$	2.4		$	4.1		$	6.7		$	9.2		$	12.0



	As of December 31,
	2005			2006			2007			2008			2009
	(In thousands)

Balance Sheet Data:
Cash and cash equivalents	$	17,558		$	20,782		$	34,745		$	51,656		$	43,659
Working capital		7,817			(2,445	)		8,010			(3,453	)		(4,122	)
Total assets		19,064			27,333			60,858			86,904			103,472
Total stockholders’ equity	$	8,535		$	3,165		$	15,910		$	7,923			21,279


(1)		We define adjusted EBITDA as net income (loss) before net interest income (expense), income tax expense (benefit), depreciation and amortization expense and share-based compensation expense. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to net income, operating income and any other measure of financial performance calculated and presented in accordance with GAAP.

We believe adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:


	•	adjusted EBITDA and similar non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired;

	•	securities analysts often use adjusted EBITDA and similar non-GAAP measures as supplemental measures to evaluate the overall operating performance of companies; and

	•	by comparing our adjusted EBITDA in different historical periods, our investors can evaluate our operating results without the additional variations of interest income (expense), income tax expense (benefit), depreciation and amortization expense and share-based compensation expense.

Our management uses adjusted EBITDA:


	•	as a measure of operating performance, because it does not include the impact of items that we do not consider indicative of our core operating performance;

	•	for planning purposes, including the preparation of our annual operating budget;

	•	to allocate resources to enhance the financial performance of our business;

	•	to evaluate the effectiveness of our business strategies; and

	•	in communications with our board of directors and investors concerning our financial performance.

We understand that, although measures similar to adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Some of these limitations are:


	•	adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments;

	•	adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

	•	adjusted EBITDA does not reflect share-based compensation expense;

	•	adjusted EBITDA does not reflect cash requirements for income taxes;

	•	adjusted EBITDA does not reflect net interest income (expense);

	•	although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for these replacements; and

	•	other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

To properly and prudently evaluate our business, we encourage you to review the GAAP financial statements included elsewhere in this prospectus, and not to rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of adjusted EBITDA to net income (loss), the most comparable GAAP measure:


	Fiscal Year Ended December 31,
	2005			2006			2007			2008			2009
	(In thousands)

Net income (loss)	$	(2,666	)	$	(7,319	)	$	774		$	1,243		$	14,590
Net interest (income) expense(a)		(626	)		(1,359	)		(1,710	)		(710	)		9
Provision for income taxes		105			—			456			2,264			2,966
Depreciation and amortization expense		99			626			1,307			2,540			3,921

EBITDA	$	(3,088	)	$	(8,052	)	$	827		$	5,337		$	21,486
Stock compensation expense(b)		—			844			934			3,551			6,917
Stock warrant expense(b)		1,013			83			5,081			3,332			4,509

Adjusted EBITDA	$	(2,075	)	$	(7,125	)	$	6,842		$	12,220		$	32,912

(a) Interest income results from earnings associated with our cash and cash equivalents. Interest income declined subsequent to 2007 due to reductions in market interest rates. No debt or other interest-bearing obligations were outstanding during any of the periods presented. Interest expense for the year ended December 31, 2009 is a result of a $150 origination fee paid in connection with establishing our new revolving line of credit and has been shown net of interest income earned during the year.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Our Background

Accretive Health is a leading provider of healthcare revenue cycle management services. Our business purpose is to help U.S. hospitals, physicians and other healthcare providers to more efficiently manage their revenue cycle operations, which encompass patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections. Our integrated technology and services offering, which we refer to as our solution, spans the entire revenue cycle and helps our customers realize sustainable improvements in their operating margins and improve the satisfaction of their patients, physicians and staff. We enable these improvements by helping our customers increase the portion of the maximum potential patient revenue they receive, while reducing total revenue cycle costs.

Our customers typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent ambulatory clinics, and their affiliated physician practice groups. To implement our solution, we assume full responsibility for the management and cost of a customer’s revenue cycle operations and supplement the existing staff involved in the customer’s revenue cycle with seasoned Accretive Health personnel. A customer’s net revenue improvements and cost savings generally increase over time as we deploy additional programs and as the programs we implement become more effective, which in turn provides visibility into our future revenue and profitability. In 2009, for example, approximately 87% of our net services revenue, and nearly all of our net income, was derived from customer contracts that were in place as of January 1, 2009.

Our customers have historically achieved significant net revenue yield improvements within 18 to 24 months of implementing our solution, with customers operating under mature managed service contracts typically realizing 400 to 600 basis points in yield improvements in the third or fourth contract year. All of a customer’s yield improvements during the period we are providing services are attributed to our solution because we assume full responsibility for the management of the customer’s revenue cycle. Our methodology for measuring yield improvements excludes the impact of external factors such as changes in reimbursement rates from payors, the expansion of existing services or addition of new services, volume increases and acquisitions of hospitals or physician practices, which may impact net revenue but are not considered changes to net revenue yield. We and our customers share financial gains resulting from our solution, which directly aligns our objectives and interests with those of our customers. Both we and our customers benefit — on a contractually agreed-upon basis — from net revenue yield increases realized by the customers as a result of our services. To date, we have experienced a contract renewal rate of 100% (excluding exploratory new services offerings, a consensual termination following a change of control and a customer reorganization). Coupled with the long-term nature of our managed service contracts and the fixed nature of the base fees under each contract, our historical renewal experience provides a core source of recurring revenue.

the underlying themes of current healthcare reform proposals make the efficient management of the revenue cycle and collection of the full amount of payments due for patient services among the most critical challenges facing healthcare providers today.

Our corporate headquarters are located in Chicago, Illinois, and we operate shared services centers and offices in Michigan, Missouri, Florida and India. As of March 31, 2010, we had 1,802 full-time employees and managed approximately 6,300 of our customers’ employees who are involved in patient registration, health management information, procedure coding, billing and collections. We refer to these functions collectively as the revenue cycle, and to the personnel involved in a customer’s revenue cycle as revenue cycle staff.

In evaluating our business performance, our management monitors various financial and non-financial metrics. On a monthly basis, our chief executive officer, chief financial officer and other senior leaders monitor our overall net patient revenue under management, aggregate net services revenue, revenue cycle operating costs, corporate-level operating expenses, cash flow and adjusted EBITDA. When appropriate, decisions are made regarding action steps to improve these overall operational measures. Our senior operational leaders also monitor the performance of each customer’s revenue cycle operations through ten to twelve hospital-specific operating reviews each year. Such reviews typically focus on planned and actual revenue cycle operating results being achieved on behalf of our customers, progress against our operating metrics and planned and actual operating costs for that site. During these regular reviews, our senior operational leaders communicate to the operating teams suggestions to improve contract and operations performance and monitor the results of previous efforts. In addition, our senior management also monitors our ability to attract, hire and retain a sufficient number of talented employees to staff our growing business, and the development and performance of our proprietary technology.

Net Services Revenue

We derive our net services revenue primarily from service contracts under which we manage our customers’ revenue cycle operations. Revenues from managed service contracts consist of base fees and incentive payments:


	•	Base fee revenues represent our contractually-agreed annual fees for managing and overseeing our customers’ revenue cycle operations. Following a comprehensive review of a customer’s operations, the customer’s base fees are tailored to its specific circumstances and the extent of the customer’s operations for which we are assuming operational responsibility; we do not have standardized fee arrangements.

	•	Incentive payment revenues represent the amounts we receive by increasing our customers’ net patient revenue and identifying potential payment sources for patients who are uninsured and underinsured. These payments are governed by specific formulas contained in the managed service contract with each of our customers. In general, we earn incentive payments by increasing a customer’s actual cash yield as a percentage of the contractual amount owed to such customer for the healthcare services provided.

In addition, we earn revenue from other services, which primarily include our share of revenues associated with the collection of dormant patient accounts (more than 365 days old) under some of our service contracts. We also receive revenue from other services provided to customers that are not part of our integrated service offerings, such as procedure-by-procedure fee schedule reviews, physician advisory services or consulting on the billing for individuals receiving emergency room treatment.

Some of our service contracts entitle customers to receive a share of the cost savings we achieve from operating their revenue cycle. This share is returned to customers as a reduction in subsequent base fees. Our services revenue is reported net of cost sharing, and we refer to this as our net services revenue.

The following table summarizes the composition of our net services revenue for the years ended December 31, 2008 and 2009 on a percentage basis:


	Year Ended			Year Ended
	December 31, 2008			December 31, 2009

Net base fees for managed service contracts		88	%		85	%
Incentive payments for managed service contracts		10	%		13	%
Other services		2	%		2	%

Total		100	%		100	%

See “Results of Operations” for more information.

Costs of Services

Under our managed service contracts, we assume responsibility for all costs necessary to conduct our customers’ revenue cycle operations. Costs of services consist primarily of the salaries and benefits of the customers’ employees engaged in revenue cycle activities and managed on-site by us, the salaries and benefits of our employees who are engaged in revenue cycle activities, the costs associated with vendors that provide services integral to the customers’ revenue cycle and the costs associated with operating our shared services centers.

Under our managed service contracts, we assume responsibility for all costs necessary to conduct our customers’ revenue cycle operations. Costs of services consist primarily of:


	•	Salaries and benefits of the customers’ employees engaged in revenue cycle activities and assigned to work on-site with us. Under our contracts with our customers, we are responsible for the cost of the salaries and benefits for these employees of our customers. Salaries are paid and benefits are provided to such individuals directly by the customer, instead of adding these individuals to our payroll, because these individuals remain employees of our customers.

	•	Salaries and benefits of our employees in our shared services centers (these individuals are distinct from on-site “infused management” discussed below) and the non-payroll costs associated with operating our shared service centers.

	•	Costs associated with vendors that provide services integral to the customer’s revenue cycle.

Operating Margin

Operating margin is equal to net services revenue less costs of services. Our operating model is designed to improve margin under each managed service contract as the contract matures, for several reasons:


	•	We typically enhance the productivity of a customer’s revenue cycle operations over time as we fully implement our technology and procedures and because any overlap between costs of our shared services centers and costs of hospital operations targeted for transition is generally concentrated in the first year of the contract.

	•	Incentive payments under each managed service contract generally increase over time as we deploy additional programs and the programs we implement become more effective and produce improved results for our customers.

Infused Management and Technology Expenses

We refer to our management and staff revenue cycle employees that we devote on-site to customer operations as infused management. Infused management and technology expenses consist primarily of the wages, bonuses, benefits, share based compensation, travel and other costs associated with deploying our employees on customer sites to guide and manage our customers’ revenue cycle operations. The employees we deploy on customer sites typically have significant experience in revenue cycle operations, technology, quality control or other management disciplines.

The other significant portion of these expenses is an allocation of the costs associated with maintaining, improving and deploying our integrated proprietary technology suite and an allocation of the costs previously capitalized for developing our integrated proprietary technology suite.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of expenses for executive, sales, corporate information technology, legal, regulatory compliance, finance and human resources personnel, including wages, bonuses, benefits and share-based compensation; fees for professional services; share-based expense for stock warrants; insurance premiums; facility charges; and other corporate expenses. Professional services consist primarily of external legal, tax and audit services. We expect selling, general and administrative expenses to increase in absolute dollars as we continue to add information technology, human resources, finance, accounting and other administrative personnel as we expand our business.

We also expect to incur additional professional fees and other expenses resulting from future expansion and the compliance requirements of operating as a public company, including increased audit and legal expenses, investor relations expenses, increased insurance expenses, particularly for directors’ and officers’ liability insurance, and the costs of complying with Section 404 of the Sarbanes-Oxley Act. While these costs may initially increase as a percentage of our net services revenue, we expect that in the future these expenses will increase at a slower rate than our overall business volume, and that they will eventually represent a smaller percentage of our net services revenue.

Although we cannot predict future changes to the laws and regulations affecting us or the healthcare industry generally, we do not expect that any associated changes to our compliance programs will have a material effect on our selling, general and administrative expenses.

Interest Income (Expense)

Interest income is derived from the return achieved from our cash balances. We invest primarily in highly liquid, short-term investments, primarily those insured by the U.S. government. Our return on our cash investments declined in 2008 and 2009 as a result of the general decrease in overall interest rates. Interest expense for the year ended December 31, 2009 resulted from origination fees associated with our revolving line of credit, which we entered into on September 30, 2009.

Income Taxes

Income tax expense consists of federal and state income taxes in the United States and India. Although we had net operating loss carryforwards in 2008, our effective tax rate in 2008 was approximately 65%. This was due principally to the fact that a large portion of our operations is conducted in Michigan, which in 2008 began to impose a tax based on gross receipts in addition to tax based on net income. Although we continued to pay the Michigan gross receipts tax in 2009, our effective tax rate declined to approximately 17% in 2009, principally due to the release of $3.5 million of valuation allowances for deferred tax assets. We expect our overall effective tax rate to be approximately 45% in 2010 and 40% in future years because we no longer have any net operating loss carryforwards and the impact of the Michigan gross receipts tax will become less significant in relation to other income-based taxes. We also expect our income tax expense to increase in absolute dollars as our income increases.

Application of Critical Accounting Policies and Use of Estimates

Our consolidated financial statements reflect the assets, liabilities and results of operations of Accretive Health, Inc. and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Our consolidated financial statements have been prepared in accordance with GAAP.

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, we base estimates on historical experience and on assumptions that we believe to be reasonable given our operating environment. Estimates are based on our best knowledge of current events and the actions we may undertake in the future. Although we believe all adjustments considered necessary for fair presentation have been included, our actual results may differ materially from our estimates.

We believe that the accounting policies described below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our consolidated financial statements. In addition, we believe that a discussion of these policies is necessary to understand and evaluate the consolidated financial statements contained in this prospectus. For further information on our critical and other significant accounting policies, see note 2 to our consolidated financial statements contained elsewhere in this prospectus.

Revenue Recognition

Our managed service contracts generally have an initial term of four to five years and various start and end dates. After the initial terms, these contracts renew annually unless canceled by either party. Revenue from managed service contracts consists of base fees and incentive payments.

We record revenue in accordance with the provisions of Staff Accounting Bulletin 104. As a result, we only record revenue once there is persuasive evidence of an arrangement, services have been rendered, the amount of revenue has become fixed or determinable and collectibility is reasonably assured. We recognize base fee revenues on a straight-line basis over the life of the managed service contract. Base fees for contracts which are received in advance of services delivered are classified as deferred revenue in the consolidated balance sheets until services have been provided.

Our managed service contracts generally allow for adjustments to the base fee. Adjustments typically occur at 90, 180 or 360 days after the contract commences, but can also occur at subsequent dates as a result of factors including changes to the scope of operations and internal and external audits. All adjustments, which can increase or decrease revenue and operating margin, are recorded in the period the changes are known and collectibility of any additional fees is reasonably assured. Any such adjustments may cause our quarter-to-quarter results of operations to fluctuate. Adjustments may vary in direction, frequency and magnitude and generally have not materially affected our annual revenue trends, margin trends, and visibility.

We record revenue for incentive payments once the calculation of the incentive payment earned is finalized and collectibility is reasonably assured. We use a proprietary technology and methodology to calculate the amount of benefit each customer receives as a result of our services. Our calculations are based in part on the amount of revenue each customer is entitled to receive from commercial and private insurance carriers, Medicare, Medicaid and patients. Because the laws, regulations, instructions, payor contracts and rule interpretations governing how our customers receive payments from these parties are complex and change frequently, estimates of a customer’s prior period benefits could change. All changes in estimates are recorded when new information is available and calculations are completed.

Incentive payments are based on the benefits a customer has received throughout the life of the managed service contract with us. Each quarter, we record the increase in the total benefits received to date. If a quarterly calculation indicates that the cumulative benefits to date have decreased, we record a reduction in revenue. If the decrease in revenue exceeds the amount previously paid by the customer, the excess is recorded as deferred revenue.

Our services also include collection of dormant patient accounts receivable that have aged 365 days or more directly from individual patients. We share all cash generated from these collections

with our customers in accordance with specified arrangements. We record as revenue our portion of the cash received from these collections when each customer’s cash application is complete.

Accounts Receivable and Allowance for Uncollectible Accounts

Base fees are billed to customers quarterly. Base fees received prior to when services are delivered are classified as deferred revenue. Accordingly, the timing of customer payments can result in short-term fluctuations in cash, accounts receivable and deferred revenue.

We assess our customers’ creditworthiness as a part of our customer acceptance process. We maintain an estimated allowance for doubtful accounts to reduce our gross accounts receivable to the amount that we believe will be collected. This allowance is based on our historical experience, our continuing assessment of each customer’s ability to pay and the status of any ongoing operations with each applicable customer.

We perform quarterly reviews and analyses of each customer’s outstanding balance and assess, on an account-by-account basis, whether the allowance for doubtful accounts needs to be adjusted based on currently available evidence such as historical collection experience, current economic trends and changes in customer payment terms. In accordance with our policy, if collection efforts have been pursued and all avenues for collections exhausted, accounts receivable would be written off as uncollectible.

Software Development

We apply the provisions of Accounting Standards Codification, or ASC, 350-40, Intangibles — Goodwill and Other — Internal-Use Software , which requires the capitalization of costs incurred in connection with developing or obtaining internal use software. In accordance with ASC 350-40, we capitalize the costs of internally-developed, internal use software when an application is in the development stage. This generally occurs after the overall design and functionality of the application has been approved and our management has committed to the application’s development. Capitalized software development costs consist of payroll and payroll-related costs for employee time spent developing a specific internal use software application or related enhancements, and external costs incurred that are related directly to the development of a specific software application.

Goodwill

Goodwill represents the excess purchase price over the net assets acquired for a business that we acquired in May 2006. In accordance with ASC 350, Intangibles — Goodwill and Other , goodwill is not subject to amortization but is subject to impairment testing at least annually. Our annual impairment assessment date is the first day of our fourth quarter. We conduct our impairment testing on a company-wide basis because we have only one operating and reporting segment. Our impairment tests are based on our current business strategy in light of present industry and economic conditions and future expectations. As we apply our judgment to estimate future cash flows and an appropriate discount rate, the analysis reflects assumptions and uncertainties. Our estimates of future cash flows could differ from actual results. Our most recent impairment assessment did not result in goodwill impairment.

Impairments of Long-Lived Assets

We evaluate all of our long-lived assets, such as furniture, equipment, software and other intangibles, for impairment in accordance with ASC 360, Property, Plant and Equipment , when events or changes in circumstances warrant such a review. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if an adjustment to fair value is required. This evaluation is significantly impacted by estimates and assumptions of future revenue, expenses and other factors, which are in turn affected by changes in the business climate, legal matters and competition.

Income Taxes

We record deferred tax assets and liabilities for future income tax consequences that are attributable to differences between the carrying amount of assets and liabilities for financial statement purposes and the income tax bases of such assets and liabilities. We base the measurement of deferred tax assets and liabilities on enacted tax rates that we expect will apply to taxable income in the year we expect to settle or recover those temporary differences. We recognize the effect on deferred income tax assets and liabilities of any change in income tax rates in the period that includes the enactment date. We provide a valuation allowance for deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of December 31, 2008 and in all prior periods, a valuation allowance was provided for all of our net deferred tax assets. As a result of our improved operations, in 2009 we determined that it was no longer necessary to maintain a valuation allowance for all of our deferred tax assets.

The primary sources of our deferred taxes are:


	•	differences in timing of depreciation on fixed assets;

	•	the timing of revenue recognition arising from incentive payments;

	•	employee compensation costs arising from stock options; and

	•	costs associated with the issuance of warrants to purchase shares of our common stock.

Beginning January 1, 2008, with the adoption of ASC 740-10, Income Taxes — Overall , we recognize the financial statement effects of a tax position only when it is more likely than not that the position will be sustained upon examination. Tax positions taken or expected to be taken that are not recognized under the pronouncement are recorded as liabilities. Interest and penalties relating to income taxes are recognized in our income tax provision in the statements of consolidated operations.

Share-Based Compensation Expense

Our share-based compensation expense results from issuances of shares of restricted common stock and grants of stock options and warrants to employees, directors, outside consultants, customers, vendors and others. We recognize the costs associated with option and warrant grants using the fair value recognition provisions of ASC 718, Compensation — Stock Compensation . Generally, ASC 718 requires the value of share-based payments to be recognized in the statement of operations based on their estimated fair value at date of grant amortized over the grant’s vesting period.

Restricted Stock Plan. Our restricted stock plan was adopted by our board of directors in March 2004, amended in June 2004, August 2004 and February 2005. As of December 31, 2009, there were 6,599,951 shares of common stock outstanding under our restricted stock plan, all of which were vested. We have made the following grants to employees, directors and consultants under the restricted stock plan:


	•	In March 2004, we issued shares of common stock to our chief executive officer. The shares vested in 48 monthly installments beginning in November 2003. As a result, we recorded share-based compensation expense of $19,200 in each of 2006 and 2007.

	•	In June 2004, we issued shares of common stock to certain employees and directors. In January 2005, we issued additional shares of common stock to a member of our board of directors. These shares vested on various schedules ranging from immediate vesting to vesting over a period of 48 months. As a result, we recorded share-based compensation expense of $18,530 and $2,328 in 2007 and 2008, respectively. We did not record any share-based compensation expense in 2009.

Ascension Health Stock and Warrants. In October 2004, Ascension Health became our founding customer. Since then, in exchange for its initial start-up assistance and subsequent sales and marketing assistance, we have issued common stock and granted warrants to Ascension Health, as described below:


	•	*Initial Stock Issuance and Protection Warrant Agreement* . In October and November 2004, we issued 902,374 shares of common stock to Ascension Health, then representing a 5% ownership interest in our company on a fully-diluted basis, and entered into a protection warrant agreement under which Ascension Health is granted the right to purchase additional shares of common stock from time to time for $0.01 per share when Ascension Health’s ownership interest in our company declines below 5% due to our issuance of additional stock or rights to purchase stock. The protection warrant agreement, and all purchase rights granted thereunder, expire on the closing of this offering. We made the initial stock grant and entered into the protection warrant agreement because Ascension Health agreed to provide us with an operational laboratory and related start-up consulting services in connection with our development of our initial revenue cycle management service offering.

In 2007, 2008 and 2009, we granted Ascension Health the right to purchase 58,175, 23,261 and 34,789 shares of common stock for $0.01 per share, respectively, pursuant to the protection warrant agreement. We accounted for the costs associated with these purchase rights as a reduction in base fee revenues due to us from Ascension Health because we could not reasonably estimate the fair value of the services provided by Ascension Health. Accordingly, we reduced the amount of our base fee revenues from Ascension Health by $928,108, $921,445 and $1,736,345 in 2007, 2008 and 2009, respectively. For additional information regarding our relationship with Ascension Health, see “Related Person Transactions — Transactions With Ascension Health”.


	•	*Supplemental Warrant.* Pursuant to a supplemental warrant agreement that became effective in November 2004, Ascension Health had the right to purchase up to 902,374 shares of our common stock based upon the achievement of specified milestones relating to its sales and marketing assistance. In May 2007 and again in September 2007, we amended and restated our supplemental warrant agreement with Ascension Health. This agreement gives Ascension Health the right to purchase up to 446,190 shares of common stock upon the achievement of specified milestones relating to its sales and marketing assistance. The purchase price for these shares is equal to the most recent price per share paid for our common stock in a capital raising transaction or, if we have not had a capital raising transaction within the preceding six months, the exercise price of the employee stock options we have most recently granted. The supplemental warrant agreement, and all purchase rights thereunder, expire on the closing of this offering. Concurrently with the amendment and restatement of the supplemental warrant agreement, in May 2007, we sold 669,284 shares of our common stock to Ascension Health for $8.20 per share for an aggregate purchase price of $5,488,128. No share-based compensation expense was recorded in connection with this sale because the shares were issued at a purchase price equal to the fair market value of the common stock at that time and Ascension Health was not required to provide any services in connection with the issuance.

We recorded the costs associated with the purchase rights under the supplemental warrant agreement as marketing expense for the periods in which the purchase rights were earned. During December 2007, Ascension Health earned the right to purchase 223,095 shares of common stock for $17.36 per share, and we recorded $4,153,163 in selling, general and administrative expense. During March 2008, Ascension Health earned the right to purchase 111,548 shares of common stock for $40.17 per share, and we recorded $2,410,790 in marketing expense. During March 2009, Ascension Health earned the right to purchase 111,547 shares of common stock for $51.05 per share, and we recorded $2,772,953 in marketing expense.

Licensing and Consulting Warrant. In conjunction with the start of our business, in February 2004, we executed a term sheet with a consulting firm and its principal contemplating that we would grant the consulting firm a warrant, with an exercise price equal to the fair market value of our common stock upon grant, to purchase shares of our common stock then representing 2.5% of our equity in exchange for exclusive rights to certain revenue cycle methodologies, tools, technology, benchmarking information and other intellectual property, plus up to another 2.5% of our equity at the time of grant if the consulting firm’s introduction of us to senior executives at prospective customers resulted in the execution of managed service contracts between us and such customers. In January 2005, we formalized the warrant grant contemplated by the term sheet and granted the consulting firm a warrant to purchase 833,334 shares of our common stock for $1.12 per share, representing 5% of our equity at that time. In 2005, we recorded $483,334 in selling, general and administrative expense in conjunction with this warrant grant. The warrant expires on the earlier of January 15, 2015 or a change of control of our company.

We used the Black-Scholes option pricing model to determine the estimated fair value of the above purchase rights at the date earned. The following table sets forth the significant assumptions used in the model during 2007, 2008 and 2009:


	Year Ended December 31,
	2007	2008	2009

Future dividends	—	—	—
Risk-free interest rate	2.75% to 4.21%	3.45%	2.91%
Expected volatility	50%	50%	50%
Expected life(1)	6.8 years	6.6 years	5.6 years


(1)		Expected life applies to Ascension Health’s supplemental warrant only, since the other warrants were fully vested upon grant.

Stock Option Plan. In December 2005, our board of directors approved a stock option plan, which provides for the grant of stock options to employees, directors and consultants. The plan was amended and restated in February 2006 and further amended in May 2007, October 2008, January 2009, November 2009 and April 2010. As of March 31, 2010, the plan permitted the issuance of a maximum of 7,151,526 shares of common stock and 2,314,571 shares were available for grant. Under the terms of the plan, all options will expire if they are not exercised within ten years after the grant date. The majority of options granted vest over four years at a rate of 25% per year on each grant date anniversary. Options can be exercised immediately upon grant, but upon exercise the shares issued are subject to the same vesting and repurchase provisions that applied before exercise.

We use the Black-Scholes option pricing model to determine the estimated fair value of each option as of its grant date. These inputs are subjective and generally require significant analysis and judgment to develop. The following table sets forth the significant assumptions used in the Black-Scholes model to calculate stock-based compensation cost for 2007, 2008 and 2009:


	Year Ended December 31,
	2007	2008	2009

Future dividends	—	—
Risk-free interest rate	2.3% to 5.5%	2.8 to 4.0%	1.6% to 3.2%
Expected volatility	50%	50%	50%
Expected life	6.25 years	6.25 years	6.25 years
Forfeitures	7.5% annually	3.75% annually	4.25% annually

Since our stock is not actively traded, we estimated its expected volatility by reviewing the historical volatility of the common stock of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward our future

expected results. We used judgment in selecting these companies, as well as in evaluating the available historical and implied volatility for these companies.

We aggregate all employees into one pool for valuation purposes. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant.

The plan has not been in existence a sufficient period for us to use our historical experience to estimate expected life. Furthermore, data from other companies is not readily available. Therefore, we have estimated our stock options’ expected life using a simplified method based on the average of each option’s vesting term and original contractual term.

An estimated forfeiture rate derived from our historical data and our estimates of the likely future actions of option holders has been applied when recognizing the share-based compensation cost of the options.

We will continue to use judgment in evaluating the expected term, volatility and forfeiture rate related to our share-based compensation on a prospective basis, and in incorporating these factors into the Black-Scholes pricing model. Higher volatility and longer expected lives result in an increase to total share-based compensation expense determined at the date of grant. In addition, any changes in the estimated forfeiture rate can have a significant effect on reported share-based compensation expense, as the cumulative effect of adjusting the rate for all expense amortization is recognized in the period that the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the share-based compensation expense recognized in our consolidated financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the share based compensation expense recognized in our consolidated financial statements. These adjustments will affect our infused management and technology expenses and selling, general and administrative expenses.

As of December 31, 2009, we had $20.5 million of total unrecognized share-based compensation cost related to employee stock options. We expect to recognize this cost over a weighted-average period of 3.0 years after January 1, 2010. The allocation of this cost between selling, general and administrative expenses and infused management and technology expenses will depend on the salaries and work assignments of the personnel holding these stock options.

On February 3, 2010, our board of directors granted options to purchase 1,325,831 shares to executive officers, employees and non-employee directors. These options have an exercise price equal to $57.66 per share (the fair value of our common stock as of such date, as determined by the board of directors), provided that if this offering occurs at a higher price prior to May 15, 2010 the exercise price will be increased to the price per share at which shares are initially offered to the public. Assuming the exercise price of these options remains $57.66 per share, the unrecognized compensation cost that will be recognized over the vesting period of these options is approximately $33.0 million.

Determination of Fair Value. Valuing the share price of a privately-held company is complex. We believe that we have used reasonable methodologies, approaches and assumptions in assessing and determining the fair value of our common stock for financial reporting purposes.

We determine the fair value of our common stock through periodic internal valuations that are approved by our board of directors. The fair value approved by our board is used for all option grants until such time as a new determination of fair value is made. To date, and as permitted by our stock option plan, our chief executive officer has selected option recipients and determined the number of shares covered by, and the timing of, option grants.

Our board considers the following factors when determining the fair value of our common stock:


	•	our financial condition, sales levels and results of operations during the relevant period;


	•	developments in our business;

	•	hiring of key personnel;

	•	forecasts of our financial results and market conditions affecting our industry;

	•	market values, sales levels and results of operations for public companies that we consider comparable in terms of size, service offerings and maturity;

	•	the superior rights and preferences of outstanding securities that were senior to our common stock; and

	•	the illiquid nature of our common stock.

From June 2005 to January 2008, we used the market approach to estimate our enterprise value. The market approach estimates the fair market value of a company by applying market multiples of publicly-traded firms in the same or similar lines of business to the results and projected results of the company being valued. When choosing companies for use in the market approach, we focused on businesses that provide outsourcing, consulting or technology services or that have high rates of growth. To obtain our preliminary enterprise value, we calculated the multiple of the market valuations of the comparable companies to their annual revenues and applied this multiple to our revenue run rate, defined as our total projected revenues for the next 12 months from existing customers. We then discounted the preliminary enterprise value by a percentage determined by our board to reflect our company’s relative immaturity in relation to the comparable companies. This discount changed over time as we matured. The resulting value was then divided by the number of shares of common stock outstanding on a fully-diluted basis to obtain the fair value per share of common stock. We performed a new valuation in this manner each time we signed a managed service contract with a new customer.

For all valuations since January 2008, we used both the market approach and the income approach to estimate our aggregate enterprise value at each valuation date. The change in valuation method was in recognition that in 2007 we had achieved some significant milestones, particularly positive net income and positive adjusted EBITDA for the year, and that an initial public offering or other type of liquidity event would eventually be considered. When choosing companies to be used for the market approach since January 2008, we focused on businesses with high rates of growth and relatively low profitability that provide services to hospitals or other medical providers, or that provide business outsourcing solutions. The comparable companies have remained largely unchanged since January 2008. The income approach involves applying an appropriate risk-adjusted discount rate to projected debt-free cash flows, based on forecasted revenue and costs. The financial forecasts were based on assumed revenue growth rates that took into account our past experience and future expectations. We assessed the risks associated with achieving these forecasts and applied an appropriate cost of capital rate based on our board’s view of our company’s stage of development and risks, the experience of our directors in managing companies backed by private equity investors, and our management’s review of academic research on this topic.

We averaged the two values derived under the market approach and the income approach and then added our current cash position and cash and tax benefits, assuming that all outstanding options and warrants were exercised, to create an enterprise value. Next, we allocated the enterprise value to our securities with rights and preferences that are superior to our common stock, using the option-pricing method set forth in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation . We then discounted the remaining value by 10% to reflect the fact that our stockholders could not freely trade our common stock in the public markets. We based the 10% discount for lack of marketability primarily on the results of a study of this topic by Bajaj, Denis, Ferris and Sarin entitled “Firm Value and Marketability Discounts” (February 26, 2001). The resulting value was then divided by the number of shares of common stock outstanding on a fully-diluted basis to obtain the fair value per share of common stock.

Prior to this offering, stock options and certain warrants represented the right to purchase shares of our non-voting common stock. Prior to the closing of this offering, all outstanding non-voting common stock will convert into voting common stock on a share-for-share basis, and thereafter stock options and warrants to purchase non-voting common stock will be stock options and warrants to purchase voting common stock, with no other changes in their terms. For all valuations prior to May 18, 2009, we determined the fair value of the voting common stock and applied it to the non-voting common stock without a discount.

Beginning on May 18, 2009, we refined our valuation methodology because of the increased potential for an initial public offering or company sale. We continued to use both the market approach and the income approach, but applied a discount to the fair value of the non-voting common stock and modified other variables as described below.

Because of the increased potential for an initial public offering, in late December 2009 we stopped granting stock options with exercise prices that were fixed at the time of grant. All stock options granted between January 1, 2010 and April 21, 2010 had an exercise price equal to the greater of $57.66 per share (the fair value of our common stock as of such date, as determined by the board of directors) and the price per share at which shares are initially offered to the public in this offering if this offering occurs prior to May 15, 2010 or within 90 days after the applicable grant date. Beginning April 22, 2010, all stock options have been granted with an exercise price equal to the price per share at which shares will be initially offered to the public in this offering, provided that, if this offering does not occur within 90 days after the applicable grant date, our board of directors will make a new determination of the fair value of our common stock and the exercise price of these options will equal such fair value.

There is inherent uncertainty in these forecasts and projections. If we had made different assumptions and estimates than those described above, the amount of our share-based compensation expense, net income or loss and related per-share amounts could have been materially different.

Information regarding the number of shares of common stock subject to option grants from January 1, 2008 through April 22, 2010 is summarized in the table below:


	Number of Shares of Common Stock
Grant Period	Subject to Option Grants

January 1, 2008 to January 31, 2008		49,500
February 1, 2008 to June 9, 2008		254,500
June 10, 2008 to September 2, 2008		77,000
September 3, 2008 to October 2, 2008		39,500
October 3, 2008 to January 16, 2009		86,500
January 17, 2009 to May 17, 2009		289,000
May 18, 2009 to July 17, 2009		88,500
July 18, 2009 to November 16, 2009		193,000
November 17, 2009 to February 2, 2010		69,000
February 3, 2010 to March 31, 2010		1,325,831
April 1, 2010 to April 22, 2010		285,500

The analyses undertaken in determining the fair value of our common stock for all grants between January 1, 2008 and March 31, 2010 are summarized below. The methodology for the fair value determination made on September 4, 2007 is summarized above. All analyses since then used the market approach and the income approach summarized above, with the additional assumptions described below.


	•	*September 4, 2007 Fair Value Determination.* For grants made between January 1, 2008 and January 31, 2008, we used $17.36 per share as the fair value of our common stock,


		based on a determination of fair value made by our board of directors on September 4, 2007. The market approach resulted in a value that was 1.5 times our annual revenue run rate as of the valuation date.


	•	*February 1, 2008 Fair Value Determination.* On February 1, 2008, our board of directors determined that the fair value of our common stock was $40.17 per share. The market approach resulted in a value that was approximately 3.53 times our net services revenue for the third quarter of 2007. For the income approach, we forecasted our cash flows over a five-year period and assumed that our terminal value would approximate 12.5 times our adjusted EBITDA for the fifth future year. We obtained the present value of each year’s cash flow by applying a 25% discount rate. Next, we averaged the values resulting from the income approach and the market approach and added our cash on hand at December 31, 2007 and the estimated cash and tax benefits that would occur assuming that all outstanding options and warrants were exercised. The resulting value represented our estimate of our enterprise value. We allocated 48.9% of the estimated enterprise value to securities with rights and preferences that are superior to our common stock, assuming a future volatility rate of 54.25% and that a liquidity event would occur in 18 months. We then reduced the remaining value attributable to common stock by 10% for non-marketability, and divided the result by the number of shares outstanding on a fully-diluted basis to arrive at the estimated fair value per share.

	•	*June 10, 2008 Fair Value Determination.* On June 10, 2008, our board of directors determined that the fair value of our common stock was $47.19 per share. The increase in our value per share was due to increases in our estimated enterprise value under both the market approach and the income approach. We continued to apply a 50% weighting to each value and then to increase the result by the amount of our cash on hand and the anticipated cash and tax benefits from option and warrant exercises. The value determined by the market approach on June 10, 2008, which was approximately 3.52 times our net services revenue for the first quarter of 2008, was higher than the value determined on February 1, 2008 because of the increase in our net services revenue in the first quarter of 2008 as compared to the third quarter of 2007. For the income approach, we used the same discount rate and methodology as in the February 1, 2008 valuation and updated our cash flow projections to reflect our new five-year plan. The percentage allocation of our estimated enterprise value to senior securities and common stock was unchanged from the prior valuation.

	•	*September 3, 2008 Fair Value Determination.* On September 3, 2008, our board of directors determined that the fair value of our common stock was $58.65 per share. The increase in our value per share was due to increases in our estimated enterprise value under both the market approach and the income approach. We continued to apply a 50% weighting to each value and then to increase the result by the amount of our cash on hand and the anticipated cash and tax benefits from option and warrant exercises. The value determined by the market approach on September 3, 2008 was higher than the value determined on June 10, 2008 because of the increase in our net services revenue in the second quarter of 2008 as compared to the first quarter of 2008 and because we increased the net services revenue multiple from 3.52 to 3.78 to reflect increases in market prices of the comparable companies. For the income approach, we used the same discount rate and methodology as in the June 10, 2008 valuation, except that we discounted the projected cash flows and terminal value for three fewer months. The percentage allocation of our estimated enterprise value to senior securities and common stock was unchanged from the prior valuation.

	•	*October 3, 2008 Fair Value Determination.* On October 3, 2008, our board of directors determined that the fair value of our common stock was $55.77 per share. There were no changes in the estimated enterprise value determined under the income approach. The board believed, however, that the significant decline in the market values of publicly traded securities that occurred during the month of September 2008 warranted a reduction in the net services


		revenue multiple from 3.78 to 3.40, resulting in a decrease in our estimated enterprise value under the market approach. All other aspects of the valuation methodology remained unchanged from the September 3, 2008 valuation.


	•	*January 17, 2009 Fair Value Determination.* On January 17, 2009, our board of directors determined that the fair value of our common stock was $51.05 per share. The decrease in our value per share was primarily due to a decrease in our estimated enterprise value under the market approach. We continued to apply a 50% weighting to the estimated enterprise value determined under both the market approach and the income approach, and then to increase the result by the amount of our cash on hand and the anticipated cash and tax benefits from option and warrant exercises. The value determined by the market approach on January 17, 2009 was lower than the value determined on October 3, 2008, because we decreased the net services revenue multiple from 3.40 to 2.79 to reflect further declines in market prices of the comparable companies and our revenues decreased slightly in the third quarter of 2008 as compared to the second quarter of 2008. For the income approach, we used the same discount rate and methodology as in the October 3, 2008 valuation, except that we discounted the projected cash flows and terminal value for three fewer months. The percentage allocation of our estimated enterprise value to senior securities and common stock was unchanged from the prior valuation.

	•	*May 18, 2009 Fair Value Determination.* On May 18, 2009, our board of directors determined that the fair value of our non-voting common stock was $50.89 per share. For the income approach, we developed new forecasts of our cash flows over a twelve-year period rather than a five-year period. We based our projections for the first five years of this period based on our actual operating results for 2008 and our expected operating results for the years 2009 through 2013, and we assumed for the next seven years of this period that we would make an orderly transition from a high-growth company to a mature growth company. To reflect that we were entering into a different stage of development, we decreased the discount rate applied to future expected cash flows from 25% to 18%. To estimate the terminal value we assumed a 5% long-term growth rate and used the Gordon growth model, which is a mathematical simplification of an earnings stream that is expected to grow at a constant rate. For the market approach, we used a similar group of six companies. In order to reduce the influence of outliers, however, the net services revenue multiple for the companies with the highest and lowest figures were weighted 10% each and the net services revenue multiple for the other four companies were weighted 20% each. In addition, the estimated enterprise value calculated under the income approach was weighted 67% and the estimated enterprise value calculated under the market approach was weighted 33%. This change to place greater emphasis on the income approach also reflected our board of director’s conclusion that we were transitioning from a company with little or no profit toward a company with increasing profit and that greater weight should be placed on the income approach using a discounted cash flow calculation, since it is based on profitability, and lesser weight should be placed on the market approach, since it is based on a net services revenue multiple. The result was then increased by the present value of the cash that we expected would be realized if all options and warrants were exercised plus the present value of the associated tax savings we would achieve. We continued to allocated the adjusted enterprise value to our securities with rights and preferences that are superior to our common stock, as in prior valuations, and continued to discount the remaining value by 10% to reflect the fact that our stockholders could not freely trade our common stock in the public markets. We also applied an additional discount of 2% to the fair value of the voting common stock in order to determine the fair value of the non-voting common stock.

	•	*July 18, 2009 Fair Value Determination.* On July 18, 2009, our board of directors determined that the fair value of our non-voting common stock was $52.15 per share. For the income approach, we updated the twelve year forecasts of our cash flows. The projection for


		the first five years of this period was updated for our actual operating results for 2009 and our expected operating results for the remainder of the year 2009 and through the year 2013. We continued to assume for the next seven years of this period that we would make an orderly transition from a high-growth company to a mature growth company. We continued to estimate the terminal value assuming a 5% long-term growth and the Gordon growth model. For the market approach, we continued to use the same group of six comparable companies as in the May 18, 2009 valuation. We also continued to use the same relative weighting methodology to estimate the aggregate enterprise value. The result was then increased by the present value of the cash that we expected would be realized if all options and warrants were exercised plus the present value of the associated tax savings we would achieve. The total adjusted enterprise value increased from $1,432 million to $1,492 million. We continued to allocate the adjusted enterprise value to our securities with rights and preferences that are superior to our common stock. This allocation accounted for the fact that we were actively considering an initial public offering. We continued to discount the remaining value by 10% to reflect the fact that our stockholders could not freely trade our common stock in the public markets. We also applied an additional discount of 2% to the fair value of the voting common stock in order to determine the fair value of the non-voting common stock.


	•	*November 17, 2009 Fair Value Determination.* On November 17, 2009, our board of directors determined that the fair value of our non-voting common stock was $57.19 per share. For the income approach, we used an updated twelve-year forecasts of our cash flows. We applied an 18% discount rate to future expected cash flows. We also continued to estimate the terminal value by assuming a 5% long-term growth rate and using the Gordon growth model. For the market approach, we added a company that provides healthcare information technology services (and had recently completed an initial public offering) to our group of comparable companies. We also expanded the market approach to consider each comparable company’s operating earnings before income taxes, depreciation and amortization, along with each comparable company’s net services revenues. The aggregate market multiple for each factor was determined using the same relative weighting between comparable companies as in the July 18, 2009 valuation. The two aggregate market multiples were then given an equal weighting in deriving an overall market multiple. As in the July 18, 2009 valuation, the aggregate enterprise value was calculated with the income approach receiving a 67% weighting and the market approach receiving a 33% weighting. The aggregate enterprise value was then increased by the present value of the cash that we expected would be realized if all options and warrants were exercised plus the present value of the associated tax savings we would achieve. We continued to allocate the adjusted enterprise value to our securities with rights and preferences that are superior to our common stock with the allocation taking into account the fact that we are actively in the process of preparing for an initial public offering. We continued to discount the remaining value by 10% to reflect the fact that our stockholders could not freely trade our common stock in the public markets. We also applied an additional discount of 2% to the fair value of the voting common stock in order to determine the fair value of the non-voting common stock.

	•	*February 3, 2010 Fair Value Determination.* On February 3, 2010, our board of directors determined that the fair value of our non-voting common stock was $57.66 per share. For the income approach, we updated our twelve-year forecast of our future expected cash flows but continued to apply an 18% discount rate to these cash flows. We also continued to estimate the terminal value by assuming a 5% long-term growth rate and the Gordon growth model. For the market approach, we used the same group of comparable companies that was used in the November 17, 2009 determination and continued to consider each comparable company’s operating earnings before income taxes, depreciation and amortization, along with each comparable company’s net services revenues. The aggregate market multiple for each factor was determined using the same relative weighting between comparable companies as in the July 18, 2009 and November 17, 2009 valuations. The two aggregate market multiples were


		then given an equal weighting in deriving an overall market multiple. As in the July 18, 2009 and November 17, 2009 valuations, the aggregate enterprise value was calculated with the income approach receiving a 67% weighting and the market approach receiving a 33% weighting. The aggregate enterprise value was then increased by the present value of the cash that we expected would be realized if all options and warrants were exercised plus the present value of the associated tax savings we would achieve. We continued to allocate the adjusted enterprise value to our securities with rights and preferences that are superior to our common stock with the allocation taking into account the fact that we are actively in the process of preparing for an initial public offering. We continued to discount the remaining value by 10% to reflect the fact that our stockholders could not freely trade our common stock in the public markets. We also applied an additional discount of 2% to the fair value of the voting common stock in order to determine the fair value of the non-voting common stock.

Legal Proceedings

In the normal course of business, we are involved in legal proceedings or regulatory investigations. We evaluate the need for loss accruals using the requirements of ASC 450, Contingencies . When conducting this evaluation we consider factors such as the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. We record an estimated loss for any claim, lawsuit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can reasonably be estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate, then we record the minimum amount in the range as our loss accrual. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded.

Results of Operations

The following table sets forth consolidated operating results and other operating data for the periods indicated.


	Fiscal Year Ended December 31,
	2007			2008		2009
	(In thousands, except other operating data as indicated)
Statement of Operations Data:
Net services revenue	$	240,725		$	398,469	$	510,192
Costs of services		197,676			335,211		410,711

Operating margin		43,049			63,258		99,481

Infused management and technology expense		27,872			39,234		51,763
Selling, general and administrative expense		15,657			21,227		30,153

Total operating expenses		43,529			60,461		81,916
Income (loss) from operations		(480	)		2,797		17,565
Net interest income (expense)		1,710			710		(9	)

Income before provision for income taxes		1,230			3,507		17,556
Provision for income taxes		456			2,264		2,966

Net income	$	774		$	1,243	$	14,590

Operating Expense Details:
Infused management and technology expense, excluding depreciation and amortization expense and share-based compensation expense	$	26,375		$	35,079	$	45,365
Selling, general and administrative expense, excluding depreciation and amortization expense and share-based compensation expense		10,760			16,879		22,940
Depreciation and amortization expense		1,307			2,540		3,921
Share-based compensation expense(1)		5,087			5,963		9,690

Total operating expenses	$	43,529		$	60,461	$	81,916

Other Operating Data (unaudited):
Net patient revenue under management (at period end) (in billions)	$	6.7		$	9.2	$	12.0


(1)		Share-based compensation expense includes share-based compensation expense and warrant-related expense, exclusive of warrant expense of $928, $921 and $1,736 which was classified as a reduction in base fee revenue for the years ended December 31, 2007, 2008 and 2009, respectively.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2009

Net Services Revenue

The following table summarizes the composition of our net services revenue for the years ended December 31, 2008 and 2009:


	2008		2009
	(In thousands)

Net base fees for managed service contracts	$	350,085	$	434,281
Incentive payments for managed service contracts		38,971		64,033
Other services		9,413		11,878

Total	$	398,469	$	510,192

Net services revenue increased $111.7 million, or 28.0%, to $510.2 million for the year ended December 31, 2009 from $398.5 million for the year ended December 31, 2008. The largest component of the increase, net base fee revenue, increased $84.2 million, or 24.1%, to $434.3 million for the year ended December 31, 2009 from $350.1 million for the year ended December 31, 2008, primarily due to an increase in the number of hospitals with whom we had managed service contracts from 46 as of December 31, 2008 to 54 as of December 31, 2009. Of the $84.2 million increase in net base fee revenues, $61.1 million was attributable to new managed service contracts entered into during 2009. In addition, incentive payment revenues increased by $25.1 million, or 64.3%, to $64.0 million for the year ended December 31, 2009 from $39.0 million for the year ended December 31, 2008, consistent with the increases that generally occur as our managed service contracts mature. All other revenues increased by $2.5 million, or 26.2%, to $11.9 million for the year ended December 31, 2009 from $9.4 million for the year ended December 31, 2008, as we increased the number of customers using our dormant patient accounts receivable collection services and continued to expand our specialized services such as emergency room physician advisory services. Net patient revenue under our management increased by $2.7 billion, or 29.7%, to $12.0 billion for the year ended December 31, 2009 from $9.2 billion for the year ended December 31, 2008.

Costs of Services

Our costs of services increased $75.5 million, or 22.5%, to $410.7 million for the year ended December 31, 2009 from $335.2 million for the year ended December 31, 2008. The increase in costs of services was primarily attributable to the increase in the number of hospitals for which we provide managed services.

Operating Margin

Operating margin increased $36.2 million, or 57.3%, to $99.5 million for the year ended December 31, 2009 from $63.3 million for the year ended December 31, 2008. The increase consisted primarily of:


	•	$25.1 million in additional incentive payments under managed service contracts;

	•	an increase of $0.6 million in the operating margin associated with our other services, as a result of the continued expansion of our dormant patient accounts receivable collection and other ancillary services; and

	•	a reduction of $11.3 million in revenue cycle operating costs under managed service contracts, net of customer cost sharing.

The above was partially offset by an increase of $0.8 million in costs related to the issuance of warrants to Ascension Health during the year ended December 31, 2009.

The increase in operating margin in absolute dollars was accompanied by an increase in operating margin as a percentage of net services revenue from 15.9% for the year ended December 31, 2008 to 19.5% for the year ended December 31, 2009, primarily due to an increased ratio of mature managed service contracts to new managed service contracts.

Operating Expenses

Infused management and technology expenses increased $12.6 million, or 31.9%, to $51.8 million for the year ended December 31, 2009 from $39.2 million for the year ended December 31, 2008. The increase in infused management and technology expenses was primarily due to the increase in the number of our management personnel deployed at customer facilities, reflecting an increase in the number of hospitals with whom we had managed service contracts, as well as the items noted below.

Selling, general and administrative expenses increased $8.9 million, or 42.1%, to $30.2 million for the year ended December 31, 2009 from $21.2 million for the year ended December 31, 2008. The increase included $1.4 million of costs, or 15.3% of the increase, for enhancing and maintaining our accounting systems, documenting internal controls, establishing an internal audit function and other costs associated with our preparation to be a public company. The increase also included additional research and development costs of $1.0 million, or 11.4% of the increase, to develop our new quality/cost service initiative. The increase also included $2.8 million, or 31.8% of the increase, related to additional depreciation, amortization and share-based compensation expenses, as discussed below. The remaining increase of $3.7 million, or 41.5% of the increase, was primarily due to increases in our personnel costs to support our expanding customer base.

We allocate our other operating expenses between the infused management expenses and selling, general and administrative expenses. During the year ended December 31, 2009, the following changes affected both categories:


	•	Share-based compensation expense increased $3.4 million, or 94.8%, to $6.9 million for the year ended December 31, 2009 from $3.6 million for the year ended December 31, 2008 due to employee option grants and vesting of previously granted stock options associated with the continued expansion of our personnel and the increase in the fair market value of our stock, which increases the cost of option grants calculated using the provisions of ASC 718.

	•	Depreciation expense increased $0.7 million, or 50.6%, to $2.0 million for the year ended December 31, 2009 from $1.3 million for the year ended December 31, 2008, due to the addition of computer equipment, furniture and fixtures, and other property to support our growing operations.

	•	Amortization expense increased $0.7 million, or 58.5%, to $1.9 million for the year ended December 31, 2009 from $1.2 million for the year ended December 31, 2008. The majority of this increase resulted from amortization of internally developed software.

Operating Income

Operating income increased $14.8 million, to $17.6 million for the year ended December 31, 2009 from an operating income of $2.8 million for the year ended December 31, 2008. The increase in operating income was primarily due to net services revenue growing at a higher rate than operating expenses as a result of operating efficiencies.

Income Taxes

Tax expense increased $0.7 million, or 31.0%, to $3.0 million for the year ended December 31, 2009 from $2.3 million for the year ended December 31, 2008. The increase in 2009 tax expense was primarily due to the increase in taxable income during the period, offset by the release of deferred tax asset valuation allowance of $3.5 million. Our tax provision for the year ended December 31, 2009 was equal to approximately 17% of our pre-tax income as compared to 65% for the year ended December 31, 2008. The decrease was mainly due to the release of the tax valuation allowance.

Net Income

Net income increased $13.3 million, to $14.6 million for the year ended December 31, 2009 from net income of $1.2 million for the year ended December 31, 2008. The increase in net income was primarily due to the increase in operating income, offset by a decrease of $0.7 million in net interest income.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2008

Net Services Revenue

The following table summarizes the composition of our net services revenue for the years ended December 31, 2007 and 2008:


	2007		2008
	(In thousands)

Net base fees for managed service contracts	$	212,086	$	350,085
Incentive payments for managed service contracts		25,491		38,971
Other services		3,148		9,413

Total	$	240,725	$	398,469

Net services revenue increased $157.7 million, or 65.5%, to $398.5 million for the year ended December 31, 2008 from $240.7 million for the year ended December 31, 2007. The largest component of the increase, net base fee revenue, increased $138.0 million, or 65.1%, to $350.1 million for the year ended December 31, 2008 from $212.1 million for the year ended December 31, 2007, primarily due to an increase in the number of hospitals with whom we had managed service contracts from 34 as of December 31, 2007 to 46 as of December 31, 2008. Of the $138.0 million increase in net base fee revenues, $113.4 million was attributable to new managed service contracts entered into during 2008. In addition, incentive payment revenues increased by $13.5 million, or 52.9%, to $39.0 million for the year ended December 31, 2008 from $25.5 million for the year ended December 31, 2007. All other revenues increased by $6.3 million, or 199.0%, to $9.4 million for the year ended December 31, 2008 from $3.1 million for the year ended December 31, 2007, as we increased the number of customers using our dormant patient accounts receivable collection services and we began rolling out specialized services such as emergency room physician advisory services. Net patient revenue under our management increased by $2.5 billion, or 37.0%, to $9.2 billion for the year ended December 31, 2008 from $6.7 billion for the year ended December 31, 2007.

Costs of Services

Our costs of services increased $137.5 million, or 69.6%, to $335.2 million for the year ended December 31, 2008 from $197.7 million for the year ended December 31, 2007. The increase in costs of services was primarily attributable to the increase in the number of hospitals for which we provide managed services.

Operating Margin

Operating margin increased $20.2 million, or 46.9%, to $63.3 million for the year ended December 31, 2008 from $43.0 million for the year ended December 31, 2007. The increase consisted primarily of:


	•	$13.5 million in additional incentive payments under managed service contracts;

	•	an increase of $3.2 million in the margin associated with our services, primarily as a result of the increase in volume of late stage receivables collections and our rollout of physician advisory services; and

	•	a reduction of $3.5 million in revenue cycle operating costs under managed service contracts, net of customer cost sharing.

Operating margin as a percentage of net services revenue decreased in the year ended December 31, 2008 because, as a result of our significant growth during 2008, there was a higher proportion of managed service contracts in their initial contract year (when improvements in net services revenue and reductions in revenue cycle operating costs are generally lower) during 2008

than during 2007. Operating margin as a percentage of net services revenue decreased from 17.9% in the year ended December 31, 2007 to 15.9% in the year ended December 31, 2008.

Operating Expenses

Infused management and technology expenses increased $11.4 million, or 40.8%, to $39.2 million for the year ended December 31, 2008 from $27.9 million for the year ended December 31, 2007. The increase in infused management and technology expenses was primarily due to the increase in the number of our management personnel deployed at customer facilities, reflecting an increase in the number of hospitals with whom we had managed service contracts, as well as the items noted below.

Selling, general and administrative expenses increased $5.6 million, or 35.6%, to $21.2 million for the year ended December 31, 2008 from $15.7 million for the year ended December 31, 2007. Of the increase, $6.1 million was due to increases in our personnel costs necessary to support our expanding customer base. This was offset by a $1.7 million decrease in share-based compensation expense associated with stock warrants granted for assistance in obtaining new hospital customers. The remaining $1.2 million of the increase related to depreciation, amortization and share-based compensation expenses, as discussed below.

We allocate our operating expenses between the infused management expenses and selling, general and administrative expenses. During the year ended December 31, 2008, the following changes affected both categories:


	•	Share-based compensation and warrant expense increased $0.9 million, or 17.6%, to $6.0 million for the year ended December 31, 2008 from $5.1 million for the year ended December 31, 2007, due to employee option grants and vesting of previously granted stock options associated with the continued expansion of our personnel and the increase in the fair market value of our stock, which increases the cost of option grants calculated using the provisions of ASC 718, offset by a reduction in share-based compensation expense due to an increase in our estimate of forfeitures.

	•	Depreciation expense increased $0.5 million, or 100%, to $1.0 million for the year ended December 31, 2008 from $0.5 million for the year ended December 31, 2007, due to the addition of computer equipment, furniture and fixtures and other property to support our growing operations.

	•	Amortization expense increased $0.7 million, or 87.5%, to $1.5 million for the year ended December 31, 2008 from $0.8 million for the year ended December 31, 2007. Of this increase, $0.5 million related to the amortization of internally developed software, $0.1 million related to the write-off of the value assigned to relationships with customers acquired as a result of our acquisition of a business that did not enter into managed service contracts with us, and $0.1 million related to recurring amortization of other intangible assets.

Operating Income (Loss)

Operating income increased $3.3 million to $2.8 million for the year ended December 31, 2008 from an operating loss of $0.5 million for the year ended December 31, 2007. The increase in operating income was primarily due to net services revenue growing at a higher rate than operating expenses as a result of operating efficiencies.

Income Taxes

We conduct a large portion of our operations in Michigan. In 2008, Michigan began to impose a tax based on gross receipts in addition to tax based on net income. For the year ended December 31, 2008, we recorded a tax provision of $2.3 million, of which $1.2 million was attributable to the Michigan gross receipts tax. As a result, our total tax provision was equal to 65% of pre-tax income

for the year ended December 31, 2008, compared to 37% of pre-tax income for the year ended December 31, 2007.

Net Income

Net income increased $0.5 million, or 60.6%, to $1.2 million for the year ended December 31, 2008 from $0.8 million for the year ended December 31, 2007. The increase in net income was primarily due to the increase in operating income.

Selected Quarterly Financial Data

The following table sets forth selected unaudited consolidated quarterly operating data for each of the eight quarters during the period from January 1, 2008 to December 31, 2009. In our management’s opinion, the data have been prepared on the same basis as the audited consolidated financial statements included in this prospectus and reflect all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of these data. You should read this information together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Operating results for any fiscal quarter are not necessarily indicative of results for the full year. Historical results are not necessarily indicative of the results to be expected in future periods.


	Three Months Ended
	Mar. 31,			June 30,		Sept. 30,		Dec. 31,			Mar. 31,			June 30,			Sept. 30,			Dec. 31,
	2008			2008		2008		2008			2009			2009			2009			2009
	(In thousands)

Net services revenue	$	86,357		$	100,904	$	105,956	$	105,252		$	112,467		$	125,682		$	134,512		$	137,531
Costs of services		73,433			86,649		87,624		87,505			92,703			102,964			105,885			109,159

Operating margin		12,924			14,255		18,332		17,747			19,764			22,718			28,627			28,372
Infused management and technology expenses		8,452			9,486		9,795		11,501			11,175			13,307			13,572			13,709
Selling, general and administrative expenses		5,696			3,946		5,020		6,565			8,816			6,492			8,071			6,774

Income (loss) from operations		(1,224	)		823		3,517		(319	)		(227	)		2,919			6,984			7,889
Interest income (expense)		264			169		251		26			44			39			(95	)		3

Net income (loss) before provision for (benefit from) income taxes		(960	)		992		3,768		(293	)		(183	)		2,958			6,889			7,892
Provision for (benefit from) income taxes		26			600		1,414		224			454			(2,893	)		2,619			2,786

Net income (loss)	$	(986	)	$	392	$	2,354	$	(517	)	$	(637	)	$	5,851		$	4,270		$	5,106

Our quarterly and annual net services revenue generally increased each period due to ongoing expansion in the number of hospitals subject to managed service contracts with us and increases in the amount of incentive payments earned. The timing of customer additions is not uniform throughout the year, however. We did not add any new customers in the quarters ended December 31, 2008 and December 31, 2009 and as a result our net services revenue were essentially unchanged from the prior quarter. We experience seasonal fluctuations in incentive payments as a result of variations in the number of days in certain months and patient deferral of elective procedures during the year-end holiday period.

Our costs of services generally increased each period due to increases in the number of revenue cycle staff persons under our management at customer sites. Our operating expenses have increased as a result of our hiring of additional employees to provide on-site management of our customers’ revenue cycle operations and our ongoing efforts to develop and enhance the technology that allows us to improve our customers’ net revenue. Operating margins are slightly depressed in quarters in which we add new customers that have not yet fully implemented our operating model and achieved expected cost efficiencies. In addition, beginning in the second half of 2008, we began to incur additional expenses to build the infrastructure necessary to become a public company. The ongoing decline in interest income for the periods presented is due to the reduction in market interest

rates. The tax benefit in the quarter ended June 30, 2009 reflects the release of reserves for deferred tax assets of $3.5 million.

Selling, general and administrative expenses in the quarters ended March 31, 2008 and March 31, 2009 included $2.4 million and $2.8 million, respectively, in share-based compensation expense associated with stock warrants granted for assistance in obtaining new hospital customers. Primarily as a result of these expenses, we incurred net losses in the quarters ended March 31, 2008 and March 31, 2009. We incurred a net loss in the quarter ended December 31, 2008 primarily due to investments made in personnel to ensure that sufficient infused management were on hand and trained for new business opportunities then being negotiated.

Liquidity and Capital Resources

Our primary source of liquidity is cash flows from operations. Given our current cash and cash equivalents, short-term investments and accounts receivable, we believe that we will have sufficient liquidity to fund our business and meet our contractual obligations for at least 12 months following the closing of this offering. We expect that the combination of our current liquidity and expected additional cash generated from operations will be sufficient for our planned capital expenditures, which are expected to consist primarily of capitalized software, and other investing activities, in the next 12 months.

Our cash and cash equivalents, consisting of demand deposits, increased $17.0 million, from $34.7 million at December 31, 2007 to $51.7 million at December 31, 2008, primarily due to cash generated by the growth in our business. Cash and cash equivalents decreased $8.0 million, from $51.7 million at December 31, 2008 to $43.7 million at December 31, 2009, primarily due to the payment of dividends, changes in accounts receivable and prepaid assets discussed below.

Our receivables could be exposed to financial risks, such as credit risk and liquidity risk. Credit risk is the risk of financial loss to us if a counterparty fails to meet its contractual obligations. Liquidity risk is the risk that we will not be able to meet our obligations as they come due. We seek to limit our exposure to credit risk through efforts to reduce our customer concentration and our quarterly assessment of customer creditworthiness, and to liquidity risk by managing our cash flows.

Operating Activities

Cash flows generated by operating activities totaled $11.8 million, $39.5 million and $15.1 million for the years ended December 31, 2007, 2008 and 2009, respectively. The increase in cash provided by operations for the year ended December 31, 2008 as compared to the year ended December 31, 2007 was primarily attributable to higher net services revenue and improved financial results due to growth in our business. While our net income increased by $13.3 million during the year ended December 31, 2009 as compared to the year ended December 31, 2008, cash provided by operations was lower in 2009 than 2008 due to the timing of payments from customers and to vendors. Receivables from customers increased by $15.1 million, $4.3 million and $7.3 million during the years ended December 31, 2007, 2008 and 2009, respectively, primarily due to increased net services revenue and the timing of customer payments. Prepaid assets increased by $3.2 million during the year ended December 31, 2009 due to a prepayment of 2009 estimated federal income taxes. Payables increased by $1.3 million and $15.5 million for the years ended December 31, 2007 and 2008, respectively, primarily due to growth in our business. Despite the increase in our net services revenue and the overall level of our operations in 2009 as compared to 2008, payables decreased by $6.1 million during 2009 due to the timing of payments at year end. Accrued service costs increased by $7.2 million, $3.7 million and $4.2 million for the years ended December 31, 2007, 2008 and 2009, respectively, as we grew our customer base from 21 sites at the beginning of 2007 to 54 at the end of 2009. Deferred revenue increased by $6.6 million and $10.3 million during the years ended December 31, 2007 and 2008, respectively, primarily due to growth in our business. While our business continued to grow during the year ended December 31, 2009, deferred revenue decreased by $0.4 million as a result of the timing of customer payments at year end.

Investing Activities

Cash used in investing activities was $3.3 million, $6.1 million and $7.2 million for the years ended December 31, 2007, 2008 and 2009, respectively. For all three years, use of cash primarily related to our purchases of furniture, fixtures, computer hardware, software and other property to support the growth of our business.

Financing Activities

Cash used in financing activities was $16.0 million for the year ended December 31, 2009 as compared to $16.3 million for the year ended December 31, 2008. These uses of cash are primarily due to the $15 million total dividend declared by our board of directors in July 2008 and the $0.72 per share dividend declared by our board of directors in August 2009. The 2009 dividend was paid on all outstanding shares of common and preferred stock and aggregated $14.9 million. The reported figures are net of proceeds from stock option exercises and the repayment of non-executive employee loans. The net cash used in 2008 includes $1.5 million related to the repurchase of common stock from one of our initial employees. There were nominal repurchases in 2009. Additionally, we incurred $2.9 million of costs related to our efforts to prepare for our initial public offering during the year ended December 31, 2009. No such costs were incurred in 2008.

Cash provided by financing activities was $5.4 million for the year ended December 31, 2007. This represented $5.5 million of proceeds from our sale of 669,284 shares of common stock to Ascension Health and an additional $0.6 million of proceeds from exercises of stock option, partially offset by our repurchases of common stock for $0.7 million.

Revolving Credit Facility

On September 30, 2009, we entered into a $15 million revolving line of credit with the Bank of Montreal, which may be used for working capital and general corporate purposes. Any amounts outstanding under the line of credit will accrue interest at LIBOR plus 4% and are secured by substantially all of our assets. Advances under the line of credit are limited to a borrowing base and a cash deposit account which will be established at the time borrowings occur. The line of credit has an initial term of two years and is renewable annually thereafter. As of December 31, 2009, we had no amounts outstanding under this line of credit. The line of credit contains restrictive covenants which limit our ability to, among other things, enter into other borrowing arrangements and pay dividends.

Future Capital Needs

We intend to fund our future growth over the next 12 months with funds generated from operations and our net proceeds from this offering. Over the longer term, we expect that cash flows from operations, supplemented by short-term and long-term financing, as necessary, will be adequate to fund our day-to-day operations and capital expenditure requirements. Our ability to secure short-term and long-term financing in the future will depend on several factors, including our future profitability, the quality of our accounts receivable, our relative levels of debt and equity, and the overall condition of the credit markets.

Contractual Obligations

The following table presents our obligations and commitments to make future payments under contracts, such as lease agreements, and under contingent commitments as of December 31, 2009:


	Year Ended December 31,
									2014 and
	2010		2011		2012		2013		beyond		Total
	(In thousands)

Minimum lease payments	$	1,839	$	1,974	$	1,770	$	1,623	$	12,281	$	19,487

Total	$	1,839	$	1,974	$	1,770	$	1,623	$	12,281	$	19,487

We rent office space and equipment under a series of operating leases, primarily for our Chicago corporate office and India operations. Lease payments are amortized to expense on a straight-line basis over the lease term. As of December 31, 2009, the Chicago corporate office consisted of approximately 28,000 square feet in a multi-story office building. We intend to exercise our option to rent approximately 22,000 square feet of additional office space on an adjacent floor, starting June 1, 2010, and will have the option to concurrently return approximately 6,500 square feet of office space on a non-adjacent floor. If we do not return the 6,500 square feet of office space, the lease for all 50,000 feet will be extended until ten years and 90 days after the date we take possession of the additional 22,000 square feet of office space, and our minimum lease payments will increase by approximately $550,000 per year. See “Business — Facilities” for additional information regarding our office leases.

Pursuant to the master services agreement between us and Ascension Health and our individual agreements with hospitals affiliated with Ascension Health that contract for our services, our fees are subject to adjustment in the event specified performance milestones are not met, which could result in a reduction in future fees payable to us by such hospitals but would not obligate us to refund any payments. These potential reductions in future fees are not reflected in the above table because the amounts cannot be quantified and because, based on our experience to date, we do not anticipate that there will be any permanent reduction in future fees under these provisions. For additional information regarding these contract provisions, see “Related Person Transactions — Transactions With Ascension Health”.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Recent Accounting Pronouncements

In June 2009, the FASB issued ASC 105, Generally Accepted Accounting Principles . ASC 105 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASC 105 did not have an impact on our consolidated financial statements.

In December 2007, the FASB issued ASC 805, Business Combinations . ASC 805 provides guidance in certain aspects of business combinations, with additional guidance provided defining the acquirer, recognizing and measuring the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, assets and liabilities arising from contingencies, defining a bargain purchase, and recognizing and measuring goodwill or a gain from a bargain purchase. In addition, under ASC 805, adjustments associated with changes in tax contingencies and valuation allowances that occur after the measurement period, not to exceed one year, are recorded as adjustments to income. This statement is effective for all business combinations for which the

acquisition date is on or after the beginning of an entity’s first fiscal year that begins after December 15, 2008; however, the guidance in this standard regarding the treatment of income tax contingencies and valuation allowances is retroactive to business combinations completed prior to January 1, 2009. We adopted ASC 805 on January 1, 2009. The adoption had no material impact on our consolidated financial statements.

In June 2008, the FASB issued an amendment to ASC 260, Earnings Per Share , codified as ASC 260-10. The guidance in ASC 260-10 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. ASC 260-10 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. We adopted ASC 260-10 effective January 1, 2009. The adoption had no material impact on our consolidated financial statements.

In April 2009, the FASB issued an amendment to ASC 825, Financial Instruments , codified by ASC 825-10. The guidance in ASC 825-10, which amends ASC 825, requires publicly-traded companies, as defined in ASC 270, Interim Reporting , to provide disclosures on the fair value of financial instruments in interim financial statements. Since ASC 825-10 requires only additional disclosures concerning the financial instruments, the adoption of ASC 825-10 effective June 30, 2009, did not have a material impact on our consolidated financial statements.

In May 2009, the FASB issued ASC 855, Subsequent Events . The guidance in ASC 855 establishes general standards of accounting for and disclosures of subsequent events that occur after the balance sheet date but prior to the issuance of financial statements. The statement requires additional disclosure regarding the date through which subsequent events have been evaluated by the entity as well as whether that date is the date the financial statements were issued. This statement became effective for our financial statements as of June 30, 2009. The adoption had no material impact on our consolidated financial statements.

In February 2010, the FASB issued Accounting Standards Update, or ASU, No. 2010-09 to amend ASC 855 which applies with immediate effect. The ASU removes the requirement to disclose the date through which subsequent events were evaluated in both originally issued and reissued financial statements for SEC filers.

In October 2009, the FASB issued ASU No. 09-13, Revenue Recognition — Multiple Deliverable Revenue Arrangements, or ASU 09-13. ASU 09-13 updates the existing multiple-element revenue arrangements guidance currently included in FASB ASC 605-25. The revised guidance provides for two significant changes to the existing multiple element revenue arrangements guidance. The first change relates to the determination of when the individual deliverables included in a multiple element arrangement may be treated as separate units of accounting. The second change modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. Together, these changes are likely to result in earlier recognition of revenue and related costs for multiple-element arrangements than under the previous guidance. This guidance also significantly expands the disclosures required for multiple-element revenue arrangements. The revised multiple element revenue arrangements guidance will be effective for the first annual reporting period beginning on or after June 15, 2010, however, early adoption is permitted, provided that the revised guidance is retroactively applied to the beginning of the year of adoption. We are currently evaluating the impact of the adoption of ASU 09-13, and we expect that the adoption of the ASU will have no material impact on our consolidated financial statements.

Qualitative and Quantitative Disclosures about Market Risk

Interest Rate Sensitivity. Our interest income is primarily generated from interest earned on operating cash accounts. Our exposure to market risks related to interest expense is limited to borrowings under our revolving line of credit, which bears interest at LIBOR plus 4%. To date, there have been no borrowings under this facility. We do not enter into interest rate swaps, caps or collars or other hedging instruments.

Foreign Currency Exchange Risk. Our results of operations and cash flows are subject to fluctuations due to changes in the Indian rupee because a portion of our operating expenses are incurred by our subsidiary in India and are denominated in Indian rupees. However, we do not generate any revenues outside of the United States. For the years ended December 31, 2008 and 2009, 0.7% and 0.6%, respectively, of our expenses were denominated in Indian rupees. As a result, we believe that the risk of a significant impact on our operating income from foreign currency fluctuations is not substantial.

BUSINESS

Overview

Our customers typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent ambulatory clinics, and their affiliated physician practice groups. We seek to develop strategic, long-term relationships with our customers and focus on providers that we believe understand the value of our operating model and have demonstrated success in both clinical and operational outcomes. As of March 31, 2010, we provided our integrated revenue cycle service offerings to 21 customers representing 53 hospitals and $11.6 billion in annual net patient revenue, as well as physicians’ billing organizations associated with several of these customers. Based on managed service contracts to which we were a party as of March 31, 2010, during the second quarter of 2010 we will be providing integrated revenue cycle services for customers with annual net patient revenue of $13.6 billion.

Grounded in sophisticated analytics, our solution spans our customers’ entire revenue cycle. This helps set us apart from competing services, which we believe address only a portion of the revenue cycle. We are not a traditional outsourcing company focused solely on cost reductions. Through the implementation of our distinctive operating model that includes people, processes and technology, our customers can generate significant and sustainable revenue cycle improvements. Our service offerings are adaptable to the evolution of the healthcare regulatory environment, technology standards and market trends, and require no up-front cash investment by our customers.

To implement our solution, we assume full responsibility for the management and cost of a customer’s revenue cycle operations and supplement the customer’s existing revenue cycle staff with seasoned Accretive Health personnel. We collaborate with our customers’ revenue cycle employees with the objective of educating and empowering them so that over time they can deliver improved results using our tools. Once implemented, our technology, processes and services are deeply embedded in a hospital’s day-to-day operations, touching each key step of the revenue cycle. We and our customers share financial gains resulting from our solution, which directly aligns our objectives and interests with those of our customers. Both we and our customers benefit — on a contractually agreed-upon basis — from net patient revenue increases and cost savings realized by the customers as a result of our services. We believe that, over time, this alignment of interests fosters greater innovation and incentivizes us to improve our customers’ revenue cycle operations.

The revenue cycle operations of a typical hospital, physician or other healthcare provider often fail to capture and collect the total amounts contractually owed to it from third-party payors and patients for medical services rendered, leading to significant bad debt write-offs, uncompensated care, payment denials by payors and corresponding administrative write-offs, as well as lost revenue for missed charges. Fitch Ratings estimates that in 2008 and 2009, uncompensated care (including bad debt write-offs, charity care and uninsured discounts) averaged 19% and 20% of net patient revenue at U.S. hospitals, respectively. We generally deliver operating margin improvements to our customers through a combination of improvements in collections, which we refer to as net revenue yield, charge capture, which involves ensuring that all charges for medical treatment are included in the associated bill, and revenue cycle cost reductions. Our customers have historically achieved significant net revenue yield improvements within 18

to 24 months of implementing our operating model, with customers subject to mature managed service contracts typically realizing 400 to 600 basis points in yield improvements in the third or fourth contract year. All of a customer’s yield improvements during the period we are providing services are attributed to our solution because we assume full responsibility for the management of the customer’s revenue cycle. Our methodology for measuring yield improvements excludes the impact of external factors such as changes in reimbursement rates from payors, the expansion of existing services or addition of new services, volume increases and acquisitions of hospitals or physician practices, which may impact net revenue but are not considered changes to net revenue yield. Improvements in charge capture and collections are typically attributable to reduced payment denials by payors, identification of additional items that can be billed to payors based on the actual procedures performed, identification of insurance for a higher percentage of otherwise uninsured patients, and improved collections of patient balances after insurance. Revenue cycle cost reductions are typically achieved through operating efficiencies, including streamlining work flow, automating processes and centralizing vendor activities. Specific sources of margin improvement vary among customers.

We have developed and refined our solution based in part on information, processes and management experience garnered through working with many of the largest and most prestigious hospitals and healthcare systems in the United States. We seek to embed our technology, personnel, know-how and culture within each customer’s revenue cycle activities with the expectation that we will serve as the customer’s on-site operational manager beyond the managed service contract’s initial term, which typically ranges from four to five years. To date, we have experienced a contract renewal rate of 100% (excluding exploratory new service offerings, a consensual termination following a change of control and a customer reorganization). Coupled with the long-term nature of our managed service contracts and the fixed nature of the base fees under each contract, our historical renewal experience provides a core source of recurring revenue.

Our net services revenue consist primarily of base fees and incentive fees. We receive base fees for managing our customers’ revenue cycle operations, net of any cost savings we share with those customers. Incentive fees represent our portion of the increase in our customers’ net patient revenue resulting from our services. We generate a portion of our operating margin as a result of the difference between the fixed base fees and the variable costs of the revenue cycles that we manage. Incentive fees are a smaller portion of overall revenue than base fees but generally contribute directly to operating margin, thus significantly impacting our profitability. We monitor each customer’s revenue cycle performance through periodic operating reviews. A customer’s net revenue improvements and cost savings generally increase over time as we deploy additional programs and as the programs we implement become more effective, which in turn provides visibility into our future revenue and profitability. In 2009, for example, approximately 87% of our net services revenue, and nearly all of our net income, was derived from customer contracts that were in place as of January 1, 2009. In 2009, we had net services revenue of $510.2 million, representing growth of 28.0% over 2008 and a compound annual growth rate of 46.4% since January 1, 2005. In addition, we were profitable for the years ended December 31, 2007, 2008 and 2009, and our profitability increased in each of these years.

Market Opportunity

We believe that current macroeconomic conditions will continue to impose financial pressure on healthcare providers and will increase the importance of managing their revenue cycles effectively and efficiently. The market opportunity for our services — which we define as the total amount of net patient revenue collected annually by U.S. hospitals and physicians’ billing organizations — exceeds $750 billion, calculated as follows. There are more than 2,200 acute care hospitals in the United States within our target market (with more than $250 million in annual net patient revenue each, or part of larger hospital systems), representing a market opportunity of approximately $510 billion in annual net patient revenue. In addition, there are more than 2,500 smaller hospitals (with less than $250 million in annual net patient revenue each), representing a market opportunity of approximately

$130 billion in annual net patient revenue, and large physicians’ billing organizations, representing an additional market opportunity of more than $115 billion in annual net patient revenue.

According to the Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services, expenditures for hospitals and physician and clinical services are expected to increase between 2009 and 2018 at annual rates of approximately 6.4% and 5.4%, respectively. Population growth, longer life expectancy, the increasing prevalence of chronic illnesses (such as diabetes and obesity) and the over-utilization of certain healthcare services is expected to put increasing pressure on hospitals, physicians and other healthcare providers to operate more efficiently. American Hospital Association surveys indicate that approximately 43% of hospitals had a negative operating margin during the first quarter of 2009 and approximately 77% of hospitals had reduced capital spending. As the scope of healthcare services expands and financial pressures mount, hospitals are demanding both greater effectiveness and improved efficiency in the management of their revenue cycle operations. We believe that efficient management of the revenue cycle and collection of the full amount of payments due for patient services are among the most critical challenges facing healthcare providers today.

We believe that the inability of healthcare providers to capture and collect the total amounts owed to them for patient services is caused by the following trends:


	•	*Complexity of Revenue Cycle Management.* At most hospitals, there is a lack of standardization across operating practices, payor and patient payment methodologies, data management processes and billing systems. In general, after a patient receives healthcare services, the hospital must coordinate payment with two or more parties, including third-party insurance companies, federal and state government payors, private charities and individual payors. Hospitals also face a growing population of uninsured patients, whom healthcare providers have an ethical and legal obligation to treat.

	•	*Lack of Integrated Systems and Processes.* Although interrelated, the individual steps in the revenue cycle are not operationally integrated across revenue cycle departments at many hospitals. Multiple tasks and milestones must be completed properly by personnel in various departments before a hospital or physician can be reimbursed for patient services. It is often difficult for a single organization to acquire and coordinate all the knowledge and experience necessary to identify and eliminate inefficiencies within the revenue cycle. Even if all steps are performed flawlessly, the time required to receive full payment for services creates long billing cycles. With frequent changes in the reimbursement rules imposed by third-party payors, the billing and collections cycle often is not timely and error-free, further lengthening the time before payment is actually received by the healthcare provider.

	•	*Increasing Patient Financial Responsibility for Healthcare Services.* Hospitals are being forced to adapt to the need for direct-to-patient billing and collections capabilities as patients bear payment responsibility for an increasing portion of healthcare costs. Hospitals have traditionally focused on collecting payments from insurance companies and from state and federal payors, and typically are less familiar with the processes necessary to collect payments from patients at the point of service, including the use of alternative payment options. Patient billing is often confusing and payment instructions are often unclear. Moreover, hospitals generally do not utilize consumer segmentation techniques to formulate effective revenue collection approaches to patients. As a result, hospitals generally write-off a high percentage of patient-owed bills, resulting in increases in bad debt and uncompensated care.

	•	*Outdated Systems and Insufficient Resources to Upgrade Them.* Many hospitals suffer from operating inefficiencies caused by outdated technology, increasingly complex billing requirements, a general lack of standardization of process and information flow, costly in-house services that could be more economically outsourced, and an increasingly stringent regulatory environment. Hospitals often lack the breadth and depth of data available to payors, and this lack of information may contribute to the filing of less accurate claims with third-party insurance payors and unfavorable resolutions of disputed claims. In addition, the endowments


		of most hospitals have significantly declined, motivating them to make their revenue cycle operations more efficient.

In addition to the above trends, we believe that the federal healthcare reform legislation that was enacted in March 2010 may create new business opportunities for us by increasing the need for services such as those that we provide. For example, reduced reimbursement for some healthcare providers may cause these healthcare providers to turn to outsourcing to extract more out of their existing revenue cycles, and value and quality-based reimbursement incentives created by the legislation could generate more interest in our service offerings.

The Accretive Health Solution

Our solution is intended to address the full spectrum of revenue cycle operational issues faced by healthcare providers, including:


	•	the increasingly complex and challenging payor environment;

	•	a lack of fully integrated end-to-end revenue cycle management expertise;

	•	the consequences of increasing patient responsibility for their healthcare costs;

	•	the difficulty and associated expense of a single organization acquiring and coordinating the knowledge and experience necessary to efficiently manage the revenue cycle;

	•	ongoing attrition of revenue cycle staff; and

	•	frequent patient confusion and frustration with financial obligations and billing.

The revenue cycle operations of a typical hospital, physician or other healthcare provider fail to capture and collect the total amounts owed to them from third-party payors and patients for medical services rendered, leading to significant bad debt write-offs, uncompensated care, payment denials by payors and corresponding administrative write-offs, as well as lost revenue for missed charges. Fitch Ratings estimates that in 2008 and 2009, uncompensated care (including bad debt write-offs, charity care and uninsured discounts) averaged 19% and 20% of net patient revenue at U.S. hospitals, respectively.

We deliver operating margin improvements to our customers through a combination of improvements in net revenue yield, charge capture and revenue cycle cost reductions. Improvements in charge capture and collections are typically attributable to reduced payment denials by payors, identification of additional items that can be billed to payors based on the actual procedures performed, identification of insurance for a higher percentage of otherwise uninsured patients, and improved collections of patient balances after insurance. Revenue cycle cost reductions are typically achieved through operating efficiencies, including streamlining work flow, automating processes and centralizing vendor activities. Specific sources of margin improvement vary among customers.

Our customers have historically achieved significant net revenue yield improvements within 18 to 24 months of implementing our operating model, with customers operating under mature managed service contracts typically realizing 400 to 600 basis points in yield improvements in the third or fourth contract year. During the assessment phase of the customer relationship, we identify specific areas for improvement in net revenue yield and begin implementation immediately upon execution of a managed service contract. While improvements in net revenue yield generally represent the majority of a customer’s operating margin improvement, we generally are able to deliver additional margin improvement through revenue cycle cost reductions. Because our managed service contracts align our interests with those of our customers, we have been able, over time, to improve our margins along with those of our customers.

We believe that our proprietary and integrated technology, management experience and well-developed processes are enhanced by the knowledge and experience we gain working with a wide range of customers and improve with each payor reimbursement or patient pay transaction. Our proprietary technology applications include workflow automation and direct payor connection

capabilities that enable revenue cycle staff to focus on problem accounts rather than on manual tasks, such as searching payor websites for insurance and benefits verification for all patients. We employ technology that identifies and isolates specific cases requiring review or action, using the same interface for all users, to automate a host of tasks that otherwise can consume a significant amount of staff time. We use real-time feedback from our customers to improve the functionality and performance of our technology and processes and incorporate these improvements into our service offerings on a regular basis. We strive to apply operational excellence throughout the entire revenue cycle.

We adapt our solution to the hospital’s organizational structure in order to minimize disruption to existing staff and to make our services transparent to both patients and physicians. The experience and knowledge of the senior management personnel we provide to our customers can improve the performance of their in-house revenue cycle staff. Our objective is to improve the operating performance of our customers, thus generating incentive fees for ourselves, by:


	•	*Improving Net Revenue Yield.* We help our customers improve their net revenue yield. Through the use of our proprietary technologies and methodologies, we precisely calculate each customer’s improvement in net revenue yield. This calculation compares the customer’s actual cash collections for a given instance of care to the maximum potential cash receipts that the customer should have received from the instance of care, which we refer to as the best possible net compliant revenue. We aggregate these calculations for all instances of care and compare the result to the aggregate calculation for the year before we began to provide our services to the customer. We receive a share of each customer’s improvement in net revenue yield.

	•	*Increasing Charge Capture.* We help our customers increase their charge capture by implementing optimization techniques and related processes. We utilize sophisticated analytics and artificial intelligence software to help improve the accuracy of claims filings and the resolution of disputed claims from third-party insurance payors. We also overlay a range of capabilities designed to reduce missed charges, improve the clinical/reimbursement interface and produce bills that comply with third-party payor requirements and applicable healthcare regulations.

	•	*Making Revenue Cycle Operations More Efficient.* We help our customers make their revenue cycle operations more efficient by implementing advanced technologies, streamlining operations, avoiding unnecessary re-work and improving quality. We also can reduce the costs of third-party services, such as Medicaid eligibility review, by transferring the work to our own internal operations. For some customers, we are able to reduce operating costs further by transferring selected internal operations to our centralized shared services centers located in the United States and India.

We employ a variety of techniques intended to achieve this objective:


	•	*Gathering Complete Patient and Payor Information.* We focus on gathering complete patient information and validating insurance coverage and benefits so the services can be recorded and billed to the appropriate parties. For scheduled healthcare services, we educate the patient as to his or her potential financial responsibilities before receiving care. Our systems maintain an automated electronic scorecard, which measures the efficiency of up-front data capture, billing and collections throughout the life cycle of any given patient account. These scorecards are analyzed in the aggregate, and the results are used to help improve work flow processes and operational decisions for our customers. Our analyses of data measured by our systems show that hospitals employing our services have increased the percentage of non-emergency in-patient admissions with complete information profiles to more than 90%, enabling fewer billing delays, increased charge capture and reduced billing cycles.


	•	*Improving Claims Filing and Third-Party Payor Collections.* Based on our customers’ experience, and on industry sources, hospitals typically do not collect 100% of the amounts they are contractually owed by insurance companies. Through our proprietary technology and process expertise, we identify, for each patient encounter, the amount our customer should receive from a payor if the applicable contract with the payor and patient policies are followed. Over time, we compare these amounts with the actual cash collected to help identify which payors, types of medical treatments and patients represent various levels of payment risk for a customer. Using proprietary algorithms and analytics, we consider actual reimbursement patterns to predict the payment risk associated with a customer’s claims to its payors, and we then direct increased attention and time to the riskiest accounts. Our experience is that this approach significantly increases the likelihood that a customer will be reimbursed the amounts it is contractually owed for providing its services.

	•	*Identifying Alternative Payment Sources.* We use various methods to find payment sources for uninsured patients and reimbursement for services not covered by third-party insurance. Our patient financial screening technology and methodologies often identify federal, state or private grant sources to help pay for healthcare services. These techniques are designed to ease the financial burden on uninsured or underinsured patients and increase the percentage of patient bills that are actually paid. After a typical implementation period, we have been able to help our customers find a third-party payment source for approximately 85% of all admitted patients who identified themselves as uninsured.

	•	*Employing Proprietary Technology and Algorithms.* Our service offerings employ a variety of proprietary data analytics and predictive modeling algorithms. For example, we identify patient accounts with financial risk by applying data mining techniques to the data we have collected. Our systems are designed to streamline work processes through the use of proprietary algorithms that focus revenue cycle staff effort on those accounts deemed to have the greatest potential for improving net revenue yield or charge capture. We frequently adjust our proprietary predictive algorithms to reflect changes in payor and patient behavior based upon the knowledge we glean from our entire customer base. As new customers are added and payor and patient behavior changes, the information we use to create our algorithms expands, increasing the accuracy and value of those algorithms. We rely upon a combination of patent, trademark, copyright and trade secret law and contractual terms and conditions to protect our intellectual property rights. We hold one U.S. patent and have filed four additional U.S. patent applications covering key innovations utilized in our solution.

	•	*Using Analytical Capabilities and Operational Excellence.* We draw on the experience that we have gained from working with many of the best healthcare provider systems in the United States to train hospital staffs about new and innovative revenue cycle management practices. We employ extensive analytical analyses to identify specific weaknesses in business processes. We also strive to achieve operational excellence and to foster an overall culture of leading by example. As a result, our on-site management teams have seen marked shifts in the behaviors of hospital administrative staff, including enthusiasm for setting daily and weekly goals, participation in daily half-hour gatherings to track results achieved during the day, and improved adherence to our standard operating procedures.

In addition, we help our customers increase their revenue cycle efficiency by implementing improved practices, advanced data management technology, streamlining work flow processes and outsourcing aspects of their revenue cycle operations. For example, services that can be shared across our customers, such as patient scheduling and pre-registration, medical transcription and patient financial services, can be performed in our shared services centers in the United States and India. By leveraging the economies of scale and experience of our shared services centers, we believe that we offer our customers better quality services at a lower cost. For those customers opting not to participate in our shared services program, we can help reduce costs by migrating services

such as Medicaid eligibility, medical transcription and collections from external vendors to our internal staff.

Our Strategy

Our goal is to become the preferred provider-of-choice for revenue cycle management services in the U.S. healthcare industry. Since our inception, we have worked with some of the largest and most prestigious healthcare systems in the United States, such as Ascension Health, the Henry Ford Health System and the Dartmouth-Hitchcock Medical Center. Going forward, our goal is to continue to expand the scope of our services to hospitals within our existing customers’ systems as well as to leverage our strong relationships with reference customers to continue to attract business from new customers. Key elements of our strategy include the following:


	•	*Delivering Tangible, Long-Term Results by Providing Services that Span the Entire Revenue Cycle.* Our solution is designed to help our customers achieve sustainable economic value through improvements in operating margins. Improvements in our customers’ operating margins in turn provide recurring revenues for us. Our technology and services are deeply integrated across the customer’s entire revenue cycle, whereas most competitive offerings address a narrower portion of the revenue cycle. Our offering alleviates the need to purchase services from multiple sources, potentially saving customers time, money and integration challenges in their efforts to improve their revenue cycle activities.

	•	*Continuing to Develop Innovative Approaches to Increase the Collection Rate on Patient-Owed Obligations.* We have developed and continue to design creative approaches intended to increase net revenue yields on patient-owed obligations. These processes include direct communications with payors to establish patient pay amounts (after insurance and taking into account deductibles) and status, contract modeling tools to provide patients with accurate updates on the portion of an outstanding balance for which they are personally responsible, and the provision of prior balance data and payment alternatives to patients at the point of service. We also use consumer behavior modeling and conduct trending analyses for collections, and we offer patients a variety of payment methods.

	•	*Enhancing and Developing Proprietary Algorithms to Identify Potential Errors and to Make Process Corrections.* Even as patients begin to assume responsibility for a greater portion of the cost of medical services, healthcare providers continue to rely upon third-party payors for the majority of medical reimbursements. To help improve revenue collection rates and timing for claims owed by payors, we have developed proprietary algorithms to assess risk and the resulting treatment of claims. Our methodology is designed to enable nearly 100% of outstanding claims to be reviewed, prioritized and pursued. We believe that our focus on collecting revenue from a broader range of outstanding claims and reducing the average time to collection differentiates our revenue cycle management services. An additional proprietary algorithm that distinguishes our services from others is incorporated in our charge capture tool that identifies potential lost charges. In instances where our customers have been using other third party tools, we routinely identify multiple additional lost charges.

	•	*Expanding Our Shared Services Program.* Our shared services program, which includes patient scheduling and pre-registration, medical transcription and patient financial services, is structured to reduce a hospital’s overhead costs while providing services of comparable or higher quality. Expansion of our shared services program is potentially advantageous for both our customers and us, as we both benefit from greater savings attributable to economies of scale and improvements in net revenue yield. We believe that continuing to transition customers to our shared services will help us achieve our targeted improvements in customer operating margins. We introduced the shared services program in 2008, and we continue to see interest in this offering from both new and existing customers. Currently, approximately 35% of our customers participate in our shared services program.


	•	*Hiring, Training and Retaining Our Personnel.* Our solution was developed by what we believe to be the best personnel available in the market. In order to grow our business and solidify our competitive position, we need to continue to hire, train and retain very talented team members who demonstrate a strong focus on outstanding customer service. Employee recruitment is a priority for us because we believe that our long-term growth is limited more by the availability of top talent than by constraints in market demand for our solution. We seek an ongoing influx of new personnel at all levels so that we have adequate staffing to pursue and accept new customer opportunities. We also make substantial ongoing investments in employee training, including our “operator academy” and “revenue cycle academy” which enable us to educate all new employees regarding our operating model and related processes and technology.


	•	*Continuing to Diversify Our Customer Base.* In October 2004, Ascension Health became our founding customer. While Ascension Health is our largest customer and we expect to continue to expand our presence within Ascension Health’s network of affiliated hospitals, we are focusing our marketing efforts primarily on other healthcare providers and expect to continue to diversify our customer base. In the year ended December 31, 2009 compared to the year ended December 31, 2008, our net services revenue from customers not affiliated with Ascension Health grew by 73.6%, while our net services revenue from hospitals affiliated with Ascension Health grew by 9.2%. As a result, the percentage of our total net services revenue attributable to hospitals affiliated with Ascension Health declined from 88.7% in the year ended December 31, 2006 to 60.3% in the year ended December 31, 2009. Since January 1, 2007, approximately $5.1 billion of the $7.9 billion in annual net patient revenue that we added to our customer base was unrelated to Ascension Health.


	•	*Developing Enhanced Service Offerings that Offer Long-Term Opportunities.* We intend to continue to introduce new services that draw upon our core competencies and that we believe will be attractive to our target customers. In considering new services, we look for market opportunities that we believe present low barriers to entry, require limited incremental cost and present significant growth opportunities. For example, we recently began targeting large physicians’ billing organizations that are linked to hospital systems, and we are developing an initiative focused on increasing the quality of healthcare through incentive payments to primary care physicians. We also plan to selectively pursue acquisitions that will enable us to broaden our service offerings.

Our Services

Core Service Offering

Our core offering consists of comprehensive, integrated technology and revenue cycle management services. We assume full responsibility for the management and cost of the customer’s complete revenue cycle operations in exchange for a base fee and the opportunity to earn incentive fees. To implement our solution, we supplement the customer’s existing revenue cycle management and staff with seasoned Accretive Health revenue cycle leaders, subject matter experts and staff, and connect our proprietary technology and analytical tools to the hospital’s existing technology systems. Our employees that we add to the hospital’s revenue cycle team typically have significant experience in healthcare management, revenue cycle operations, technology, quality control and other management disciplines. In addition to implementing revenue enhancement procedures, we help our customers reduce their revenue cycle costs by implementing improved practices, advanced data management technology and more efficient processes, as well as outsourcing aspects of their revenue cycle operations. We seek to adapt our solution to the hospital’s organizational structure in order to minimize disruption to existing staff and to make our services transparent to both patients and physicians.

We believe that our solution offers our customers a number of strategic, financial and operational benefits:


	•	*Operating Management.* We assign highly-trained management teams to each customer site to facilitate technology implementation, provide hands-on training to existing hospital employees and guide staff toward achievable performance goals.

	•	*Technology Improvements.* We integrate our proprietary technology with a hospital’s transaction systems to help improve claims collections and realize operating efficiencies. By using a web interface to layer our tools on top of a hospital’s existing software, we can bring our capabilities online in a timely manner without requiring any up-front hardware investment by customers.

	•	*Standardized Operating Model.* We offer our customers a revenue cycle operating model that has delivered tangible financial benefits. Our standard implementation techniques are designed to enable us to install our operating model in a timely manner and consistently at customer sites. We utilize a uniform set of key performance indicators to drive and assess the revenue cycle operations of our customers. Our senior operational leaders monitor each customer’s revenue cycle performance through ten to twelve operating reviews each year.

	•	*Multi-Industry Revenue Process Experience.* Our personnel have years of prior work experience advising customers on revenue process management issues in complex industries. We have combined this experience with healthcare industry innovative practices and operational excellence to form the foundation of our service offerings. We believe that the depth and breadth of our knowledge of healthcare and non-healthcare revenue cycle management help differentiate us from our competitors.

	•	*Shared Services.* We offer customers the opportunity to realize operating efficiencies by outsourcing certain revenue tasks and responsibilities to shared facilities that we operate. By allowing multiple, unrelated hospitals to utilize the same set of resources for key revenue cycle tasks, our shared services capability provides opportunities to reduce the operating costs of our customers. We have been able to achieve meaningful margin improvements for the customers that utilize our shared services.

Our solution spans a hospital’s entire revenue cycle. We deploy our proprietary technology and management experience at each key point in the revenue cycle. As part of our solution, we make targeted changes in the hospital’s processes designed to improve its revenue cycle operations. We also implement cost-reduction programs, including the use of our shared services centers for customers who choose to participate and, for other customers, by moving services such as Medicaid eligibility, transcription and collections from external vendors to our internal staff.

Front Office (Patient Access). A hospital’s front office revenue cycle operations typically consist of scheduling, pre-registration, registration and collection of patient co-payments. Complete and accurate information gathering at this stage is critical to a hospital’s ability to collect revenue from the patient and third-party payors after healthcare services are provided.

AHtoAccess, our integrated suite of proprietary patient admission tools, is designed to minimize downstream collections issues by standardizing up-front patient information gathering through direct connections between the customer and each of its third-party payors and automated workflow navigation of authorization and referral requirements. AHtoAccess is used by our on-site management teams and hospital employees to handle a variety of front office tasks, including:


	•	verification of patient contact information, which improves accuracy of recording patient admissions data in the hospital’s patient accounting system;

	•	real-time validation of coverage and benefits for insured patients, which allows up-front assessment of each patient’s ability to pay;

	•	screening of self-pay patients for alternative coverage solutions, which helps identify payment sources including long-term payment plans and charity or government-sponsored coverage for uninsured or underinsured patients; and

	•	up-front calculation of patient pay residuals, which facilitates accurate and timely communication and collection of residual payment obligations and any outstanding patient balances from previous services.

Middle Office (Health Services Billing). Once treatment has been provided to a patient, a hospital’s middle office revenue cycle operations typically consist of transcribing physicians’ dictated records of patient care and related diagnoses, assigning treatment codes so that bills may be generated and consolidating all patient information into a single patient file. Our solution provides opportunities to improve revenue yield attributable to the middle office by enabling a customer to properly bill all appropriate charges, reduce payment denials by payors based upon inaccurate or

incomplete billing or untimely filing, and improve the accuracy and comprehensiveness of patient and billing information to enable bills to be issued in a timely and efficient manner.

We deploy several proprietary software tools in the middle office. AHtoCharge is an automated variance detection tool used to identify missing charges in patient bills and to detect coding errors in patient records. In addition to the use of proprietary technology, we enhance a hospital’s revenue cycle operations in the middle office with our:


	•	in-house nurse auditors, who review the accuracy of treatments, diagnoses and charges in patient records and follow-up with hospital revenue cycle staff so that the bills may be updated and sent out within the normal billing cycle; and

	•	on-staff physicians, who help hospital case managers properly code emergency department patients during their transition from “observation” to “in-patient” status, to improve accurate and appropriate billing to payors.

Back Office (Collections). A hospital’s back office revenue cycle operations typically consist of bill creation and submission, follow-up to resolve unpaid or underpaid claims and re-submit incomplete claims, the collection of amounts due from patients and the application of cash payments to outstanding balances. At this stage of the revenue cycle, efficiency and data accuracy are critical to increasing the hospital’s collections from all responsible parties in a timely manner, and reducing the hospital’s bad debt expense. Our solution is designed to improve revenue yield attributable to the back office by enabling a customer to:


	•	decrease the time required for bill creation and submission;

	•	increase the percentage of claims receiving maximum allowable reimbursement from payors;

	•	find alternative payment sources for unpaid and underpaid claims with both third-party payors and patients; and

	•	reduce contractual write-offs to provide an accurate record of outstanding charges.

We deploy a number of proprietary tools in the back office:


	•	*Yield-Based Follow Up.* Our Yield-Based Follow Up tool enables us to pursue reimbursement for claims based on risk scoring and detection as established by our proprietary algorithms.

	•	*Medical Financial Solutions.* Our Medical Financial Solutions tool uses proprietary algorithms to assess a patient’s propensity to pay and determines follow-up actions structured to allow higher yields with lower collections effort.

	•	*Retro Eligibility.* Our Retro Eligibility tool continually searches for insurance coverage for each patient visit, even after treatment has concluded, to determine whether uninsured patients are eligible for some form of insurance coverage.

	•	*AHtoContract.* Our AHtoContract tool utilizes proprietary modeling and analytics to calculate the aggregate reimbursement due to the hospital from third-party payors and patients for a given patient treatment.

	•	*Underpayments.* Our Underpayments tool employs payor remittance data and contract models to determine whether a payor has reimbursed less than its contracted amount for a specific claim and enables the hospital’s back office staff to resolve these situations directly with payors.

	•	*AHtoPost.* Our AHtoPost tool is used by our shared services centers to centralize the task of posting cash payments to customers’ patient accounting systems.

Accretive Direct Service Offering

Our “Accretive Direct” service offering is a focused technology and services solution for smaller hospitals where implementation of the complete suite of on-site management assistance included with our core service offering is not economically feasible. This service offering incorporates additional automation and standardization into our revenue cycle management solution with less reliance on infused management personnel. Currently, we have one customer that uses our Accretive Direct services, which include:


	•	implementation of our AHtoAccess tool in the customer’s front office revenue cycle operations;

	•	implementation of our AHtoCharge tool and our physician advisory services in the customer’s middle office revenue cycle operations;

	•	outsourcing of the customer’s pre-service patient calling activities, back office revenue cycle operations and patient financial services activities to our shared services operating centers; and

	•	support for audits of Medicare charges.

Quality/Cost Service Initiative

We are pursuing a new quality/cost service initiative that we believe presents attractive growth potential for us. We are building a technology and service solution that, once completed and implemented, would allow hospitals and physicians to deliver healthcare services to specific patient populations, and be compensated for focusing on prevention, medical best practices and use of electronic health records to achieve better outcomes, as opposed to fees for services. This approach would reward providers for cost savings and increased quality. We believe that our knowledge and understanding of the U.S. healthcare payment and reimbursement system, our business process experience and our technology position us well to pursue this opportunity.

Healthcare providers tend to focus on their own role in patient care rather than the totality of a patient’s healthcare. This approach often leads to ineffective care coordination and can have a negative impact on healthcare quality and cost. Our quality/cost service initiative is intended to link episodes of care and facilitate the re-emergence of the primary care physician, or PCP, as the coordinator of care for each patient. We believe that appropriate financial incentives can be designed to encourage PCPs to focus on the prevention of acute care episodes — for example, through comprehensive annual physicals and the systematic use of HbA1c blood sugar tests for diabetics — and, when those episodes do occur, to focus on the prevention of hospital readmissions. To accomplish these objectives, the financial incentives would relate to, among other things, total integration of care, medical best practices and the use of healthcare information technology. Because PCPs drive the vast majority of healthcare decisions (excluding personal lifestyle decisions) that have an impact on healthcare, we believe that this initiative could reduce costs and increase healthcare quality.

We believe a service offering of this nature would be attractive to healthcare providers because of the potential for higher quality patient care and lower healthcare costs. In addition, the American Recovery and Reinvestment Act enacted in February 2009 provides for potential payments over time of up to $44,000 (under Medicare) and $64,000 (under Medicaid) to any physician who adopts and “meaningfully uses” electronic health records, and we believe our healthcare information technology can help physicians qualify for these payments.

We plan to beta test our quality/cost initiative at selected customer sites and expect to be in a position to roll out a service offering based on this initiative during 2010.

Customers

Our Customers

Customers for our core service offering typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent clinics, and the physician practice groups affiliated with those systems. Our core service offering is best-suited for healthcare organizations in which substantial improvements can be realized through the full implementation of our solution. Our Accretive Direct service offering is targeted to hospitals with less than $250 million in annual net patient revenue. We seek to develop strategic, long-term relationships with our customers and focus on providers that we believe understand the value of our operating model and have demonstrated success in both the provision of healthcare services and the ability to achieve financial and operational results. In October 2004, Ascension Health became our founding customer. While Ascension Health is still our largest customer and we expect to continue to expand our presence beyond the hospitals we currently service within Ascension Health’s network, we are focusing our marketing efforts primarily on other healthcare providers and expect to continue to diversify our customer base. As of March 31, 2010, we provided our integrated revenue cycle service offering to 21 customers representing 53 hospitals and $11.6 billion in annual net patient revenue, as well as physicians’ billing organizations associated with several of these customers. Based on managed service contracts to which we were a party as of March 31, 2010, during the second quarter of 2010 we will be providing integrated revenue cycle services for customers with annual net patient revenue of $13.6 billion.

We target seven market segments in the United States for our integrated revenue cycle service offering:


	•	*Academic Medical Centers and Ambulatory Clinics.* Academic medical centers and ambulatory clinics, including related physician practices, represent approximately $120 billion in annual net patient revenue. This market segment offers attractive opportunities for us because of the significant size and patient volume of academic medical centers and ambulatory clinics (typically more than $1 billion each in net patient revenue) and the fragmented revenue cycle management operations of most physician practices. Our customers in this market segment include the Dartmouth-Hitchcock Medical Center and the Henry Ford Health System.

	•	*Catholic Community Healthcare Systems.* Catholic community healthcare systems represented our initial target market segment and remain a primary focus for us. Catholic community healthcare systems manage approximately $62 billion in annual net patient revenue. Ascension Health is the nation’s largest Catholic and largest non-profit healthcare system, with a network of 78 hospitals and related healthcare facilities located in 20 states and the District of Columbia. We serve a number of hospitals and regional healthcare systems affiliated with Ascension Health.

	•	*Other Faith-Based Community Healthcare Systems.* Drawing on our experience with the Catholic community healthcare system market, we also target the market for other faith-based community healthcare systems. Healthcare systems affiliated with other religious faiths manage approximately $42 billion in annual net patient revenue. We serve several regional healthcare systems in this market segment.


	•	*Not-for-Profit Community Hospitals.* There are nearly 2,000 not-for-profit community hospitals, with a variety of affiliations that are not faith-based. Not-for-profit community hospitals, including integrated delivery networks, manage approximately $241 billion in annual net patient revenue. Fairview Health Services, which is an integrated delivery network, is one of our customers in this market segment, with six hospitals served.


	•	*Physicians’ Billing Organizations.* Large physicians’ billing organizations represent more than $115 billion in annual net patient revenue. Our customer work in this market includes the billing activities involving several hundred physicians at the Dartmouth-Hitchcock Medical Center and the Henry Ford Health System.


	•	*For-Profit Hospital Systems.* For-profit hospital systems manage approximately $80 billion in annual net patient revenue. This sector, although smaller than the not-for-profit sector, still represents a significant target market segment for our revenue cycle services. We currently serve one for-profit hospital as the result of the acquisition of a formerly non-profit hospital by a for-profit company in 2009.


	•	*Government-Owned Hospitals.* Based on industry sources, each major metropolitan area in the United States has at least one large municipal or city-owned hospital system. We believe that this market segment represents approximately $95 billion in annual net patient revenue. We do not currently have any customers in this market segment.

We believe that the diversity of our customer base, ranging from not-for-profit community hospitals to large academic medical centers and healthcare systems, demonstrates our ability to adapt and apply our operating model to many different situations.

Customer Agreements

We provide our revenue cycle service offering pursuant to managed service contracts with our customers. In rendering our services, we must comply with customer policies and procedures regarding charity care, personnel, compliance and risk management as well as applicable federal, state and local laws and regulations. Generally, we are the exclusive provider of revenue cycle management services to our customers.

Our contracts are multi-year agreements and vary in length based on the customer. After the initial term of the agreement, our customer contracts automatically renew unless terminated by either party upon prior written notice.

In general, our managed service contracts provide that:


	•	we assume responsibility for the management and cost of the customer’s revenue cycle operations, including the payroll and benefit costs associated with the customer’s employees conducting revenue cycle activities, and the agreements and costs associated with the related third-party services;

	•	we are required to staff a sufficient number of our own employees on each customer’s premises and the technology necessary to implement and manage our services;

	•	in general, the customer pays us base fees equal to a specified amount, subject to annual increases under an agreed-upon formula, and incentive fees based on achieving agreed-upon financial benchmarks;

	•	the parties provide representations and indemnities to each other; and

	•	the contracts are subject to termination by either party in the event of a material breach which is not cured by the breaching party.

See “Related Person Transactions — Transactions with Ascension Health — Customer Relationship” for more information regarding our master services agreement with Ascension Health.

Sales and Marketing

Our new business opportunities have historically been generated through high-level industry contacts of members of our senior management team and board of directors and positive references from existing customers. As we have grown, we have added senior sales executives and adopted a more institutional approach to sales and marketing that relies on systematic relationship building by all of our senior team members. Our sales process generally begins by engaging senior executives of the prospective hospital or healthcare system, typically followed by our assessment of the prospect’s existing revenue cycle operations and a review of the findings. We employ a standardized managed service contract that is designed to streamline the contract process and support a collaborative

discussion of revenue cycle operation issues and our proposed working relationship. Our sales process typically requires six to twelve months from the introductory meeting to contract execution.

Technology

Technology Development

Our technology development organization operates out of various facilities in the United States and India. Our technology is developed in-house by Accretive Health employees, although at times we may supplant our technology development team with independent contractors, all of whom have assigned any resulting intellectual property rights to us. We use a rapid application development methodology in which new functionality and enhancements are released on a 30-day cycle, and minor functionality or “patch” work is released on a seven-day cycle. Based upon this schedule, we release approximately eleven technology offerings with new functionalities each year across each of the four principal portions of our customer-facing applications. All customer sites run the same base set of code. We use a beta-testing environment to develop and test new technology offerings at one or more customers, while keeping the rest of our customers on production-level code.

Our applications are deployed on a consistent architecture based upon an industry-standard Microsoft SQL*Server database and a “DotNetNuke” open source application architecture. This architecture provides a common framework for development, which in turn simplifies the development process and offers a common interface for end users. We believe the consistent look and feel of our architecture allows our customers and staff to begin using ongoing enhancements to our software suite quickly and easily.

We devote substantial resources to our development efforts and plan at a yearly, half-yearly, quarterly and release level. We employ a “value point” scoring system to assess the impact an enhancement will have on net revenue, costs, efficiency and customer satisfaction. The results of this value point system analysis are evaluated in conjunction with our overall corporate goals when making development decisions. In addition to our technology development team, our operations personnel play an integral role in setting technology priorities in support of their objective of keeping our software operating 24 hours a day, 7 days a week.

Technology Operations

Our applications are hosted in data centers located in Alpharetta, Georgia and Salt Lake City, Utah, and our internal financial application suite is hosted in a data center in Minneapolis, Minnesota. These data centers are operated for us by third parties and are SAS-70 compliant. Our development, testing and quality assurance environment is operated from our Alpharetta, Georgia data center, with a separate server room in Chicago, Illinois. We have agreements with our hardware and system software suppliers for support 24 hours a day, 7 days a week. Our operations personnel also use our resources located in our other U.S. facilities and in our India facilities.

Customers use high-speed Internet connections or private network connections to access our business applications. We utilize commercially available hardware and a combination of custom-developed and commercially available software. We designed our primary application in this manner to permit scalable growth. For example, database servers can be added without adding web servers, and vice versa. We believe that this architecture enables us to scale our operations effectively and efficiently.

Our databases and servers are backed-up in full on a weekly basis and undergo incremental back-ups nightly. Databases are also backed-up frequently by automatically shipping log files with accumulated changes to separate sets of back-up servers. In addition to serving as a back-up, these log files update the data in our online analytical processing engine, enabling the data to be more current than if only refreshed overnight. Data and information regarding our customers’ patients is

encrypted when transmitted over the internet or traveling off-site on portable media such as laptops or backup tapes.

Customer system access requests are load-balanced across multiple application servers, allowing us to handle additional users on a per-customer basis without application changes. System utilization is monitored for capacity planning purposes.

Our software interacts with our customers’ software through a series of real-time and batch interfaces. We do not require changes to the customer’s core patient care delivery or financial systems. Instead of installing hardware or software in customer locations or data centers, we specify the information that a customer needs to extract from its existing systems in order to interface with our systems. This methodology enables our systems to operate with many combinations of customer systems, including custom and industry-standard implementations. We have successfully integrated our systems with 15 to 20 year old systems, with package and custom systems, and with major industry-standard products.

When these interfaces are in place, we provide a tool suite across the hospital revenue cycle. For our purposes, the revenue cycle starts when a patient registers for future service or arrives at a hospital or clinic for unscheduled service and ends when the hospital has collected all the appropriate revenue from all possible sources. Thus, we provide eligibility, address validation, skip tracing, charge capture, patient and payor follow-up, analytics and tracking, charge master management, contract modeling, contract “what if” analysis, collections and other functions throughout the front office, middle office and back office operations of a customer’s revenue cycle.

Because our databases run on industry-standard hardware and software, we are able to use all standard tools to develop, maintain and monitor our solution. Databases for one or more customers can run on a single database server with disk storage configured as a redundant array of inexpensive disks (RAID). In the event of a server failure, we have maintenance contracts in place that require the service provider to have the server back on-line in four hours or less, or we move the customer processing to another server. The RAID configuration protects against disk failures having an impact on our operations.

In the event that a combination of events causes a system failure, we typically can isolate the failure to one or a small number of customers. We believe that no combination of failures by our systems can impact a customer’s ability to deliver patient care, nor can any such failures prevent accurate accounting of customer finances because accounting functions are maintained on customer systems. In the past twelve months, our up-time has exceeded 99.45% of planned up-time.

Our data centers were designed to withstand many catastrophic events, such as blizzards and hurricanes. To protect against a catastrophic event in which our primary data center is completely destroyed and service cannot be restored within a few days, we store backups of our systems and databases off-site. In the event that we had to move operations to a different data center, we would re-establish operations by provisioning new servers, restoring data from the off-site backups and re-establishing connectivity with our customers’ host systems. Because our systems are web-based, no changes would need to be made on customer workstations, and customers would be able to reconnect as our systems became available again.

We monitor the response time of our application in a number of ways. We monitor the response time of individual transactions by customer and place monitors inside our operations and at key customer sites to run synthetic transactions that demonstrate our systems’ end-to-end responsiveness. Our hosting provider reports on responsiveness server-by-server and identifies potential future capacity issues. In addition, we survey key customers regarding system response time to make sure customer-specific conditions are not impacting performance of our tools.

Proprietary Software Suite

Our proprietary AHtoAccess software suite is composed of a broad range of integrated functional areas or domains. The “patient access”, “improving best possible”, “follow-up” and “measurement” domains utilize interdependent design and development paths and are an integral driver of value throughout our customers’ entire revenue cycle. These domains correspond to the front office, middle office and back office revenue cycle business processes described above.


	•	The “patient access” domain is used during hospital employees’ first interactions with patients, either at the point of service in a hospital or in advance of a hospital visit during our pre-registration process. The domain uses a straightforward, consistent architecture.

	•	The “improving best possible” domain is designed to facilitate top-line revenue improvements and bottom-line efficiency gains. The domain’s AHtoCharge tool is a rules-based engine that, with the oversight of a centralized team of nurse-auditors, automatically analyzes medical billing and coding data to identify inconsistencies that may delay or hinder collections.

	•	The “follow-up” domain tracks unpaid claims and contacts with insurance companies, government organizations and other payors responsible for outstanding debts for past patient services. The domain also organizes previously unpaid claims using a proprietary risk-based algorithm.

	•	The “measurement” domain integrates our functional domains by providing real-time metrics and insight into the operation of revenue cycle businesses. This application can be used to generate standard operational reports and allows the end user to review and analyze all of the micro-level data that supports the results found in these reports.

In addition to applications designed for use by our customers, we have developed proprietary software for use in our collections operations and measurement activity. To manage patient follow-up activities and the collection of patient debt, we use a combination of off-the-shelf telephony and campaign management software which analyzes critical data points to determine the optimum approach for collecting outstanding debts. Our measurement system enables a user to generate models for outstanding medical claims related to specific third-party payors and determine the maximum allowed reimbursement, based upon the hospital’s contract with each payor.

Competition

While we do not believe any single competitor offers a fully integrated, end-to-end revenue cycle management solution, we face competition from various sources.

The internal revenue cycle management staff of hospitals, who historically have performed the functions addressed by our services, in effect compete with us. Hospitals that previously have made investments in internally developed solutions sometimes choose to continue to rely on their own internal revenue cycle management staff.

We also currently compete with three categories of external participants in the revenue cycle market, most of which focus on small components of the hospital revenue cycle:


	•	software vendors and other technology-supported revenue cycle management business process outsourcing companies, such as athenahealth, Eclipsys and MedAssets;

	•	traditional consultants, either specialized healthcare consulting firms or healthcare divisions of large accounting firms, such as Deloitte Consulting and Huron Consulting; and

	•	IT outsourcers, which typically are large, non-healthcare focused business process outsourcing and information technology outsourcing firms, such as Perot Systems and Computer Science Corporation/First Consulting.

We believe that competition for revenue cycle management services is based primarily on the following factors:


	•	knowledge and understanding of the complex healthcare payment and reimbursement system in the United States;

	•	a track record of delivering revenue improvements and efficiency gains for hospitals and healthcare systems;

	•	the ability to deliver a solution that is fully-integrated along each step of a hospital’s revenue cycle operations;

	•	cost-effectiveness, including the breakdown between up-front costs and pay-for-performance incentive compensation;

	•	reliability, simplicity and flexibility of the technology platform;

	•	understanding of the healthcare industry’s regulatory environment; and

	•	sufficient infrastructure and financial stability.

We believe that we compete effectively based upon all of these criteria. We also believe that several aspects of our business model differentiate us from our competitors:


	•	our solution does not require any up-front cash investment from customers and we do not charge hourly or licensing fees for our services;

	•	we serve only healthcare providers and do not provide services to third-party payors; and

	•	we focus on delivering significant and sustainable revenue cycle improvements rather than one-time cost reductions only.

Nonetheless, we operate in a growing and attractive market with a steady stream of new entrants. Although we believe that there are barriers to replicating our end-to-end revenue cycle solution, we expect competition to intensify in the future. Other companies may develop superior or more economical service offerings that hospitals could find more attractive than our offerings. Moreover, the regulatory landscape may shift in a direction that is more strategically advantageous to existing and future companies.

Government Regulation

The customers we serve are subject to a complex array of federal and state laws and regulations. These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. We devote significant efforts, through training of personnel and monitoring, to establish and maintain compliance with all regulatory requirements that we believe are applicable to our business and the services we offer.

Government Regulation of Health Information

Privacy and Security Regulations. The Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations that have been issued under it, which we collectively refer to as HIPAA, contain substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. HIPAA prohibits a covered entity from using or disclosing an individual’s protected health information unless the use or disclosure is authorized by the individual or is specifically required or permitted under HIPAA. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf.

HIPAA applies to covered entities, such as healthcare providers that engage in HIPAA-defined standard electronic transactions, health plans and healthcare clearinghouses, as well as “business associates” that perform functions on behalf or provide services to covered entities. Our customers are covered entities, and we are considered a “business associate” under HIPAA as a result of our contractual obligations to and interactions with our customers. In order to provide customers with services that involve the use or disclosure of protected health information, HIPAA requires our customers to enter into business associate agreements with us so that certain HIPAA requirements would be applied to us as contractual commitments. Such agreements must, among other things, provide adequate written assurances:


	•	as to how we will use and disclose the protected health information;

	•	that we will implement reasonable administrative, physical and technical safeguards to protect such information from misuse;

	•	that we will enter into similar agreements with our agents and subcontractors that have access to the information;

	•	that we will report security incidents and other inappropriate uses or disclosures of the information; and

	•	that we will assist the customer with certain of its duties under HIPAA.

Transaction Requirements. In addition to privacy and security requirements, HIPAA also requires that certain electronic transactions related to healthcare billing be conducted using prescribed electronic formats. For example, claims for reimbursement that are transmitted electronically to payors must comply with specific formatting standards, and these standards apply whether the payor is a government or a private entity. We are contractually required to structure and provide our services in a way that supports our customers’ HIPAA compliance obligations.

Data Security and Breaches. In recent years, there have been well-publicized data breach incidents involving the improper dissemination of personal health and other information of individuals, both within and outside of the healthcare industry. Many states have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take certain actions in response to data breach incidents, such as providing prompt notification of the breach to affected individuals and government authorities. In many cases, these laws are limited to electronic data, but states are increasingly enacting or considering stricter and broader requirements. In February 2009, HIPAA was amended by the Health Information Technology for Economic and Clinical

Health, or HITECH, Act to impose certain of the HIPAA privacy and security requirements directly upon business associates. Business associates are also required to notify covered entities, which are required to notify individuals and government authorities of data security breaches involving unsecured protected health information. In addition, the U.S. Federal Trade Commission, or FTC, has prosecuted some data breach cases as unfair and deceptive acts or practices under the Federal Trade Commission Act. We have implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security incidents.

State Laws. In addition to HIPAA, most states have enacted patient confidentiality laws that protect against the unauthorized disclosure of confidential medical information, and many states have adopted or are considering further legislation in this area, including privacy safeguards, security standards and data security breach notification requirements. Such state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements, and we must comply with them even though they may be subject to different interpretations by various courts and other governmental authorities.

Other Requirements. In addition to HIPAA, numerous other state and federal laws govern the collection, dissemination, use, access to and confidentiality of individually identifiable health and other information and healthcare provider information. The FTC has issued and several states have issued or are considering new regulations to require holders of certain types of personally identifiable information to implement formal policies and programs to prevent, detect and mitigate the risk of identity theft and other unauthorized access to or use of such information. Further, the U.S. Congress and a number of states have considered or are considering prohibitions or limitations on the disclosure of medical or other information to individuals or entities located outside of the United States.

Government Regulation of Reimbursement

Our customers are subject to regulation by a number of governmental agencies, including those that administer the Medicare and Medicaid programs. Accordingly, our customers are sensitive to legislative and regulatory changes in, and limitations on, the government healthcare programs and changes in reimbursement policies, processes and payment rates. During recent years, there have been numerous federal legislative and administrative actions that have affected government programs, including adjustments that have reduced or increased payments to physicians and other healthcare providers and adjustments that have affected the complexity of our work. For example, the federal healthcare reform legislation that was enacted in March 2010 may reduce reimbursement for some healthcare providers, increase reimbursement for others (including primary care physicians) and create various value and quality-based reimbursement incentives. It is possible that the federal or state governments will implement additional reductions, increases or changes in reimbursement in the future under government programs that adversely affect our customer base or our cost of providing our services. Any such changes could adversely affect our own financial condition by reducing the reimbursement rates of our customers.

Fraud and Abuse Laws

A number of federal and state laws, generally referred to as fraud and abuse laws, are used to prosecute healthcare providers, physicians and others that make, offer, seek or receive referrals or payments for products or services that may be paid for through any federal or state healthcare program and in some instances any private program. Given the breadth of these laws and regulations,

they may affect our business, either directly or because they apply to our customers. These laws and regulations include:

Anti-Kickback Laws. There are numerous federal and state laws that govern patient referrals, physician financial relationships, and inducements to healthcare providers and patients. The federal healthcare anti-kickback law prohibits any person or entity from offering, paying, soliciting or receiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and other federal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by these programs. Courts have construed this anti-kickback law to mean that a financial arrangement may violate this law if any one of the purposes of an arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. There are several limited exclusions known as safe harbors that may protect some arrangements from enforcement penalties. These safe harbors have very limited application. Penalties for federal anti-kickback violations can be severe, and include imprisonment, criminal fines, civil money penalties with triple damages and exclusion from participation in federal healthcare programs. Many states have similar anti-kickback laws, some of which are not limited to items or services for which payment is made by a federal healthcare program.

False or Fraudulent Claim Laws. There are numerous federal and state laws that forbid submission of false information or the failure to disclose information in connection with the submission and payment of provider claims for reimbursement. In some cases, these laws also forbid abuse of existing systems for such submission and payment, for example, by systematic over treatment or duplicate billing of the same services to collect increased or duplicate payments.

In particular, the federal False Claims Act, or FCA, prohibits a person from knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval by an officer, employee or agent of the United States. The FCA also prohibits a person from knowingly making, using, or causing to be made or used a false record or statement material to such a claim. The FCA was amended on May 20, 2009 by the Fraud Enforcement and Recovery Act of 2009, or FERA. Following the FERA amendments, the FCA’s “reverse false claim” provision also creates liability for persons who knowingly conceal an overpayment of government money or knowingly and improperly retain an overpayment of government funds. In addition, the federal healthcare reform legislation that was enacted in March 2010 requires providers to report and return overpayments and to explain the reason for the overpayment in writing within 60 days of the date on which the overpayment is identified, and the failure to do so is punishable under the FCA. Violations of the FCA may result in treble damages, significant monetary penalties, and other collateral consequences including, potentially, exclusion from participation in federally funded healthcare programs. The scope and implications of the FERA amendments have yet to be fully determined or adjudicated and as a result it is difficult to predict how future enforcement initiatives may impact our business.

In addition, under the Civil Monetary Penalty Act of 1981, the Department of Health and Human Services Office of Inspector General has the authority to impose administrative penalties and assessments against any person, including an organization or other entity, who knowingly presents, or causes to be presented, to a state or federal government employee or agent certain false or otherwise improper claims.

Stark Law and Similar State Laws. The Ethics in Patient Referrals Act, known as the Stark Law, prohibits certain types of referral arrangements between physicians and healthcare entities and thus applies to our customers. Physicians are prohibited from referring patients for certain designated health services reimbursed under federally-funded programs to entities with which they or their immediate family members have a financial relationship or an ownership interest, unless such referrals fall within a specific exception. Violations of the statute can result in civil monetary penalties and/or exclusion from the Medicare and Medicaid programs. Furthermore, reimbursement claims for care rendered under forbidden referrals violate the Stark Law and may be deemed false or fraudulent,

resulting in liability under other fraud and abuse laws. Any such violations by, and penalties and exclusions imposed upon, our customers could adversely affect their financial condition and, in turn, could adversely affect our own financial condition.

Laws in many states similarly forbid billing based on referrals between individuals and/or entities that have various financial, ownership or other business relationships. These laws vary widely from state to state.

Laws Limiting Assignment of Reimbursement Claims

Various federal and state laws, including Medicare and Medicaid, forbid or limit assignments of claims for reimbursement from government funded programs. Some of these laws limit the manner in which business service companies may handle payments for such claims and prevent such companies from charging their provider customers on the basis of a percentage of collections or charges. We do not believe that the services we provide our customers result in an assignment of claims for the Medicare or Medicaid reimbursements for purposes of federal healthcare programs. Any determination to the contrary, however, could adversely affect our ability to be paid for the services we provide to our customers, require us to restructure the manner in which we are paid, or have further regulatory consequences.

Emergency Medical Treatment and Active Labor Act

The federal Emergency Medical Treatment and Active Labor Act, or EMTALA, was adopted by the U.S. Congress in response to reports of a widespread hospital emergency room practice of “patient dumping”. At the time of EMTALA’s enactment, patient dumping was considered to have occurred when a hospital capable of providing the needed care sent a patient to another facility or simply turned the patient away based on such patient’s inability to pay for his or her care. EMTALA imposes requirements as to the care that must be provided to anyone who seeks care at facilities providing emergency medical services. In addition, the Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services has issued final regulations clarifying those areas within a hospital system that must provide emergency treatment, procedures to meet on-call requirements, as well as other requirements under EMTALA. Sanctions for failing to fulfill these requirements include exclusion from participation in the Medicare and Medicaid programs and civil monetary penalties. In addition, the law creates private civil remedies that enable an individual who suffers personal harm as a direct result of a violation of the law to sue the offending hospital for damages and equitable relief. A hospital that suffers a financial loss as a direct result of another participating hospital’s violation of the law also has a similar right.

EMTALA generally applies to our customers, and we assist our customers with the intake of their patients. Although we believe that our patient intake practices are in compliance with the law and applicable regulations, we cannot be certain that governmental officials responsible for enforcing the law or others will not assert that we are in violation of these laws nor what obligations may be imposed by regulations to be issued in the future.

Regulation of Debt Collection Activities

The federal Fair Debt Collection Practices Act, or FDCPA, regulates persons who regularly collect or attempt to collect, directly or indirectly, consumer debts owed or asserted to be owed to another person. Certain of our accounts receivable activities may be subject to the FDCPA. The FDCPA establishes specific guidelines and procedures that debt collectors must follow in communicating with consumer debtors, including the time, place and manner of such communications. Further, it prohibits harassment or abuse by debt collectors, including the threat of violence or criminal prosecution, obscene language or repeated telephone calls made with the intent to abuse or harass. The FDCPA also places restrictions on communications with individuals other than consumer debtors in connection with the collection of any consumer debt and sets forth specific procedures to be followed when communicating with such third parties for purposes of obtaining location information about the consumer. In addition, the FDCPA contains various notice and disclosure requirements and

prohibits unfair or misleading representations by debt collectors. Finally, the FDCPA imposes certain limitations on lawsuits to collect debts against consumers.

Debt collection activities are also regulated at state level. Most states have laws regulating debt collection activities in ways that are similar to, and in some cases more stringent than, the FDCPA. In addition, some states require debt collection companies to be licensed. In all states where we operate, we believe that we currently hold all required state licenses or are pursuing a license, or are exempt from licensing.

We are also subject to the Fair Credit Reporting Act, or FCRA, which regulates consumer credit reporting and which may impose liability on us to the extent that the adverse credit information reported on a consumer to a credit bureau is false or inaccurate. State law, to the extent it is not preempted by the FCRA, may also impose restrictions or liability on us with respect to reporting adverse credit information.

The FTC has the authority to investigate consumer complaints relating to the FDCPA and the FCRA, and to initiate or recommend enforcement actions, including actions to seek monetary penalties. State officials typically have authority to enforce corresponding state laws. In addition, affected consumers may bring suits, including class action suits, to seek monetary remedies (including statutory damages) for violations of the federal and state provisions discussed above.

Regulation of Credit Card Activities

We accept payments by credit cards from patients of our customers. Various federal and state laws impose privacy and information security laws and regulations with respect to the use of credit cards. If we fail to comply with these laws and regulations or experience a credit card security breach, our reputation could be damaged, possibly resulting in lost future business, and we could be subjected to additional legal or financial risk as a result of non-compliance.

Foreign Regulations

Our operations in India are subject to additional regulations by the government of India. These include Indian federal and local corporation requirements, restrictions on exchange of funds, employment-related laws and qualification for tax status.

Intellectual Property

We rely upon a combination of patent, trademark, copyright and trade secret laws and contractual terms and conditions to protect our intellectual property rights, and have sought patent protection for aspects of our key innovations.

We have been issued one U.S. patent and filed four additional U.S. patent applications aimed at protecting the four domains of our AHtoAccess software suite: patient access, improving best possible, follow-up and measurement. See “Business — Technology — Proprietary Software Suite” for more information. Legal standards relating to the validity, enforceability and scope of protection of patents can be uncertain. We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Our patent applications may not result in the grant of patents with the scope of the claims that we seek, if at all, or the scope of the granted claims may not be sufficiently broad to protect our products and technology. Our one issued patent or any patents that may be granted in the future from pending or future applications may be opposed, contested, circumvented, designed around by a third party or found to be invalid or unenforceable. Third parties may develop technologies that are similar or superior to our proprietary technologies, duplicate or otherwise obtain and use our proprietary technologies or design around patents owned or licensed by us. If our technology is found to infringe any patent or other intellectual property right held by a third party, we could be prevented from providing our service offerings and subject us to significant damage awards.

We also rely in some circumstances on trade secrets to protect our technology. We control access to and the use of our application capabilities through a combination of internal and external controls, including contractual protections with employees, customers, contractors and business partners. We license some of our software through agreements that impose specific restrictions on customers’ ability to use the software, such as prohibiting reverse engineering and limiting the use of copies. We also require employees and contractors to sign non-disclosure agreements and invention assignment agreements to give us ownership of intellectual property developed in the course of working form us.

On occasion, we incorporate third-party commercial or open source software products into our technology platform. Although we prefer to develop our own technology, we periodically employ third-party software in order to simplify our development and maintenance efforts, provide a “commodity” capability, support our own technology infrastructure or test a new capability.

Employees

As of March 31, 2010, we had 1,802 full-time employees, including 212 engaged in technology development and deployment. None of our employees is represented by a labor union and we consider our current employee relations to be good.

Our operations employees are required to participate in our “operator academy” and “revenue cycle academy”, consisting of multiple training sessions each year. Our ongoing training and executive learning programs are modeled after the practices of companies that we believe have reputations for service excellence. In addition, all of our employees undergo mandatory HIPAA training.

As of March 31, 2010, pursuant to managed service contracts, we also managed approximately 6,300 revenue cycle staff persons who are employed by our customers. We have the right to control and direct the work activities of these staff persons and are responsible for paying their compensation out of the base fees paid to us by our customers, but these staff persons are considered employees of our customers for all purposes.

Facilities

As of March 31, 2010, our corporate headquarters occupy approximately 28,000 square feet in Chicago, Illinois under a lease expiring on various dates in 2013 and 2014. We intend to exercise our option to rent approximately 22,000 square feet of additional office space on an adjacent floor, starting June 1, 2010, and will have the option to concurrently return approximately 6,500 square feet of office space on a non-adjacent floor. Assuming we do not return the 6,500 square feet of office space, the lease for all 50,000 square feet will be extended until ten years and 90 days after the date we take possession of the additional 22,000 square feet of office space. In addition, after the landlord provides this additional office space, we will have an option to lease at least 50% of the rentable space on another floor in the same building. We also have rights of first offer on other space in the same building.

As of March 31, 2010, we also leased facilities in Jupiter, Florida; Kalamazoo, Michigan and Cape Girardeau, Missouri; and near New Delhi, India. Pursuant to our master services agreement with Ascension Health and the managed service contracts between us and our customers, we occupy space on-site at all hospitals where we provide our revenue cycle management services. We do not pay customers for our use of space provided by them. In general, we are not permitted to provide services to one customer from another customer’s site.

We believe that our current facilities are sufficient for our current needs. We intend to add new facilities or expand existing facilities as we add employees or expand our geographic markets, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Legal Proceedings

From time to time, we have been and may again become involved in legal or regulatory proceedings arising in the ordinary course of our business. We are not presently a party to any material litigation or regulatory proceeding and we are not aware of any pending or threatened litigation or regulatory proceeding against us that could have a material adverse effect on our business, operating results, financial condition or cash flows.

MANAGEMENT

Executive Officers and Directors

Our executive officers and directors, their current positions and their ages as of March 31, 2010 are set forth below:


Name	Age		Position(s)

Mary A. Tolan		49	Founder, President and Chief Executive Officer, Director
John T. Staton		49	Chief Financial Officer and Treasurer
Etienne H. Deffarges		52	Executive Vice President
Gregory N. Kazarian		47	Senior Vice President
J. Michael Cline(1)		50	Founder and Chairman of the Board
Edgar M. Bronfman, Jr.(1)(3)		54	Director
Steven N. Kaplan(2)(3)		50	Director
Denis J. Nayden(1)		55	Director
George P. Shultz(3)		89	Director
Arthur H. Spiegel, III(1)		70	Director
Mark A. Wolfson(2)		57	Director


(1)		Member of compensation committee.

(2)		Member of audit committee.

(3)		Member of nominating and corporate governance committee.

Mary A. Tolan , a founder of Accretive Health, has served as our president and chief executive officer and a director since November 2003. Prior to joining our company, Ms. Tolan spent 21 years at Accenture Ltd, a leading global management consulting, technology services and outsourcing company. At Accenture, Ms. Tolan served in several leadership roles, including group chief executive for the resources operating group that had approximately $2 billion in annual revenue, and as a member of Accenture’s executive committee and management committee. She serves on the board of trustees of the University of Chicago, Loyola University and the Lyric Opera of Chicago.

John T. Staton has served as our chief financial officer and treasurer since September 2005. Mr. Staton was with Accenture for 16 years before joining our company. From 2004 to 2005, Mr. Staton led the business consulting practice within Accenture’s North American products practice. Prior to this role, he was a partner in Accenture’s global retail practice. Before joining Accenture, Mr. Staton held positions in General Electric’s manufacturing management program and Hewlett-Packard’s sales and channel marketing organizations.

Etienne H. Deffarges has served as our executive vice president since April 2004. From 1999 until joining our company, Mr. Deffarges was a partner at Accenture, most recently serving as managing partner for its global utilities industry group, and as a member of its executive committee. Prior to joining Accenture, Mr. Deffarges spent 14 years at Booz Allen Hamilton Inc., a strategy and technology consulting firm, including serving as a senior partner and global practice leader of the energy, chemicals and pharmaceuticals practice from 1994 to 1999 and as a member of its executive committee.

Gregory N. Kazarian has served as our senior vice president since January 2004, and until November 2009 was also our general counsel and secretary. Prior to joining our company, Mr. Kazarian was with the law firm Pedersen & Houpt, P.C. for 16 years, where he handled employment, intellectual property, creditors’ rights, dispute resolution and outsourcing matters.

J. Michael Cline , a founder of Accretive Health, has been a member of our board of directors since August 2003 and has served as chairman of the board since July 2009. Mr. Cline has served as the founding managing partner of Accretive, LLC, a private equity firm, since founding that firm in

December 1999. From 1989 to 1999, Mr. Cline served as a general partner of General Atlantic Partners, LLC, a private equity firm. Mr. Cline serves on the boards of several privately-held companies. He also serves on the advisory board of the Harvard Business School Rock Center for Entrepreneurship, on the board of the National Fish and Wildlife Foundation and as a trustee of Panthera, an organization devoted to the preservation of the world’s wild cat species where he also chairs Panthera’s Tigers Forever initiative.

Edgar M. Bronfman, Jr. has been a member of our board of directors since October 2006. Mr. Bronfman has served as chairman and chief executive officer of Warner Music Group since March 2004. Before joining Warner Music Group, Mr. Bronfman served as chairman and chief executive officer of Lexa Partners LLC, a management venture capital group which he founded in April 2002. Mr. Bronfman was vice chairman of the board of directors of Vivendi Universal, S.A. from December 2000 until December 2003 and also served as an executive officer of Vivendi from December 2000 until December 2001. Prior to the formation of Vivendi, Mr. Bronfman served as president and chief executive officer of The Seagram Company Ltd. from June 1994 until December 2000 and as president and chief operating officer of Seagram from 1989 until June 1994. Mr. Bronfman is a director of IAC/InterActiveCorp, a publicly-held operator of Internet businesses. Mr. Bronfman is also a member of the board of trustees of the New York University Medical Center and the board of governors of the Joseph H. Lauder Institute of Management and International Studies at the University of Pennsylvania. He also is a general partner of Accretive, LLC, a private equity firm.

APPAC, a minority shareholder group of Vivendi Universal, initiated an inquiry in the Paris Court of Appeal into various issues relating to Vivendi, including Vivendi’s financial disclosures, the appropriateness of executive compensation, and trading in Vivendi stock by certain individuals previously associated with Vivendi. The inquiry has encompassed certain trading by Mr. Bronfman in Vivendi stock. Several individuals, including Mr. Bronfman and the former CEO, CFO and COO of Vivendi, had been given the status of “mis en examen” in connection with the inquiry. Although there is no equivalent to “mis en examen” in the U.S. system of jurisprudence, it is a preliminary stage of proceedings that does not entail any filing of charges. In January 2009, the Paris public prosecutor formally recommended that no charges be filed and that Mr. Bronfman not be referred for trial. On October 22, 2009, the investigating magistrate rejected the prosecutor’s recommendation and released an order referring for trial Mr. Bronfman and six other individuals, including the former CEO, CFO and COO of Vivendi. While the inquiry encompassed various issues, Mr. Bronfman has been referred for trial solely with respect to certain trading in Vivendi stock. The outcome of any subsequent proceedings with respect to Mr. Bronfman is uncertain at this time. Mr. Bronfman believes that his trading in Vivendi stock was at all times proper.

Steven N. Kaplan has been a member of our board of directors since July 2004. Since 1988, Mr. Kaplan has served as a professor at the University of Chicago Booth School of Business, where he currently is the Neubauer Family Professor of Entrepreneurship and Finance and serves as the faculty director of the Polsky Center for Entrepreneurship. Mr. Kaplan also serves as a director of Morningstar, Inc., a publicly-held provider of independent investment research, and on the boards of trustees of the Columbia Acorn Trust and Wanger Asset Trust.

Denis J. Nayden has been a member of our board of directors since October 2003 and served as co-chairman of our board until July 2009. Mr. Nayden has served as a managing partner of Oak Hill Capital Management, LLC, a private equity firm, since 2003. From 2000 to 2002, he was chairman and chief executive officer of GE Capital Corporation, the financing unit of General Electric Company, and prior to that had a 25-year tenure at General Electric. Mr. Nayden is a director of Genpact Limited, a publicly-held global provider of business process services; RSC Holdings Inc., a publicly-held equipment rental provider; and several privately-held companies. He also serves on the board of trustees of the University of Connecticut.

George P. Shultz has been a member of our board of directors since April 2005. Mr. Shultz has had a distinguished career in government, academia and business. He has served as the Thomas W.

and Susan B. Ford Distinguished Fellow at the Hoover Institution of Stanford University since 1991. Mr. Shultz served as United States Secretary of State from 1982 until 1989, chairman of the President’s Economic Policy Advisory Board from 1981 until 1982, United States Secretary of the Treasury and Chairman of the Council on Economic Policy from 1972 until 1974, Director of the Office of Management and Budget from 1970 to 1972, and United States Secretary of Labor from 1969 until 1970. From 1948 to 1957, Mr. Shultz taught at MIT, taking a year’s leave of absence in 1955 to serve as a senior staff economist on the President’s Council of Economic Advisors during the Eisenhower administration. He then taught from 1957 to 1969 at Stanford University and the University of Chicago Graduate School of Business, where he also served as Dean for six years. From 1974 to 1982, Mr. Shultz was president and a director of Bechtel Group, Inc., a privately-held global leader in engineering, construction and project management. Among numerous honors, Mr. Shultz was awarded the Medal of Freedom, the nation’s highest civilian honor, in 1989, and holds honorary degrees from more than a dozen universities. He also chairs the Governor of California’s Economic Advisory Board and the J.P. Morgan Chase International Council; serves as Advisory Council Chair of the Precourt Energy Efficiency Center at Stanford University; chairs the MIT Energy Initiative External Advisory Board; and serves on the board of directors of Fremont Group, L.L.C., a private investment firm.

Arthur H. Spiegel, III has been a member of our board of directors since October 2003 and served as co-chairman of our board until July 2009. Since 2002, Mr. Spiegel has been a private investor. From 1996 until 2002, Mr. Spiegel was President of CSC Healthcare Group, which offered consulting, system integration, claims processing software and business process and IT outsourcing services to the healthcare industry. Mr. Spiegel founded APM Management Consultants, a healthcare consulting firm, in 1974 and served as its CEO until it was acquired by Computer Science Corporation in 1996. He serves on the boards of several privately-held companies.

Mark A. Wolfson has been a member of our board of directors since October 2003. Mr. Wolfson has served as a managing partner of Oak Hill Capital Management, LLC, a private equity firm, since 1998, and is a founding managing partner of Oak Hill Investment Management, L.P. Mr. Wolfson has been on the faculty of the Stanford University Graduate School of Business since 1977, has served as its associate dean, and has held the title of consulting professor since 2001. He has been a research associate of the National Bureau of Economic Research since 1988 and serves on the executive committee of the Stanford Institute for Economic Policy Research. Mr. Wolfson is a director of eGain Communications Corporation, a publicly-held provider of multi-channel customer service and knowledge management software; Financial Engines, Inc., a publicly-held provider of portfolio management and retirement services and investment advice; and several privately-held companies. He is also an advisor to the investment committee of the William and Flora Hewlett Foundation.

Board Composition

Our board of directors currently consists of eight members, all of whom were elected as directors pursuant to a stockholders’ agreement that we have entered into with holders of our convertible preferred stock. Upon the closing of this offering, the board voting arrangements contained in the stockholders’ agreement will terminate and there will be no further contractual obligations regarding the election of our directors. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. There are no family relationships among any of our directors or executive officers.

In accordance with the terms of our restated certificate of incorporation and amended and restated by-laws, our board of directors is divided into three classes, each of which consists, as nearly as possible, of one-third of the total number of directors constituting our entire board of directors and each of whose members serve for staggered three-year terms. As a result, only one class of our board of directors will be elected each year. Upon the expiration of the term of a class of directors,

directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires. The members of the classes are as follows:


	•	the class I directors are Ms. Tolan and Messrs. Cline and Nayden, and their term expires at the annual meeting of stockholders to be held in 2011;


	•	the class II directors are Messrs. Bronfman, Kaplan and Shultz, and their term expires at the annual meeting of stockholders to be held in 2012; and


	•	the class III directors are Messrs. Spiegel and Wolfson, and their term expires at the annual meeting of stockholders to be held in 2013.

Our restated certificate of incorporation and restated by-laws provide that the authorized number of directors may be changed only by resolution of the board of directors. Our restated certificate of incorporation and restated by-laws also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast in an election of directors, and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.

Director Independence

Pursuant to the corporate governance listing standards of the New York Stock Exchange, a director employed by us cannot be deemed to be an “independent director”, and consequently Ms. Tolan is not an independent director. In addition, in accordance with the NYSE corporate governance listing standards, each other director will qualify as “independent” only if our board of directors affirmatively determines that he or she has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship.

Our board of directors has affirmatively determined that each of Messrs. Bronfman, Cline, Kaplan, Nayden, Shultz, Spiegel and Wolfson is “independent” in accordance with Section 303A.02(b) of the NYSE Listed Company Manual. In making this determination, our board of directors considered the percentage of our common stock owned by an entity affiliated with Accretive, LLC, of which Mr. Cline is the founding managing partner and Mr. Bronfman is a general partner, and the percentage of our common stock owned by FW Oak Hill Accretive Healthcare Investors, L.P., of which Messrs. Nayden and Wolfson are limited partners. Our board also considered that Messrs. Nayden and Wolfson are managing partners of Oak Hill Capital Management, LLC, an entity associated with FW Oak Hill Accretive Healthcare Investors, L.P., and that Mr. Wolfson is a managing partner of Oak Hill Investment Management, L.P., another entity associated with FW Oak Hill Accretive Healthcare Investors, L.P., and a Vice President and Assistant Secretary of Group VI 31, LLC, the general partner of FW Oak Hill Accretive Healthcare Investors, L.P. See “Principal and Selling Stockholders”.

All of the members of the board’s three standing committees described below are independent as defined under the rules of the New York Stock Exchange.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee operates under a charter that has been approved by our board of directors. Following this offering, copies of each committee’s charter will be posted on the Investor Relations section of our website.

Audit Committee

The members of our audit committee are Messrs. Kaplan (chair) and Wolfson. Our board of directors has determined that each of the members of our audit committee satisfy the requirements

for financial literacy under the current requirements of the New York Stock Exchange and rules and regulations. Within 12 months after this offering, we intend to appoint a third member to our audit committee, who will replace Mr. Kaplan as chair, to be an “audit committee financial expert”, as defined by SEC rules, and satisfy the financial sophistication requirements of the New York Stock Exchange. Our audit committee assists our board of directors in its oversight of our accounting and financial reporting process and the audits of our financial statements.

The audit committee’s responsibilities include:


	•	appointing, evaluating, retaining, terminating the engagement of, setting the compensation of and assessing the independence of our independent registered public accounting firm;

	•	overseeing the work of our independent registered public accounting firm, including the receipt and consideration of reports from the firm and reviewing with the firm audit problems, internal control issues and other accounting and financial reporting matters;

	•	coordinating the board’s oversight of our internal control over financial reporting, disclosure controls and procedures, code of business conduct and ethics, and internal audit function;

	•	establishing procedures for the receipt, retention and treatment of accounting related complaints and concerns;

	•	reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

	•	periodically meeting separately with our independent registered public accounting firm, management and internal auditors;

	•	discussing generally the type and presentation of information to be disclosed in our earnings press releases, as well as financial information and earnings guidance provided to analysts, rating agencies and others;

	•	reviewing our policies and procedures for approving and ratifying related person transactions, including our related person transaction policy;

	•	establishing policies regarding the hiring of employees or former employees of our independent registered public accounting firm;

	•	discussing our policies with respect to risk assessment and risk management;

	•	preparing the audit committee report required by SEC rules;

	•	in coordination with the compensation committee, evaluating our senior financial management; and

	•	at least annually, evaluating its own performance.

All audit services to be provided to us and all non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.

Compensation Committee

The members of our compensation committee are Messrs. Nayden (chair), Bronfman, Cline and Spiegel. Our compensation committee assists our board of directors in the discharge of its responsibilities relating to the compensation of our executive officers. The compensation committee’s responsibilities include:


	•	approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating our chief executive officer’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors (as


		directed from time to time by the board of directors), determining and approving our chief executive officer’s compensation;


	•	reviewing in consultation with our chief executive officer, and approving or making recommendations to the board of directors with respect to, compensation of our executive officers (other than our chief executive officer);

	•	overseeing the evaluation of our senior executives, in consultation with our chief executive officer in the case of all senior executives other than the chief executive officer and in conjunction with the audit committee in the case of our senior financial management;

	•	reviewing and making recommendations to the board of directors with respect to incentive-compensation and equity-based plans that are subject to board approval;

	•	administering our equity incentive plans, including the authority to delegate to one or more of our executive officers the power to grant options or other stock awards to employees who are not directors or executive officers of our company, but only if consistent with the requirements of the applicable plan and law;

	•	reviewing and making recommendations to the board of directors with respect to director compensation;

	•	reviewing and discussing with management the compensation discussion and analysis required by SEC rules;

	•	preparing the compensation committee report required by SEC rules; and

	•	at least annually, evaluating its own performance.

Nominating and Corporate Governance Committee

The members of our nominating and corporate governance committee are Messrs. Shultz (chair), Bronfman and Kaplan. The nominating and corporate governance committee’s responsibilities include:


	•	recommending to the board of directors the persons to be nominated for election as directors or to fill vacancies on the board of directors, and to be appointed to each of the board’s committees;

	•	applying the criteria for selecting directors approved by the board, and annually reviewing with the board the requisite skills and criteria for new board members as well as the composition of the board of directors as a whole;

	•	developing and recommending to the board corporate governance guidelines applicable to our company;

	•	overseeing an annual evaluation of the board of directors;

	•	at the request of the board of directors, reviewing and making recommendations to the board relating to management succession planning; and

	•	at least annually, evaluating its own performance.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor have they ever been an officer or employee of our company.

Corporate Governance Guidelines

Our board of directors has adopted corporate governance guidelines to assist the board in the exercise of its duties and responsibilities and to serve the best interests of our company and our stockholders. Following this offering, a copy of these guidelines will be posted on the Investor Relations section of our website. These guidelines, which provide a framework for the conduct of the board’s business, are expected to provide that:


	•	the board’s principal responsibility is to oversee the management of Accretive Health;

	•	directors have an obligation to become and remain informed about our company and business;

	•	directors are responsible for determining that effective systems are in place for periodic and timely reporting to the board on important matters concerning our company;

	•	directors are responsible for attending board meetings and meetings of committees on which they serve;

	•	a majority of the members of the board of directors shall be independent directors;

	•	each director must limit the number of other public company boards on which he or she serves so that he or she is able to devote adequate time to his or her duties to Accretive Health, including preparing for and attending meetings;

	•	the non-management directors meet in executive session at least semi-annually;

	•	directors have full and free access to officers and employees of our company, and the right to hire and consult with independent advisors at our expense;

	•	new directors participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and

	•	at least annually, the board of directors and its committees will conduct self-evaluations to determine whether they are functioning effectively.

Code of Business Conduct and Ethics

Our board of directors has adopted a written code of business conduct and ethics that will apply to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following this offering, a copy of the code of business conduct and ethics will be posted on the Investor Relations section of our website.

Director Compensation

Since our company was formed, we have not paid cash compensation to any director for his or her service as a director. However, non-employee directors are reimbursed for reasonable travel and other expenses incurred in connection with attending our board and committee meetings.

In the past, we have granted restricted stock and options to purchase shares of our common stock to our non-employee directors who are not affiliated with our 5% stockholders. We did not grant any restricted stock or options to purchase shares of our common stock to our non-employee directors during our fiscal year ended December 31, 2009. Ms. Tolan has never received any compensation in connection with her service as a director.

In anticipation of becoming a public company, we adopted the following director compensation plan for non-employee directors in November 2009. These arrangements will become effective upon

the completion of this offering, except for the option grants made on February 3, 2010 as described below.

Cash Compensation. Each non-employee director will receive a $60,000 annual retainer. The chairs of the board of directors and the audit committee will receive an additional annual retainer of $20,000, and the chairs of the compensation committee and the nominating and corporate governance committee will receive an additional annual retainer of $10,000. There are no additional fees for attending board or board committee meetings. Cash fees will be paid quarterly in arrears to the non-employee directors who were serving as directors at the end of the quarter.

In lieu of cash fees, non-employee directors may elect to receive fully-vested options to purchase shares of our common stock. Elections must be received by the 75th day of a quarter and will apply to all subsequent quarterly cash fees until a new election is received. Such options will be granted on the first trading day of each quarter with respect to the fees payable for the preceding quarter, and the exercise price will equal the fair market value of the common stock on the date of grant. The number of shares subject to such options will be calculated by dividing the dollar amount of the cash fees for the quarter by the Black-Scholes option value we used for purposes of determining the share-based compensation expense that we recognized for financial statement reporting purposes in that quarter.

Stock Options. On February 3, 2010, each current non-employee director (Messrs. Bronfman, Cline, Kaplan, Nayden, Shultz, Spiegel and Wolfson) was granted a stock option to purchase 13,333 shares of common stock at an exercise price of $57.66 per share (the fair value of our common stock as of such date, as determined by the board of directors), provided that if this offering occurs at a higher price prior to May 15, 2010 the exercise price will be increased to the price per share at which shares are initially offered to the public. These options vest in four equal annual installments, based on continued service as a director, and can be exercised immediately upon grant, provided that upon exercise the shares issued are subject to the same vesting and repurchase provisions that applied before exercise.

The number of shares of common stock subject to the stock option granted to each non-employee director on February 3, 2010 was selected by our board of directors based on the recommendation of the compensation committee and the input of the independent consulting firm referenced below under the “Competitive Market Data and Use of Compensation Consultants.” These option grants reflect the board’s view, based on its business judgment and collective experience as well as the input of the independent consulting firm, that the market value for compensation for service as a non-employee is $130,000 per year. These grants also reflect the board’s view that a longer term grant provides a better correlation with the interests of stockholders and, as a result, these grants vest over four years based on continued service as a director. The number of shares subject to these options was determined on February 3, 2010 using the Black-Scholes valuation method for a four-year option with a value of $130,000 per year.

Unless a different arrangement is specifically agreed to, any non-employee director who joins our board after the date of this offering will be granted a stock option on the date of such director’s first board meeting. The option will have a total Black-Scholes value based on the target value of $130,000 per year, and the exercise price will equal the fair market value of the common stock on the date of grant. Each such option will vest in four equal annual installments, based on continued service as a director.

Expenses. We reimburse each non-employee director for ordinary and reasonable expenses incurred in attending board and board committee meetings.

Executive Compensation

Compensation Discussion and Analysis

This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded

to and earned by our executives and is intended to place in perspective the data presented in the tables and narrative that follow.

As we have prepared to become a public company, our compensation committee has begun a thorough review of all elements of our executive compensation program, including the function and design of our annual cash incentive and equity incentive programs. The compensation committee has begun, and expects to continue in the coming months, to evaluate the need for revisions to our executive compensation program to ensure our program is competitive with the companies with which we compete for superior executive talent. As part of this process, the compensation committee is considering the competitiveness of the elements of the compensation packages we offer to our executives, as well as their total compensation packages.

Overview of Executive Compensation Process

Roles of Our Board, Compensation Committee and Chief Executive Officer in Compensation Decisions. Our compensation committee oversees our executive compensation program, and has done so historically. In this role, the compensation committee has reviewed all compensation decisions relating to our executive officers and has made recommendations to the board. Our chief executive officer annually reviews the performance of each of our other executive officers, and, based on these reviews, provides recommendations to the committee and the board with respect to salary adjustments, annual cash incentive bonus targets and awards and equity incentive awards. Our compensation committee meets with our chief executive officer annually to discuss and review her recommendations regarding executive compensation for our executive officers, excluding herself. These recommendations are forwarded to the board, which typically meets in executive session to discuss those recommendations and to consider the compensation of the chief executive officer. Our chief executive officer is not present for board or committee discussions regarding her compensation. Our chief executive officer may grant options to executive officers other than herself and determine the number of shares covered by, and the timing of, option grants. The board has, and it exercises, the ability to materially increase or decrease amounts of compensation payable to our executive officers pursuant to recommendations made by our chief executive officer.

Competitive Market Data and Use of Compensation Consultants. Historically, our compensation committee has not formally benchmarked our executive compensation against compensation data, but rather has relied on its members’ business judgment and collective experience, including in the healthcare and consulting industries. As part of our preparation to become a public company, in August 2009 our compensation committee engaged an independent compensation consulting firm to provide advice regarding our executive compensation program and general information regarding executive compensation practices in our industry. Although the compensation committee and board consider the compensation consulting firm’s advice in considering our executive compensation program, the compensation committee and board ultimately make their own decisions about these matters.

At the compensation committee’s request, the independent compensation consulting firm has conducted a number of compensation analyses to provide information regarding competitive pay and practices for executives of technology, business process outsourcing and healthcare services companies comparable to us in terms of revenue and growth rate, and/or which are anticipated to be comparable to us in terms of market capitalization. This peer group, which will be periodically reviewed and updated by the compensation committee, consists of:


Akamai Technologies	Genpact	Metavente
Athenahealth	Global Payments	Nuance Communications
Blackboard	HLTH Corp	Quality Systems
Cerner	Huron Consulting	salesforce.com
Cognizant Tech Solutions	MAXIMUS	SXC Health Solutions
Eclipsys	MedAssets	WNS Holdings

Although the board and compensation committee may consider peer group data, to date, they have not benchmarked total executive compensation or most compensation elements against this peer group, and they do not aim to set total compensation, or any compensation element, at a specified level as compared to the companies in our peer group.

Objectives and Philosophy of Our Executive Compensation Program

Our primary objective with respect to executive compensation is to attract, retain and motivate highly talented individuals who have the breadth and experience to successfully execute our business strategy. Our executive compensation program is designed to:


	•	reward the achievement of our annual and long-term operating and strategic goals;

	•	recognize individual contributions; and

	•	align the interests of our executives with those of our stockholders by rewarding performance that meets or exceeds established goals, with the ultimate objective of increasing stockholder value.

To achieve these objectives, our executive compensation program ties a portion of each executive’s overall compensation to key corporate financial goals, primarily adjusted EBITDA targets, as well as to individual performance. We also provide a portion of our executive compensation in the form of equity incentive awards that vest over time, which we believe helps to retain our executive officers and aligns their interests with those of our stockholders by allowing them to participate in our long-term performance as reflected in the trading price of shares of our common stock.

Elements of Our Executive Compensation Program

The primary elements of our executive compensation program are:


	•	base salaries;

	•	annual cash incentive bonuses;

	•	equity incentive awards; and

	•	other employee benefits.

Our compensation committee has not adopted any formal or informal policies or guidelines for allocating compensation between these elements.

Base Salaries. We use competitive base salary to attract and retain qualified candidates to help us achieve our growth and performance goals. Base salaries are intended to recognize an executive officer’s immediate contribution to our organization, as well as his or her experience, knowledge and responsibilities.

From time to time, in its discretion, our compensation committee and board evaluate and adjust executive officer base salary levels based on factors determined to be relevant, including:


	•	the executive officer’s skills and experience;

	•	the particular importance of the executive officer’s position to us;

	•	the executive officer’s individual performance;

	•	the executive officer’s growth in his or her position;

	•	market level increases;

	•	base salaries for comparable positions within our company; and

	•	inflation rates.

Our compensation committee and board historically have considered annual base salary adjustments in the first quarter of the year. From 2004 through 2007, we did not increase the base salary of any of our executive officers, other than a nominal increase in 2007 to reflect the rate of inflation. In the first quarter of 2008, our board increased the base salaries for our executive officers (other than our chief financial officer, who joined us in September 2005) by 25% over their original

base salaries because these executive officers had not received base salary increases commensurate with their significant contributions to the development of our business during our first three years of operation. These contributions included, in the case of Ms. Tolan, her overall strategic leadership in building our business, in the case of Mr. Deffarges, his role in expanding our customer base, and in the case of Mr. Kazarian, his contributions in various legal and operational matters. While it has been our philosophy to keep base salaries for senior executives below market levels and place greater emphasis on performance-based compensation, based on the significant growth of the business from 2003 to 2008, and the fact that these senior executives had joined us between November 2003 and April 2004 and had not received any increase in base salary in 2004, 2005, or 2006 and only a nominal increase in 2007, the board deemed it appropriate to provide these adjustments to base salary for these executives. In light of general economic conditions in the first quarter of 2009, and despite our strong performance in 2008, we did not increase any executive officer’s base salary for 2009.

In determining base salaries for our executive officers for 2010, our compensation committee considered the results of a market analysis of the compensation for executives at comparable companies performed by the independent compensation consulting firm retained by the compensation committee. Based on this analysis, the compensation committee determined that a market adjustment was warranted in the compensation of our chief executive officer, and set her 2010 base salary at $700,000 and her 2010 bonus target at $950,000. The compensation committee also elected to increase the 2010 base salaries for Messrs. Deffarges, Staton and Kazarian by 2.7% each, reflecting the rate of inflation, to $449,313, $330,000 and $288,850, respectively.

Annual Cash Incentive Bonuses. We maintain an annual cash incentive bonus program in which each of our executive officers participates. These annual cash incentive bonuses are intended to compensate our executive officers for our achievement of corporate financial goals, primarily adjusted EBITDA targets, as well as individual performance in the areas of:


	•	economic and financial contributions;

	•	operations;

	•	customer satisfaction;

	•	business development; and

	•	organizational and leadership development.

Our annual cash incentive bonuses have varied from year to year, and we expect that they will continue to vary, depending on actual corporate and individual performance results.

Historically, our board has set our corporate financial goals and our executive officers’ individual cash incentive bonus targets each year in advance and it has worked with our chief executive officer to develop aggressive goals to be achieved by the company and our executive officers. The goals established by the board have been based on our historical operating results and growth rates, as well as our expected future results, and are designed to require significant effort and operational success on the part of our executive officers and the company. However, during the course of the year, the board and our compensation committee, based on recommendations of our chief executive officer (with respect to our other executive officers), may adjust such goals as they deem appropriate.

Each executive officer’s initial target annual bonus is set upon commencement of employment as part of the executive’s overall compensation package. The target annual bonus amount is then reviewed and adjusted in each subsequent year, generally so that it is equal to the higher of the executive’s prior year actual bonus and his or her prior year target bonus. The updated targets reflect strong growth and performance assumptions which correlate to our annual plans. When these growth and performance expectations are exceeded, bonuses above target can be awarded. These higher performance-based awards, and our continued strong growth and performance expectations, are considered when setting target bonuses for subsequent years. We believe this helps to calibrate incentive compensation with our growth and performance. The board believes that this approach supports our pay-for-performance philosophy and encourages the achievement of growth and

performance goals. The board approves actual annual cash incentive bonuses, based on the recommendations of our compensation committee, with input from our chief executive officer in the case of executive officers other than herself. There are no minimum or maximum payout levels, and our board has broad discretion to make adjustments to the awards.

For each of the years ended December 31, 2008 and 2009, our corporate financial goals were based on adjusted EBITDA. The corporate financial goals were developed prior to the beginning of the year by management in consultation with the compensation committee, and then reviewed, refined and approved by our board of directors. Our compensation committee believes that adjusted EBITDA is an appropriate measure of our business performance because it emphasizes the addition of new customers and expansion of services with existing customers, as well as improvements in our operating efficiency, and it is reflective of stockholder value creation. In 2008, we exceeded our adjusted EBITDA target by $1.5 million, and our actual adjusted EBITDA was $12.2 million. In 2009, we met our adjusted EBITDA target of $32.8 million.

For the years ended December 31, 2008 and 2009, each executive officer’s target bonus awards were set as follows:


	Target Annual
	Cash Incentive
	Bonus
	Year Ended
	December 31,
Executive Officer	2008		2009

Mary A. Tolan	$	450,000	$	600,000
John T. Staton	$	183,000	$	258,000
Etienne H. Deffarges	$	346,750	$	446,750
Gregory N. Kazarian	$	127,250	$	202,250

As discussed above, the compensation committee has set the 2010 bonus target for our chief executive officer at $950,000. The 2010 bonus targets for our other executive officers are equal to their 2009 bonus targets.

Because our adjusted EBITDA for the year ended December 31, 2008 exceeded our goal, our board exercised its discretion to increase our executive officers’ annual cash incentive bonuses above the targets. The allocation of bonuses for 2008 among our executive officers was based on the compensation committee’s subjective assessments of individual contributions by our executive officers in their respective areas of primary responsibility. In making these assessments, the compensation committee considered the following: in the case of Ms. Tolan, her success in growing our business, securing talented personnel to support the business’ growth and enhancing our operating model, and the fact that our financial performance substantially exceeded plan; in the case of Mr. Deffarges, his role in connection with our successful efforts to secure new customers; in the case of Mr. Staton, his contributions to our ability to exceed our financial plan and his role in successfully strengthening our financial operations; and in the case of Mr. Kazarian, his role in our ability to attract talented employees to support our growth and his success in taking on operating responsibilities important to our growth. For our executive officers other than Ms. Tolan, the compensation committee also considered Ms. Tolan’s recommendations regarding incentive compensation and her assessment of each executive officer’s contributions to our performance during 2008. For the actual 2008 amounts that we paid to each executive officer under our annual cash incentive bonus program, see the Summary Compensation Table below.

Our adjusted EBITDA for the year ended December 31, 2009 met the plan established by our board. The allocation of bonuses for 2009 among our executive officers was based on the compensation committee’s subjective assessments of individual contributions by our executive officers in their respective areas of primary responsibility. In making its assessments regarding incentive compensation, the compensation committee considered the following: in the case of Ms. Tolan, her success in driving our growth, increasing our operating margins, recruiting key talent for the

organization and identifying new business opportunities; in the case of Mr. Deffarges, his oversight of several of our operating sites and his contributions in the area of organizational build-out and development; in the case of Mr. Staton, his contributions to our financial performance, the development of our financial systems and controls and the recruitment and development of our finance team; and in the case of Mr. Kazarian, his oversight of several of our operating sites and his contributions in the area of organizational build-out and development. For our executive officers other than Ms. Tolan, the compensation committee also considered Ms. Tolan’s recommendations regarding incentive compensation and her assessment of each executive officer’s contributions to our performance during 2009. For the actual 2009 amounts that we paid to each executive officer under our annual cash incentive bonus program, see the Summary Compensation Table below.

Our board uses our unaudited financial results to make financial target performance determinations under our annual cash incentive bonus program, and those results may be adjusted in connection with the preparation of our audited consolidated financial statements. You should read our consolidated financial statements, the related notes to these financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. As described above, the purpose of these targets was to establish a method for determining the payment of cash incentive bonuses. You are cautioned not to rely on these performance goals as a prediction of our future performance.

From time to time, we may make special cash bonus awards to our employees, including our executive officers. In July 2008 and August 2009, we determined to award special cash bonuses of approximately $81,000 and $143,000, respectively, to Mr. Staton contemporaneously with the cash dividend we declared on all outstanding capital stock in each of those years. As the holder of vested options who was not a stockholder, Mr. Staton was not entitled to participate in those cash dividends. However, because Mr. Staton is primarily responsible for our financial management and is deeply involved in helping to achieve our strategic goals, and in light of the connection between Mr. Staton’s contributions and our ability to pay these cash dividends, the board determined to award him special cash bonuses in amounts that represented the payments he would have received as cash dividends if he had owned such number of shares equal to the vested portion of his option on the record date for the applicable dividend. As stockholders, our other executive officers participated directly in these cash dividends and therefore did not receive any special bonus in either year relating to this aspect of our financial performance.

Equity Incentive Awards. Our equity incentive award program is the primary vehicle for offering long-term incentives to our executive officers. To date, equity incentive awards to our executive officers have been made in the form of restricted stock awards and stock options, and our compensation committee currently intends to continue this practice. Although we do not have any equity ownership guidelines or requirements for our executive officers, we believe that equity incentive awards:


	•	provide our executive officers with a strong link to our long-term performance, including by enhancing their accountability for long-term decision making;

	•	help balance the short-term orientation of our annual cash incentive bonus program;

	•	create an ownership culture by aligning the interests of our executive officers with the creation of value for our stockholders; and

	•	further our goal of executive retention.

Employees who are considered essential to our long-term success are eligible to receive equity incentive awards, which typically vest over four years. In determining the size of equity incentive awards to executive officers, our compensation committee generally considers the executive’s experience, skills, level and scope of responsibilities and internal comparisons to other comparable positions in our company. As of December 31, 2009, all equity incentive awards granted to our executive officers had fully vested. Accordingly, in connection with its evaluation of the need for revisions to our executive compensation program, on February 3, 2010 our board of directors, on the recommendation of the compensation committee, granted stock options to purchase 300,000,

115,000, 130,000 and 72,000 shares of our common stock, respectively, to Ms. Tolan and Messrs. Staton, Deffarges and Kazarian. These options have an exercise price equal to $57.66 per share (the fair value of our common stock as of such date, as determined by the board of directors), provided that if this offering occurs at a higher price prior to May 15, 2010 the exercise price will be increased to the price per share at which shares are initially offered to the public. These options vest in four equal annual installments, based on continued employment, and can be exercised immediately upon grant, provided that upon exercise the shares issued are subject to the same vesting and repurchase provisions that applied before exercise.

Other Employee Benefits. We maintain broad-based benefits that are provided to all employees, including our 401(k) retirement plan, flexible spending accounts, a medical care plan, vacation and standard company holidays. Our executive officers are eligible to participate in each of these programs on the same terms as non-executive employees; however, we do not provide a matching 401(k) contribution for any of our executive officers. See “— 401(k) Retirement Plan” for more information regarding our 401(k) retirement plan.

We also provide for each of our chief executive officer, chief financial officer and executive vice president supplemental disability income protection that provides income replacement in the event of a qualifying disability.

Severance and Change of Control Arrangements. We have an employment agreement with our chief executive officer that provides a combination of “single trigger” and “double trigger” benefits in connection with a change of control of our company and/or termination of her employment. We believe a combination of “single trigger” and “double trigger” vesting along with severance payments maximizes stockholder value because it limits any unintended windfalls to executives in the event of a friendly change of control, while still providing executives appropriate incentives to cooperate in negotiating any change of control, including a change of control in which they believe they may lose their jobs. We also have an employment agreement with our chief financial officer and an offer letter with our senior vice president, each of which provides for specified salary continuation, and in the case of our chief financial officer, benefits continuation, in the event of specified employment terminations.

See “— Potential Payments upon Termination or Change in Control” and “Employment Agreements” for a more detailed description of these arrangements.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code, which will become applicable to us upon the closing of this offering, generally disallows a tax deduction for compensation in excess of $1.0 million paid to our chief executive officer and our four other most highly paid executive officers, except our chief financial officer. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We periodically review the potential consequences of Section 162(m) and we generally intend to structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, our board or compensation committee may, in their judgment, authorize compensation payments that are not exempt under Section 162(m) when they believe that such payments are appropriate to attract and retain executive talent.

Summary Compensation Table

The following table sets forth information regarding compensation earned by our chief executive officer, our chief financial officer and our two other executive officers during our fiscal years ended December 31, 2008 and 2009. We refer to these individuals as our named executive officers.


											Non-Equity
							Stock				Incentive Plan		All Other
Name and			Salary		Bonus		Awards		Option		Compensation		Compensation			Total
Principal Position	Year		($)		($)(1)		($)(2)		Awards ($)(2)		($)		($)(3)			($)

Mary A. Tolan		2009		515,000		—		—		—		600,000		5,219			1,120,219
Founder, President and Chief Executive Officer(4)		2008		515,000		150,000		—		—		450,000		8,760			1,123,760
John T. Staton		2009		321,360		143,492		—		89,088		258,000		3,640			815,580
Chief Financial Officer and Treasurer		2008		321,360		156,099		—		133,632		183,000		6,049			800,140
Etienne H. Deffarges		2009		437,500		—		—		—		350,000		10,704			798,204
Executive Vice President		2008		437,500		100,000		1,244		—		346,750		12,753			898,247
Gregory N. Kazarian		2009		281,250		—		—		—		202,250					483,500
Senior Vice President(5)		2008		281,250		75,000		—		—		127,250		36,500(6	)		520,000


(1)		Represents the amount of the discretionary cash bonus paid to each executive officer. In the case of Mr. Staton, the 2008 and 2009 amounts also include the special cash bonuses intended to approximate his participation in our 2008 and 2009 cash dividends.

(2)		Valuation of these option awards is based on the dollar amount of share-based compensation expense that we recognized for financial statement reporting purposes in 2008 and 2009 computed in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. These amounts do not represent the actual amounts paid to or realized by the named executive officer during 2008 and 2009. The assumptions used by us with respect to the valuation of option awards are the same as those set forth in Note 10 to our financial statements included elsewhere in this prospectus.

(3)		For Ms. Tolan, Mr. Staton and Mr. Deffarges, these amounts represent long-term disability insurance premiums paid by us on behalf of each such named executive officer.

(4)		Ms. Tolan is also a member of our board of directors but does not receive any additional compensation in her capacity as a director.

(5)		Mr. Kazarian was also our general counsel and secretary until November 2009.

(6)		Consists of the $22,000 cost of travel provided to Mr. Kazarian under a program designed to recognize exemplary performance by senior employees, and a $13,000 reimbursement to Mr. Kazarian for the associated U.S. federal and state income taxes.

Grants of Plan-Based Awards in 2008 and 2009

The following table sets forth information for 2008 and 2009 regarding grants of compensation in the form of plan-based awards made during 2008 and 2009 to our named executive officers.


	Payouts
	Under Non-Equity
	Incentive Plan
	Awards Target
	($)(1)(2)
Name	2008		2009

Mary A. Tolan	$	450,000	$	600,000
John T. Staton	$	183,000	$	258,000
Etienne H. Deffarges	$	346,750	$	350,000
Gregory N. Kazarian	$	127,250	$	202,250


(1)		Annual cash incentive bonuses paid under the annual cash incentive bonus program for 2008 and 2009 are also disclosed in the “Summary Compensation Table.”

(2)		There are no minimum or maximum payout levels, and our board has broad discretion to make adjustments to the awards.

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Outstanding Equity Awards at Year End

The following table sets forth information regarding outstanding stock options held by our named executive officers as of December 31, 2009. We did not grant any equity awards to our named executive officers during 2008 or 2009, none of our executive officers exercised any stock options and no restricted stock awards held by our named executive officers became vested during 2008 or 2009, other than 48,611 shares of restricted common stock held by Mr. Deffarges, which vested in full in 2008.

Option Awards

Equity Incentive

Plan Awards:

Number of

Securities

Underlying

Unexercised

Option

Options

Unearned

Exercise

Option

(#)

Options

Price

Expiration

Name

Exercisable

Unexercisable

(#)

($)

Date

Mary A. Tolan

—

John T. Staton

199,295

(1)

—

3.01

8/31/2015

Etienne H. Deffarges

—

Gregory N. Kazarian

—


(1)		This stock option was immediately exercisable upon grant, and as of December 31, 2009, was fully vested.

Potential Payments Upon Termination or Change of Control

The table below summarizes the potential payments to each of our named executive officers if he or she were to be terminated on December 31, 2009 under the circumstances described in the footnotes below.


	Severance			Medical/Welfare
Name	Payments(1)			Benefits(2)			Total Benefits

Mary A. Tolan	$	515,000	(3)		—		$	515,000
John T. Staton	$	599,994	(4)	$	18,252	(4)	$	618,246
Etienne H. Deffarges		—			—			—
Gregory N. Kazarian	$	281,250	(5)		—		$	281,250


(1)		Amounts subject to a reduction for compensation earned by the named executive officer from any new employment during the severance period.

(2)		Calculated based on the estimated cost to us of providing these benefits.

(3)		Represents amounts payable for termination due to death or “disability” or termination without “cause” or for “good reason” pursuant to the employment agreement described below.

(4)		Represents amounts payable for termination without “cause” or for “good reason” pursuant to the employment agreement described below.

(5)		Represents amounts payable for termination without “cause” pursuant to the offer letter described below.

Employment Agreements

Mary A. Tolan. We entered into an at-will employment agreement with Mary A. Tolan, our president and chief executive officer, effective January 2004. Pursuant to the agreement, Ms. Tolan is entitled to an annual base salary of at least $400,000, subject to adjustment by our board of directors. Ms. Tolan’s annual base salary is currently $700,000. Pursuant to the agreement, Ms. Tolan earned a one-time cash performance bonus of $200,000 based on customer procurement during 2004

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consistent with our business plan. Pursuant to the agreement, in March 2004, our board of directors granted Ms. Tolan 3,000,000 shares of restricted stock, which vested in equal monthly installments over four years ending November 2007.

If Ms. Tolan’s employment is terminated due to her death or “disability”, if we terminate Ms. Tolan’s employment without “cause” or if Ms. Tolan terminates her employment for “good reason”, as those terms are defined in her employment agreement, (1) Ms. Tolan will be entitled to receive her base salary paid in accordance with our payroll practices during the 12 months following such termination, subject to a reduction for any compensation she earns from any new employment during the severance period, and (2) Ms. Tolan’s outstanding stock-based awards will continue to vest until the earlier of 12 months following her termination or the end of the applicable award’s vesting period. In the event of a “change in control”, as such term is defined in her employment agreement, 50% of all unvested shares of Ms. Tolan’s stock-based awards will accelerate and vest in full as of the effective date of the “change in control”. If Ms. Tolan’s employment is terminated without “cause” or if Ms. Tolan terminates her employment for “good reason” within 12 months after a “change in control”, the remaining 50% of all unvested shares of Ms. Tolan’s stock-based awards will accelerate and vest in full. If Ms. Tolan is terminated for “cause”, she has agreed to execute a limited stock power transferring all rights to vote the 3,000,000 shares of restricted stock granted to her pursuant to the employment agreement to a person we designate in our sole discretion. Ms. Tolan’s employment agreement restricts her from engaging in activities competitive with us, soliciting our employees and consultants, and diverting business from us for a period of 12 months following her termination.

John T. Staton. We entered into an at-will employment agreement with John T. Staton, our chief financial officer and treasurer, effective June 2005. Pursuant to the agreement, Mr. Staton is entitled to an annual base salary of at least $300,000, subject to adjustment by our board of directors and our chief executive officer. Mr. Staton’s annual base salary is currently $330,000. Mr. Staton is eligible to earn an annual performance bonus of up to $100,000 per year, with the full $100,000 guaranteed for each of his first two years of employment. Pursuant to the agreement, in September 2005, our board of directors granted Mr. Staton an option to purchase 299,295 shares of our common stock at an exercise price of $3.01 per share, vesting in equal monthly installments over four years ending September 2009.

If we terminate Mr. Staton’s employment without “cause” or if Mr. Staton terminates his employment for “good reason”, as those terms are defined in his employment agreement, Mr. Staton will be entitled to receive $33,333 per month during the 18 months following such termination, subject to a reduction for any compensation he earns from any new employment during the severance period. If Mr. Staton’s employment is terminated without “cause” or if Mr. Staton terminates his employment for “good reason”, Mr. Staton and his family will be entitled to continue to participate in our health insurance plan during the 18 months following termination to the extent of his participation prior to termination, and we will pay the premiums that we paid prior to termination. Mr. Staton’s employment agreement restricts him from engaging in activities competitive with us, soliciting our employees and consultants, and diverting business from us for a period of 18 months following his termination.

Gregory N. Kazarian. We entered into an offer letter with Gregory N. Kazarian, our senior vice president, in December 2003. Pursuant to the offer letter, Mr. Kazarian is entitled to an annual base salary of $225,000. Mr. Kazarian’s annual base salary is currently $288,850. Pursuant to the offer letter, Mr. Kazarian earned a one-time cash performance bonus of $75,000 based on customer procurement, and was entitled to receive an option to purchase shares of our common stock then representing 1.5% of our common stock. In lieu of the option, in June 2004, our board of directors awarded Mr. Kazarian 250,000 shares of common stock, then representing 1.5% of our common stock, which vested in equal monthly installments over four years ending before January 2008. If we terminate Mr. Kazarian’s employment without cause, Mr. Kazarian will be entitled to receive his current monthly base salary during the 12 months following such termination, subject to a reduction for any compensation he earns from any new employment during the severance period.

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Confidentiality and Non-Disclosure Agreements

As a condition to employment, each named executive officer entered into a confidentiality and non-disclosure agreement with us. Under these agreements, each named executive officer has agreed:


	•	not to solicit our employees and customers during his or her employment and for a period of 18 months after the termination of employment;

	•	not to compete with us during his or her employment and for a period of 12 months after the termination of employment;

	•	to protect our confidential and proprietary information; and

	•	to assign to us intellectual property developed during the course of his or her employment.

Stock Option and Other Compensation Plans

Amended and Restated Stock Option Plan

Our amended and restated stock option plan, which we refer to as our prior option plan, was adopted by our board of directors in December 2005. The plan was amended and restated in February 2006 and further amended in May 2007, October 2008, January 2009, November 2009 and April 2010. As of March 31, 2010, a maximum of 7,151,526 shares of common stock was authorized for issuance under our prior option plan. Upon effectiveness of our 2010 stock incentive plan described below, no further grants will be made under our prior option plan, and all grants then outstanding under our prior option plan will remain outstanding in accordance with their terms.

As of March 31, 2010, there were options to purchase 3,897,406 shares of common stock outstanding under our prior option plan, 939,549 shares of common stock issued and outstanding pursuant to the exercise of options granted under this plan (of which 933,476 shares were vested) and 2,314,571 shares of common stock available for future grants under the plan.

Our prior option plan provides for the grant of options that are not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code, which we refer to as non-statutory stock options. Our employees, directors and outside consultants are eligible to receive options under the plan. The plan is administered by the board of directors, our compensation committee or another committee designated by the board of directors. Subject to limitations specified in the plan, the committee or our chief executive officer may grant options, select option recipients and determine the number of shares covered by, and the timing of, option grants, except that our chief executive officer may not grant options to herself.

Unless otherwise prescribed in an option agreement, options granted pursuant to our prior option plan vest in equal installments on each of the first four anniversaries of the grant date. Options under our prior option plan are immediately exercisable upon grant, provided that unvested shares of common stock issued upon exercise of an option remain subject to our right of repurchase upon termination and to restrictions on transfer. Subject to the repurchase right, upon exercise of an option, a holder has the rights of a stockholder as to both the vested and unvested shares. Our prior option plan contains restrictive covenants relating to confidentiality, ownership of proprietary information, non-competition and non-solicitation. In the event an option holder’s employment or service is terminated other than for cause, as defined in our prior option plan, the unvested portion of the unexercised option shall be forfeited, the vested but unexercised portion of the option may be exercised within 60 days and unvested shares that were issued upon prior exercises are subject to our right of repurchase at a price per share equal to the lesser of the option’s exercise price or the fair market value at the time of termination. In the event an option holder’s employment or service is terminated for cause, the vested but unexercised portion of the option is forfeited, vested shares that were issued upon prior exercises are subject to our right of repurchase at a price per share equal to the option’s exercise price, and unvested shares that were issued upon prior exercises are subject to our right of repurchase at a price per share equal to the lesser of the option’s exercise price or the fair market value at the time of termination.

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Upon a “change of control”, as defined in the plan, all unvested shares issued upon prior exercises of options granted under our prior option plan will be accelerated in full unless the acquirer replaces the shares with its shares subject to the same vesting schedule. If an acquirer of our company does not accept the assignment of our repurchase rights under the prior option plan, the repurchase rights will terminate upon the change of control.

Our prior option plan restricts option recipients from engaging in activities competitive with us, soliciting our employees and consultants, and diverting business from us while serving as an employee, director or consultant and for periods of 18 to 24 months after termination of employment or service.

2010 Stock Incentive Plan

Our 2010 stock incentive plan, which will become effective immediately prior to the closing of this offering, was adopted by our board of directors and approved by our stockholders in April 2010. The 2010 stock incentive plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards. Upon effectiveness of the plan, the number of shares of our common stock that will be reserved for issuance under the 2010 stock incentive plan will equal the sum of the number of shares of common stock then available for issuance under our prior option plan plus the number of shares of common stock subject to awards granted under our prior option plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us pursuant to a contractual repurchase right, up to a maximum of 6,218,050 shares.

Our employees, officers, directors, consultants and advisors are eligible to receive awards under our 2010 stock incentive plan. The exercise price of all stock options granted under the 2010 stock incentive plan cannot be less than 100% of the fair market value of the common stock on the date of grant. Incentive stock options may be granted only to our employees; in the case of any participant who owns 10% or more of the total combined voting power of our capital stock, an incentive stock option cannot have an exercise price of less than 110% of the fair market value of the common stock on the date of grant and the term of the option cannot exceed five years.

The 2010 stock incentive plan is administered by the board of directors, our compensation committee or another committee designated by the board of directors. The board of directors may delegate authority to an executive officer to grant options under the plan. Subject to limitations specified in the plan, the board, applicable committee or executive officer to whom authority is delegated will select the recipients of awards and determine:


	•	the number of shares of common stock covered by options and the dates upon which the options become exercisable;

	•	the exercise price of options;

	•	the duration of the options; and

	•	the number of shares of common stock subject to any restricted stock or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price.

Our board of directors has delegated authority to our chief executive officer to grant options under the 2010 stock incentive plan, except to herself and to other executive officers and directors, and subject to such guidelines as our board of directors may establish from time to time.

In general, options granted pursuant to our 2010 stock incentive plan will have a term of up to ten years and will vest in equal installments on each of the first four anniversaries of the grant date. Unless otherwise provided in the applicable option agreement, options will not be exercisable prior to vesting. Agreements evidencing options under the 2010 stock incentive plan will generally contain restrictive covenants relating to confidentiality, ownership of proprietary information, non-competition and non-solicitation. In the event an option holder’s employment or service is terminated other than for cause, as defined in the applicable option agreement, the unvested portion of the unexercised option will be forfeited and the vested but unexercised portion of the option may be exercised within 60 days.

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In the event an option holder’s employment or service is terminated for cause, the vested but unexercised portion of the option will be forfeited and vested shares that were issued upon prior exercises will be subject to our right of repurchase at a price per share equal to the option’s exercise price. In addition, if the option holder has sold the vested shares, we have the right to recover the proceeds from such sale that are in excess of the option’s exercise price.

Upon a merger or other reorganization event, our board of directors, may, in its sole discretion, take any one or more of the following actions pursuant to our 2010 stock incentive plan, as to some or all outstanding awards other than restricted stock awards:


	•	provide that all outstanding awards shall be assumed or substituted by the successor corporation;

	•	upon written notice to a participant, provide that the participant’s unexercised options or awards will terminate immediately prior to the consummation of such transaction unless exercised by the participant;

	•	provide that outstanding awards will become exercisable, realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon the reorganization event;

	•	in the event of a reorganization event pursuant to which holders of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to the participants equal to the excess, if any, of the acquisition price times the number of shares of our common stock subject to such outstanding awards (to the extent then exercisable (after giving effect to any acceleration of vesting) at prices not in excess of the acquisition price), over the aggregate exercise price of all such outstanding awards and any applicable tax withholdings, in exchange for the termination of such awards; and

	•	provide that, in connection with a liquidation or dissolution, awards convert into the right to receive liquidation proceeds.

Upon the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and other rights under each outstanding restricted stock award will continue for the benefit of the successor company and will, unless the board of directors may otherwise determine, apply to the cash, securities or other property into which our common stock is converted pursuant to the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all conditions on each outstanding restricted stock award will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award.

No award may be granted under the 2010 stock incentive plan after 2020. Our board of directors may amend, suspend or terminate the 2010 stock incentive plan at any time, subject to stockholder approval to the extent required by applicable law or stock market requirements.

Restricted Stock Plan

Our restricted stock plan was adopted by our board of directors in March 2004 and amended in June 2004, August 2004 and February 2005. As of March 31, 2010, there were 6,599,951 shares of common stock outstanding under our restricted stock plan, all of which were vested. Upon the closing of this offering, no further shares will be available for issuance under our restricted stock plan.

Our restricted stock plan provides for the grant of restricted stock awards. Our employees, directors and outside consultants are eligible to receive awards under the plan. The plan is administered by the board of directors, our compensation committee or another committee designated by the board of directors, provided that a majority of the members of such committee are directors who are not also our employees. The committee may grant awards, select the recipients and timing of awards, and determine the number of shares covered by awards.

Shares issued under our restricted stock plan vest on schedules specified in the applicable award agreement, ranging from immediate vesting to vesting over a period of 48 months. Upon

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termination for cause or without good reason, all unvested shares shall be forfeited. Upon termination without cause, for good reason, or for death or disability, unvested shares may continue to vest for up to 12 months and are subject to repurchase by us at the original purchase price therefor. Subject to the repurchase provisions, upon grant of an award, a holder has the rights of a stockholder as to both the vested and unvested shares.

Upon a “change of control”, as defined in the plan, unvested shares are accelerated only to the extent provided in the applicable award agreement, employment agreement or other agreement.

401(k) Retirement Plan

We maintain a 401(k) retirement plan that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all of our employees are eligible to participate. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equal to $16,500 in 2009, and have the amount of the reduction contributed to the 401(k) plan. We currently match up to 50% of the first 3% of base compensation in 401(k) plan contributions by employees who are below the “director level”; as such, our named executive offices do not receive a match from the company for amounts, if any, deferred under the 401(k) plan.

Limitation of Liability and Indemnification

As permitted by Delaware law, we plan to adopt provisions in our restated certificate of incorporation, which will become effective upon the closing of this offering, that limit or eliminate the personal liability of our directors. Our restated certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their fiduciary duties as directors, except liability for:


	•	any breach of the director’s duty of loyalty to us or our stockholders;

	•	any act or omission not in good faith or which involves intentional misconduct or a knowing violation of law;

	•	any unlawful payments related to dividends or unlawful stock repurchases or redemptions; or

	•	any transaction from which the director derived an improper personal benefit.

These limitations do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies, including injunctive relief or rescission. If Delaware law is amended to permit the further elimination or limiting of the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law as so amended.

As permitted by Delaware law, our restated certificate of incorporation that will become effective upon the closing of this offering also provides that:


	•	we will indemnify our directors and officers to the fullest extent permitted by law;

	•	we may indemnify our other employees and other agents to the same extent that we indemnify our officers and directors, unless otherwise determined by the board of directors; and

	•	we will advance expenses to our directors and officers in connection with legal proceedings to the fullest extent permitted by law.

The indemnification provisions contained in our restated certificate of incorporation that will become effective upon the closing of this offering are not exclusive. In addition, we have entered into indemnification agreements with each of our directors and executive officers. Each indemnification agreement provides that we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as our director, officer, employee or agent, provided that he or she acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no

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reasonable cause to believe that his or her conduct was unlawful. In the event that we do not assume the defense of a claim against a director or executive officer, we will be required to advance his or her expenses in connection with his or her defense, provided that he or she undertakes to repay all amounts advanced if it is ultimately determined that he or she is not entitled to be indemnified by us. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we understand that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

In addition, we maintain standard policies of insurance under which coverage is provided to our directors and officers against losses rising from claims made by reason of breach of duty or other wrongful act, and to us with respect to payments which may be made by us to such directors and officers pursuant to the above indemnification provisions or otherwise as a matter of law.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information concerning our company.

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RELATED PERSON TRANSACTIONS

Since January 1, 2007, we have engaged in the following transactions, other than compensation arrangements, with our directors, executive officers and holders of more than 5% of our voting securities, and certain affiliates of our directors, executive officers and 5% stockholders.

Share Exchanges

Effective as of December 31, 2008, certain of our directors, executive officers and their affiliates agreed to exchange 2,398,334 shares of our non-voting common stock held by them for 2,398,334 shares of our voting common stock. To implement these exchanges, we entered into share exchange agreements with these persons in February 2009. These shares are subject to the terms and conditions set forth in our restricted stock plan, the restricted stock award agreements entered into with these persons in connection with the original issuance of their shares of non-voting common stock and our stockholders’ agreement pursuant to which these persons have certain registration rights. For a more detailed description of these registration rights, see “Description of Capital Stock — Registration Rights”. Upon the closing of this offering, all other outstanding shares of non-voting common stock will be converted into voting common stock. The table below sets forth the number of shares of voting common stock issued to our directors, executive officers and their affiliates in exchange for an equal number of shares of non-voting common stock:


Name	Number of Shares

Etienne H. Deffarges		1,166,667
Steven N. Kaplan		41,667
Gregory N. Kazarian		250,000
The Shultz 1989 Family Trust(1)		90,000
Spiegel Family LLC(2)		750,000
John T. Staton Declaration of Trust(3)		100,000


(1)		George P. Shultz, a member of our board of directors, and his wife are the beneficiaries of The Shultz 1989 Family Trust.

(2)		Arthur H. Spiegel, III, a member of our board of directors, and his wife are the managing members of Spiegel Family LLC, the members of which are members of Mr. Spiegel’s immediate family.

(3)		John T. Staton, our chief financial officer and treasurer, is the trustee of John T. Staton Declaration of Trust, the beneficiaries of which are members of Mr. Staton’s immediate family.

Transactions with Ascension Health

In October 2004, Ascension Health became our founding customer. Since then, in exchange for its initial start-up assistance, operational laboratory services and related consulting services relative to the services we were developing, we have issued common stock and granted warrants to Ascension Health, as a result of which Ascension Health holds more than 5% of our voting securities. Ascension Health is the nation’s largest Catholic and largest non-profit health system. It is dedicated to its mission of serving all, with special attention to those who are poor and vulnerable. Our work on behalf of Ascension Health is done in compliance with its charity care guidelines and billing and collection policies, which recognize the human dignity of each individual and our responsibility to treat all patients with respect. A key element of our work for Ascension Health is qualifying patients for charity care and identifying potential payment sources for patients who are uninsured or underinsured. Since January 1, 2007, we have engaged in the following transactions with Ascension Health:

Customer Relationship. In October 2004, we and Ascension Health entered into a master services agreement with an initial term through November 1, 2007. In December 2007, we and Ascension Health renewed and extended the agreement through December 31, 2012 pursuant to an amended and restated master services agreement, which will automatically renew for successive one-year terms unless terminated by us or Ascension Health upon 180 days prior written notice.

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Pursuant to the amended and restated master services agreement, we provide our revenue cycle service offering to hospitals affiliated with Ascension Health that execute separate managed service contracts with us and thereby become our customers. In rendering our services, we must comply with each hospital’s policies and procedures relating to billing, collections, charity care, personnel, risk management, good corporate citizenship and other matters; the ethical and religious directives for Catholic healthcare services; and all applicable federal, state and local laws and regulations. Ascension Health’s affiliated hospitals are not obligated to execute a managed service contract with us or to use our services. Each managed service contract with a hospital affiliated with Ascension Health incorporates the provisions of the master services agreement and provides that the hospital will be bound by all amendments, modifications and waivers that we and Ascension Health agree to under the master services agreement. With certain discrete exceptions, we are the exclusive provider of revenue cycle services to the hospitals affiliated with Ascension Health that execute managed service contracts with us. Our managed service contracts with hospitals affiliated with Ascension Health require us to consult with such hospitals before undertaking services for competitors specified by such hospitals in their contracts with us. As a result, before we can begin to provide services to a specified competitor, we are required to inform and discuss the situation with the hospital that specified the competitor but are not required to obtain the consent of such hospital. We do not believe the existence of this consultation obligation has materially impaired our ability to obtain new customers.

The term of each managed service contract with a hospital affiliated with Ascension Health is five years and will automatically renew for successive one-year terms unless terminated by us or Ascension Health upon 210 days prior written notice. By mutual agreement, we and Ascension Health can terminate the managed service contracts between us and hospitals affiliated with Ascension Health upon 180 days prior written notice after the second anniversary of the effective date of the applicable contract. Upon 30 days prior written notice, Ascension Health can terminate the affected portion of any applicable managed service contract if we are unable to provide services to a hospital for 30 days out of any 45-day period due to any cause beyond our reasonable control. We can terminate any applicable managed service contract if a hospital is excluded from participation in the federal Medicare, state Medicaid or other specified federal or state healthcare programs, and Ascension Health can terminate the master services agreement if we are excluded from participation in any such program. A hospital cannot terminate its managed service contract with us but it can determine not to renew its contract with us. All managed service contracts between us and hospitals affiliated with Ascension Health will terminate automatically when the master services agreement between us and Ascension Health terminates or expires.

The amended and restated master services agreement provides, among other things, that:


	•	we assume full responsibility for the management and cost of the revenue cycle operations of each hospital that executes a managed service contract with us, including the payroll and benefit costs associated with the hospital’s employees conducting revenue cycle activities (and who remain hospital employees for all purposes), and the agreements and costs associated with related third-party services;

	•	we are required to supply, at our cost, a sufficient number of our own employees on each hospital’s premises and the technology necessary to implement and manage our services;

	•	each hospital must provide us with the facilities, standard office furnishings and services, pre-existing revenue cycle assets and authority to provide our services;

	•	in general, each hospital pays us:


	•	base fees equal to a specified amount, subject to annual increases under an inflation and wage increase formula;

	•	incentive fees based on achieving agreed-upon benchmarks; and

	•	management and technology fees;

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	•	our fees are subject to adjustment in the event specified performance milestones are not met, which would result in a reduction of future fees payable to us;

	•	we are required to offer to Ascension Health’s affiliated hospitals fees for our services that are at least as low as the fees we charge any other similarly-situated customer receiving comparable services at comparable volumes;

	•	we must implement our services and technology at each hospital in a manner that does not cause an unplanned material disruption in the hospital’s operations;

	•	we are required to work to qualify patients for charity care and identify potential payment sources for patients who are uninsured and underinsured;

	•	we are required to maintain patient and employee satisfaction levels as compared to specified baseline performance measurements;

	•	a joint review board consisting of an equal number of senior executives from us and Ascension Health oversees the obligations and performance of the parties and hears fee disputes and other disputes, with any unresolved disputes submitted to binding arbitration (provided that hospitals cannot withhold base fees for any reason);

	•	the parties provide various representations and indemnities (subject to a specified cap) to each other;

	•	following termination or expiration of the master services agreement or any managed service contract between us and a hospital affiliated with Ascension Health, if requested by Ascension Health, we must:


	•	provide termination assistance, in return for reasonable compensation, for three months;

	•	continue to provide our services for up to one year in return for compensation equal to a specified percentage of the then-applicable base fees; and

	•	provide reasonable assistance to Ascension Health in seeking bids from other parties to provide similar services; and


	•	following termination or expiration of the agreement, we must grant to the applicable hospitals a license to continue using all software and tools we used to provide our services, in exchange for payments and fees that vary depending on whether the agreement is terminated for cause or for any other reason.

The amended and restated master services agreement may not be terminated by hospitals affiliated with Ascension Health. The agreement may only be terminated by Ascension Health or us in the following circumstances:


	•	either party may terminate the agreement if the other party materially breaches the agreement and fails to cure the breach in accordance with specified cure provisions; and

	•	Ascension Health may terminate the agreement (1) if we undergo a change in control, (2) if Ascension Health receives an opinion of qualified legal counsel, after consultation with our qualified legal counsel, in which it concludes that the agreement presents a material risk of causing Ascension Health or any affiliated hospital to violate any applicable laws, regulations or rules related to its operations, and that risk cannot be reasonably mitigated by the parties following good faith consultations and consideration of reasonable amendments and modifications to the agreement, or (3) if we become excluded from participation in the federal Medicare, state Medicaid or other specified federal or state healthcare programs, or if we fail to promptly remove from providing services to Ascension Health and its affiliates any of our staff or related entities that become excluded from participation in the federal Medicare, state Medicaid or other specified federal or state healthcare programs.

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In 2007, 2008 and 2009, net services revenue from hospitals affiliated with Ascension Health were $214.2 million, $281.7 million and $307.5 million, respectively, representing 89.0%, 70.7% and 60.3% of our total net services revenue in such periods, respectively. As of December 31, 2009, we had $17.7 million of accounts receivable from hospitals affiliated with Ascension Health.

Ascension Health is one of the selling stockholders in this offering and, following completion of this offering, will own % of our outstanding common stock. See “Principal and Selling Stockholders”.

Initial Stock Issuance and Protection Warrant Agreement. In October and November 2004, we issued 902,374 shares of our common stock to Ascension Health, then representing a 5% ownership interest in our company on a fully-diluted basis, and entered into a protection warrant agreement, under which we granted Ascension Health the right to purchase additional shares of our common stock from time to time for $0.01 per share when Ascension Health’s ownership interest in our company declines below 5% due to our issuance of additional stock or rights to purchase stock. The protection warrant agreement, and all purchase rights granted thereunder, expire on the closing of this offering. In 2007, 2008 and 2009, we granted Ascension Health the right to purchase 58,175, 23,261 and 34,789 shares of our common stock for $0.01 per share, respectively, pursuant to the protection warrant agreement. In 2007, 2008 and 2009, Ascension Health purchased 213,100, 66,652 and 41,938 shares of our common stock, respectively, from us for $0.01 per share, pursuant to the protection warrant agreement. As of December 31, 2009, Ascension Health has the right to purchase an additional 7,635 shares pursuant to the protection warrant agreement at any time prior to the closing of this offering.

Supplemental Warrant Agreement. Pursuant to a supplemental warrant agreement that became effective in November 2004, Ascension Health had the right to purchase up to 902,374 shares of our common stock based upon the achievement of specified milestones relating to its sales and marketing assistance. In May 2007, we amended and restated the supplemental warrant agreement to reduce the number of shares covered by the agreement to 446,190 shares. In September 2007, we further amended and restated the supplemental warrant agreement to modify the purchase right milestones. Under the supplemental warrant agreement, the purchase price is equal to the most recent common stock-equivalent price per share paid in a capital raising transaction or, if we have not had a capital raising transaction within the preceding six months, the exercise price of the employee stock options we have most recently granted. All purchase rights under the supplemental warrant agreement will expire on the closing of this offering. Based on Ascension Health’s achievement of specified milestones relating to its sales and marketing assistance, Ascension Health earned the right to purchase all 446,190 shares under the supplemental warrant agreement. The table below summarizes Ascension Health’s purchase rights under the supplemental warrant agreement:


Date Earned	Number of Shares		Purchase Price Per Share

December 2007		223,095	$	17.36
March 2008		111,548	$	40.17
March 2009		111,547	$	51.05

Ascension Health may purchase these shares for cash or in a cashless exercise transaction in which Ascension Health receives a smaller number of shares (based on the difference between the exercise price and the fair market value of the underlying shares on the date of exercise).

Registration Statement. Approximately one year after this offering, we intend to file a registration statement on Form S-3 under the Securities Act to register the resale of the shares of common stock issued to Ascension Health upon exercise of all warrants acquired by it under the Protection Warrant Agreement and Supplemental Warrant Agreement.

Stock Sale. Concurrently with the amendment and restatement of the supplemental warrant agreement described above in May 2007, we sold 669,284 shares of our common stock to Ascension Health for $8.20 per share, which was equal to the fair market value of the common stock at that time, for an aggregate purchase price of $5,488,128.

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Registration Rights

We are a party to a stockholders’ agreement with certain of our stockholders, including the following directors, executive officers and holders of more than 5% of our voting securities and their affiliates: Mary A. Tolan, Etienne H. Deffarges, Gregory N. Kazarian, John T. Staton Declaration of Trust, Steven N. Kaplan, The Shultz 1989 Family Trust, Spiegel Family LLC, Accretive Investors SBIC, L.P. and FW Oak Hill Accretive Healthcare Investors, L.P. Pursuant to the registration rights provisions of the stockholders’ agreement, the foregoing stockholders are selling a portion of their shares in this offering. See “Principal and Selling Stockholders”. In addition, after the contractual lock-up agreements in connection with this offering expire, the stockholders who are parties to the stockholders’ agreement will have the right to require us to register all or a portion of their shares under the Securities Act under specific circumstances and subject to certain limitations. For a more detailed description of these registration rights, see “Description of Capital Stock — Registration Rights”.

Management Investments in Our Company

We have not sold any shares of preferred stock since January 1, 2007. Between August 2003 and December 2005, we raised approximately $16.1 million from the sale of preferred stock to private investors principally consisting of our 5% stockholders, directors, executive officers and their affiliates. All outstanding shares of preferred stock will automatically convert into shares of common stock upon the closing of this offering, and the holders thereof will be entitled to receive in addition to such shares of common stock the liquidation preference payments described below under “Liquidation Preference Payments.” Each of our four executive officers made one or more cash investments in our company on the same terms as applicable to the other investors in these preferred stock financings. The cash investments of Ms. Tolan and Mr. Deffarges together represented more than 10% of the aggregate proceeds from our preferred stock financings.

Liquidation Preference Payments

Concurrently with the closing of this offering, upon the automatic conversion of shares of our preferred stock as described in the preceding paragraph, we are required to make liquidation preference payments to the holders of our outstanding preferred stock in amounts equal to the original purchase price per share plus any accrued but unpaid dividends. Each holder is entitled to elect to receive such payment in cash or in shares of common stock valued at the initial public offering price per share set forth on the cover of this prospectus. The following table sets forth the total amount of the liquidation preference payments to be made to our directors, executive officers and holders of more than 5% of our voting securities who hold shares of our preferred stock and, based on elections received by such holders, the allocation of such payments between cash and shares of common stock assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus:


Name	Shares		Cash		Total Payment

Accretive Investors SBIC, L.P.				—	$	7,238,625
FW Oak Hill Accretive Healthcare Investors, L.P.				—	$	6,032,357
Mary A. Tolan				—	$	1,255,199
John T. Staton Declaration of Trust		—	$	78,946	$	78,946
Etienne H. Deffarges		—	$	530,132	$	530,132
Steven N. Kaplan		—	$	88,212	$	88,212
Gregory N. Kazarian		—	$	69,979	$	69,979
The Shultz 1989 Family Trust				—	$	132,633
Spiegel Family LLC				—	$	506,714
Total			$	767,269	$	15,932,797

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Certain Employment Arrangements

We employ Kyle Hupach, the brother-in-law of Gregory N. Kazarian, our senior vice president, as a director of revenue cycle operations. Mr. Hupach’s current annual base salary is $123,250, and he also participates in our standard employee benefits package. In 2008 and 2009, Mr. Hupach’s total compensation, including salary, bonus and the amount of share-based compensation expense that we recognized for financial statement reporting purposes for stock options previously granted to him, was $156,670 and $180,872, respectively.

Indemnification

Our restated certificate of incorporation that will be in effect upon the closing of this offering provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with each of our directors and executive officers that are broader in scope than the specific indemnification provisions contained in the Delaware General Corporation Law. For more information regarding these agreements, see “Management — Limitation of Liability and Indemnification” and “Description of Capital Stock — Limitation of Liability and Indemnification of Officers and Directors”.

Policies and Procedures for Related Person Transactions

Our board of directors has adopted a written related person transaction policy to set forth policies and procedures for the review and approval or ratification of related person transactions. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, the amount involved exceeds $120,000, and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and employment by us of a related person. Our related person transaction policy will contain exceptions for any transaction or interest that is not considered a related person transaction under SEC rules as in effect from time to time.

Any related person transaction proposed to be entered into by us must be reported to our general counsel and will be reviewed and approved by the audit committee in accordance with the terms of the policy, prior to effectiveness or consummation of the transaction whenever practicable. If our general counsel determines that advance approval of a related person transaction is not practicable under the circumstances, the audit committee will review and, in its discretion, may ratify the related person transaction at the next meeting of the audit committee. Alternatively, our general counsel may present a related person transaction arising in the time period between meetings of the audit committee to the chair of the audit committee, who will review and may approve the related person transaction, subject to ratification by the audit committee at the next meeting of the audit committee.

In addition, any related person transaction previously approved by the audit committee or otherwise already existing that is ongoing in nature will be reviewed by the audit committee annually to ensure that such related person transaction has been conducted in accordance with the previous approval granted by the audit committee, if any, and that all required disclosures regarding the related person transaction are made.

Transactions involving compensation of executive officers will be reviewed and approved by the compensation committee in the manner specified in the charter of the compensation committee.

A related person transaction reviewed under this policy will be considered approved or ratified if it is authorized by the audit committee in accordance with the standards set forth in the policy after full

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disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the audit committee will review and consider:


	•	the related person’s interest in the related person transaction;

	•	the approximate dollar value of the amount involved in the related person transaction;

	•	the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

	•	whether the transaction was undertaken in the ordinary course of business of our company;

	•	whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to us than the terms that could have been reached with an unrelated third party;

	•	the purpose of, and the potential benefits to us of, the transaction; and

	•	any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The audit committee will review all relevant information available to it about the related person transaction. The audit committee may approve or ratify the related person transaction only if the audit committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The audit committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related person in connection with approval of the related person transaction.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2010, by:


	•	each of our directors;

	•	each of our named executive officers;

	•	each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock;

	•	all of our directors and executive officers as a group; and

	•	each selling stockholder.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares of common stock issuable upon the exercise of stock options or warrants that are immediately exercisable or exercisable within 60 days after March 31, 2010. Except as otherwise indicated, all of the shares reflected in the table are shares of common stock and all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

Percentage ownership calculations for beneficial ownership prior to this offering are based on 20,752,739 shares outstanding as of March 31, 2010, assuming (1) the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, (2) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (3) the issuance of shares of common stock upon cashless exercises of outstanding warrants prior to the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. Percentage ownership calculations for beneficial ownership after this offering reflect (1) the shares we are offering hereby, (2) the issuance of shares of common stock to FT Partners contemporaneously with the closing of this offering, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, which FT Partners has elected in writing to receive in partial satisfaction of a fee for financial advisory services in respect of this offering, and (3) the assumed issuance of shares of common stock in satisfaction of the liquidation preference payments required to be made to the holders of our outstanding preferred upon the closing of this offering, assuming that all such holders elect to receive such payments in common stock and assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. Except as otherwise indicated in the table below, addresses of named beneficial owners are in care of Accretive Health, Inc., 401 North Michigan Avenue, Suite 2700, Chicago, Illinois 60611.

In addition, in computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding (1) shares of common stock subject to options or warrants held by that person that are immediately exercisable or exercisable within 60 days of March 31, 2010 and (2) shares of common stock to be received prior to the closing of this offering pursuant to the distribution of shares from two entities, which collectively are the record holder of less than 5% of our outstanding common stock, pursuant to which certain directors and executive officers previously invested in our company. We did not deem the shares subject to these options and warrants to be outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

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									Shares to be	Shares Beneficially
									Sold if	Owned After the
									Underwriters’	Offering if
	Shares Beneficially Owned						Shares Beneficially Owned		Option is	Underwriters’ Option
	Prior to Offering					Number of	After Offering		Exercised in	is Exercised in Full
Name of Beneficial Owner	Number		Percentage			Shares Offered	Number	Percentage	Full	Number	Percentage

5% Stockholders
Accretive Investors SBIC, L.P.(1)		5,333,927		25.7	%
FW Oak Hill Accretive Healthcare Investors, L.P.(2)		4,445,092		21.4	%
Ascension Health(3)		2,347,173		11.1	%
Executive Officers and Directors
Mary A. Tolan(4)		3,853,167		18.3	%
John T. Staton(5)		434,303		2.1	%
Etienne H. Deffarges(6)		1,546,443		7.4	%
Gregory N. Kazarian(7)		365,384		1.8	%
Edgar M. Bronfman, Jr.(8)		13,333			*
J. Michael Cline(9)		5,347,260		25.8	%
Steven N. Kaplan(10)		117,431			*
Denis J. Nayden(11)		13,333			*
George P. Shultz(12)		194,701			*
Arthur H. Spiegel, III(13)		1,052,058		5.1	%
Mark A. Wolfson(14)		13,333			*
All current executive officers and directors as a group (11 persons)(15)		12,950,746		59.8	%
Other Selling Stockholders


(1)		Accretive Associates SBIC, LLC is the general partner of Accretive Investors SBIC, L.P. Mr. Cline is the managing member of Accretive Associates SBIC, LLC, and may be deemed to have sole voting and investment power with respect to the shares held by Accretive Investors SBIC, L.P. Also includes shares of common stock which Accretive Associates SBIC, LLC has the right to elect to receive in satisfaction of the liquidation preference payment required to be made to it upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. The address of Accretive Investors SBIC, L.P. is c/o Accretive, LLC, 51 Madison Avenue, 31st Floor, New York, New York 10010.


(2)		Group VI 31, LLC is the general partner of FW Oak Hill Accretive Healthcare Investors, L.P. (the “Oak Hill Partnership”) The sole member of Group VI 31, LLC is J. Taylor Crandall, who disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. J. Taylor Crandall exercises voting and investment power with respect to such shares. Messrs. Nayden and Wolfson are limited partners of the Oak Hill Partnership, and Mr. Wolfson is a Vice President and Assistant Secretary of Group VI 31, LLC. Neither Mr. Nayden nor Mr. Wolfson is deemed to have voting or investment power with respect to any shares held by the Oak Hill Partnership by virtue of their roles as limited partners of the Oak Hill Partnership or, in the case of Mr. Wolfson, by virtue of his position with Group VI 31, LLC. Also includes shares of common stock which the Oak Hill Partnership has elected to receive in satisfaction of the liquidation preference payment required to be made to it upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. The address of the Oak Hill Partnership is 201 Main Street, Suite 3100, Fort Worth, Texas 76102.


(3)		Ascension Health is a Missouri not-for-profit corporation. Anthony J. Speranzo, Ascension Health’s senior vice president and chief financial officer, has sole voting and investment power with respect to the shares held by Ascension Health. Mr. Speranzo disclaims beneficial ownership of such shares. Includes warrants to purchase 450,354 shares exercisable within 60 days of March 31, 2010. The address of Ascension Health is 4600 Edmundson Road, St. Louis, Missouri 63134.


(4)		Includes 825,000 shares held by family trusts. Members of Ms. Tolan’s immediate family share voting and investment power with respect to the shares held by these trusts. Also includes 300,000 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased

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		upon exercise of these options as of March 31, 2010) and shares of common stock which Ms. Tolan has elected to receive in satisfaction of the liquidation preference payment required to be made to her upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.


(5)		Consists of 20,000 shares held by John T. Staton Declaration of Trust, 80,000 shares held by John T. Staton 2009 Grantor Retained Annuity Trust, 20,008 shares of our common stock to be received by John T. Staton Declaration of Trust pursuant to the investment distribution referred to above, and 314,295 shares subject to options exercisable within 60 days of March 31, 2010 (of which 199,295 shares would be vested if purchased upon exercise of these options as of March 31, 2010). The beneficiaries of John T. Staton Declaration of Trust and John T. Staton 2009 Grantor Retained Annuity Trust are members of Mr. Staton’s immediate family. Mr. Staton is the trustee of such trusts and exercises sole voting and investment power with respect to the shares held by the trusts.


(6)		Includes 249,776 shares of our common stock to be received pursuant to the investment distribution referred to above and 130,000 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010).


(7)		Includes 43,384 shares of our common stock to be received pursuant to the investment distribution referred to above and 72,000 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010).


(8)		Consists of 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010). Mr. Bronfman is a member of Accretive Associates SBIC, LLC, which is the general partner of Accretive Investors SBIC, L.P., but exercises no voting or investment power with respect to the shares held by Accretive Investors SBIC, L.P. Mr. Bronfman disclaims beneficial ownership of the shares held by Accretive Investors SBIC, L.P.


(9)		Consists of the shares described in note (1) above and 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010). Mr. Cline is the managing member of Accretive Associates SBIC, LLC, which is the general partner of Accretive Investors SBIC, L.P. and, as such, may be deemed to have sole voting and investment power with respect to the shares described in note (1) above.


(10)		Includes 62,431 shares of our common stock to be received pursuant to the investment distribution referred to above and 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010).


(11)		Consists of 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010). Mr. Nayden is not deemed to have voting or investment power with respect to any shares held by the Oak Hill Partnership as a limited partner. See note 2 above.


(12)		Consists of 90,000 shares held by The Shultz 1989 Family Trust, of which Mr. Shultz and his wife are the beneficiaries, 91,368 shares of our common stock to be received by The Shultz 1989 Family Trust pursuant to the investment distribution referred to above, 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010) and shares of common stock which The Shultz 1989 Family Trust has elected to receive in satisfaction of the liquidation preference payment required to be made to it upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus. George T. Argyris is the trustee for the trust and exercises sole voting and investment power with respect to the shares held by the trust. Mr. Argyris disclaims beneficial ownership of such shares.


(13)		Consists of 750,000 shares held by Spiegel Family LLC, the members of which are members of Mr. Spiegel’s immediate family, 288,724 shares of our common stock to be received by Spiegel Family LLC pursuant to the investment distribution referred to above, 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010) and shares of common stock which Spiegel Family LLC has elected to receive in satisfaction of the liquidation preference payment required to be made to it upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on

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		the cover of this prospectus. Mr. Spiegel and his wife are the managing members of Spiegel Family LLC and exercise shared voting and investment power with respect to such shares.


(14)		Consists of 13,333 shares subject to options exercisable within 60 days of March 31, 2010 (of which no shares would be vested if purchased upon exercise of these options as of March 31, 2010). Mr. Wolfson is not deemed to have voting or investment power with respect to any shares held by the Oak Hill Partnership as a limited partner or as a Vice President or Assistant Secretary of Group VI 31, LLC. See note 2 above.


(15)		Does not include the shares described in notes (1) and (2) above. Includes 755,692 shares of our common stock to be received pursuant to the investment distribution referred to above, 909,626 shares subject to options exercisable within 60 days of March 31, 2010 (of which 199,295 shares would be vested if purchased upon exercise of these options as of March 31, 2010) and shares of common stock which executive officers and directors have elected to receive in satisfaction of the liquidation preference payment required to be made to them upon the closing of this offering, assuming an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.

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DESCRIPTION OF CAPITAL STOCK

General

Following the closing of this offering, our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share, all of which preferred stock will be undesignated.

The following description of our capital stock and provisions of our certificate of incorporation and bylaws are summaries and are qualified by reference to the restated certificate of incorporation and the amended and restated bylaws that will be in effect upon the closing of this offering. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering.

Common Stock

As of March 31, 2010 there were 20,752,739 shares of our common stock outstanding, held of record by 87 stockholders, assuming the conversion of all outstanding shares of convertible preferred stock into common stock and the conversion of all outstanding shares of non-voting common stock into voting common stock.

The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders and do not have any cumulative voting rights. Holders of our common stock are entitled to receive proportionally any dividends declared by our board of directors out of funds legally available therefor, subject to any preferential dividend or other rights of any then outstanding preferred stock.

In the event of our liquidation or dissolution, holders of our common stock are entitled to share ratably in all assets remaining after payment of all debts and other liabilities, subject to the prior rights of any then outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. All outstanding shares of our common stock are validly issued, fully paid and nonassessable. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable.

The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock, any or all of which may be greater than or senior to the rights of the common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and reduce the likelihood that such holders will receive dividend payments or payments on liquidation. In certain circumstances, an issuance of preferred stock could have the effect of decreasing the market price of our common stock.

Authorizing our board of directors to issue preferred stock and determine its rights and preferences has the effect of eliminating delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a

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majority of our outstanding stock. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.

Stock Options

As of March 31, 2010, 3,897,406 shares of common stock were issuable upon the exercise of stock options outstanding and exercisable at a weighted-average exercise price of $35.43 per share (assuming that options to purchase 1,325,831 shares granted after January 1, 2010 with an exercise price equal to the higher of $57.66 per share or the initial public offering price per share will have an exercise price of $57.66 per share), of which 1,394,008 shares with a weighted average exercise price of $11.88 per share would be vested if purchased upon exercise of these options as of March 31, 2010.

Warrants

As of March 31, 2010, 446,190 shares of voting common stock were issuable upon the exercise of warrants outstanding and exercisable at a weighted-average exercise price of $31.48 per share and 833,334 shares of non-voting common stock were issuable upon the exercise of warrants outstanding and exercisable at a weighted-average exercise price of $1.12 per share. The warrants to purchase 446,190 shares of voting common stock may be exercised by paying the exercise price in cash or pursuant to a cashless exercise feature based on the fair market value per share of our common stock, but the warrants to purchase 833,334 shares of non-voting common stock may be exercised only by paying the exercise price in cash. Prior to the closing of this offering, we will issue shares of voting common stock upon cashless exercises of outstanding warrants, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.

Upon the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, any warrants to purchase non-voting common stock that are not exercised prior to this offering will remain outstanding and will be warrants to purchase shares of voting common stock.

Registration Rights

We have entered into a stockholders’ agreement with certain of our stockholders. After the completion of this offering and the sale by the selling stockholders of the shares of common stock offered by them hereby, holders of an aggregate of shares of outstanding common stock and shares issuable upon exercise of outstanding warrants will have the right to require us to register these shares under the Securities Act under specified circumstances. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. The following description of these registration rights is intended as a summary only and is qualified in its entirety by reference to the stockholders’ agreement, which is filed as an exhibit to the registration statement of which this prospectus forms a part.

Demand Registration Rights. Beginning 181 days after the effective date of the registration statement of which this prospectus forms a part, subject to the contractual lock-up agreements, the holders of at least 50% of our shares of common stock having registration rights under the stockholders’ agreement, provided such shares represent at least 25% of our outstanding common stock on a fully-diluted basis, may demand that we register all or a portion of their shares under the Securities Act, subject to certain limitations. In addition, each of the three parties to the stockholders’ agreement holding more than 12% of our common stock on an as-converted basis as of September 25, 2009 (Mary A. Tolan, Accretive Investors SBIC, L.P. and FW Oak Hill Accretive Healthcare Investors, L.P.) may demand on one occasion that we register all or a portion of its shares under the Securities Act, provided that the shares to be registered have an aggregate market value of at least $50 million or represent at least 5% of our then outstanding common stock. We are not

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required to file (1) a registration statement less than six months after the effective date of a registration statement effected pursuant to this requirement of the stockholders’ agreement or (2) more than five registration statements pursuant to this requirement under the stockholders’ agreement. In addition, we may not register any shares of our common stock held by a stockholder who is not a party to the stockholders’ agreement in a registration statement requested to be filed pursuant to the terms of the stockholders’ agreement.

Incidental Registration Rights. If at any time we propose to register shares of our common stock under the Securities Act, other than a registration statement on Form S-4 or Form S-8, the holders of registrable shares under the stockholders’ agreement will be entitled to notice of our intention to file a registration statement and, subject to certain exceptions, have the right to require us to use best efforts to register all or a portion of the registrable shares held by them. In the event that any registration in which the holders of registrable shares participate pursuant to the stockholders’ agreement is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited due to market conditions. A total of shares of common stock are being sold in this offering by selling stockholders (plus up to additional shares that the underwriters have an option to purchase from selling stockholders) pursuant to these incidental registration rights granted under the stockholders’ agreement.

Pursuant to the stockholders’ agreement, we are required to pay all registration fees and expenses, including the reasonable fees and disbursements of one counsel for the participating stockholders, and indemnify each participating stockholder with respect to each registration of registrable shares that is effected.

In connection with any underwritten offering pursuant to the registration rights granted under the stockholders’ agreement, each holder of registrable shares has agreed, whether or not such holder’s registrable shares are included in such registration, not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any registrable shares or of any security convertible into or exchangeable or exercisable for any registrable shares (other than as part of such underwritten offering), without the consent of the managing underwriter of the offering, during a period commencing seven days before and ending 180 days (or such lesser number as the managing underwriter shall designate) after the effective date of such registration. In addition, we have agreed, if required by the managing underwriter of the offering, not to effect any public sale or distribution of any of our equity or debt securities, or securities convertible into or exchangeable or exercisable for any of our equity or debt securities, during a period commencing seven days before and ending 180 (or such lesser number as the managing underwriter shall designate) days after the effective date of such registration, except for shares sold in such underwritten offering or except in connection with a stock option plan, stock purchase plan, savings or similar plan, or an acquisition, merger or exchange offer.

Anti-Takeover Effects of Delaware Law and Our Charter and Bylaws

Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.

Classified Board; Removal of Directors

Our certificate of incorporation and bylaws divide our board of directors into three classes with staggered three-year terms. In addition, a director may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote

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of a majority of our directors then in office, although less than a quorum. The classification of our board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

Stockholder Action by Written Consent; Special Meetings

Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Our certificate of incorporation and bylaws also provide that, except as otherwise required by law, special meetings of our stockholders can only be called by our chairman of the board, our chief executive officer or our board of directors.

Advance Notice Requirements for Stockholder Proposals

Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting. This written notice must contain certain information specified in our bylaws. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities.

Delaware Business Combination Statute

We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly-held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.

Amendment of Certificate of Incorporation and Bylaws

The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of our board of directors or by the affirmative vote of the holders of at least two-thirds of the votes which all our stockholders would be entitled to cast in any election of directors. In addition, the affirmative vote of the holders of at least two-thirds of the votes which all our stockholders would be entitled to cast in any election of directors is required to amend or repeal or to adopt any provisions inconsistent with

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any of the provisions of our certificate of incorporation described above under “— Classified Board; Removal of Directors” and “— Stockholder Action by Written Consent; Special Meetings”.

Limitation of Liability and Indemnification of Officers and Directors

Our restated certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law. Our restated certificate of incorporation also provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors for:


	•	any breach of the director’s duty of loyalty to us or our stockholders;

	•	any act or omission not in good faith or which involves intentional misconduct or a knowing violation of law;

	•	any unlawful payments related to dividends or unlawful stock repurchases or redemptions; or

	•	any transaction from which the director derived an improper personal benefit.

Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act or failure to act, or any cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision. If the Delaware General Corporation Law is amended to permit the further elimination or limiting of the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.

In addition, our restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to limited exceptions.

Authorized but Unissued Shares

The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the New York Stock Exchange. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company, LLC.

New York Stock Exchange

We have applied to list our common stock on the New York Stock Exchange under the symbol “AH”.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and a liquid public trading market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares issued upon exercise of outstanding options or warrants or in the public market after this offering, or the anticipation of those sales, could adversely affect the public market prices prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. We have applied to list our common stock on the New York Stock Exchange under the symbol “AH”.

Upon the closing of this offering, we will have outstanding an aggregate of shares of common stock, assuming no exercise by the underwriters of their option to purchase additional shares from us and no exercise of then outstanding options or warrants. Of these shares, all shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates”, as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.

The remaining shares of common stock will be “restricted securities”, as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.

Subject to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:


	Shares Eligible
Date Available for Sale	for Sale	Comment

Date of prospectus		Shares sold in the offering and shares saleable under Rule 144 that are not subject to a lock-up

90 days after date of prospectus		Shares saleable under Rules 144 and 701 that are not subject to a lock-up

180 days after date of prospectus		Lock-up released; shares saleable under Rules 144 and 701

In addition, of the 3,897,406 shares of our common stock that were subject to stock options outstanding as of March 31, 2010, 1,394,008 shares would be vested if purchased upon exercise of these options and would be eligible for sale subject to the lock-up agreements and securities laws described below. The 1,279,524 shares of our common stock that were subject to warrants outstanding as of March 31, 2010 were exercisable as of March 31, 2010 and, upon exercise will be eligible for sale subject to the lock-up agreements and securities laws described below.

Rule 144

Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in “broker’s transactions” or certain “riskless principal transactions” or

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to market makers, a number of shares within any three-month period that does not exceed the greater of:


	•	1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or

	•	the average weekly trading volume in our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and the NYSE concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.

Non-Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.

Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.

Rule 701

In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchased shares from us in connection with a compensatory stock or option plan or other written agreement entered into before the effective date of this offering is entitled to sell such shares 90 days after this offering in reliance on Rule 144.

Lock-up Agreements

Our officers and directors and the holders of substantially all of our outstanding shares of common stock have agreed with the underwriters, subject to certain exceptions, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of common stock, options or warrants to purchase shares of common stock or securities convertible into, exchangeable for or that represent the right to receive shares of common stock, whether now owned or hereafter acquired, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, as modified as described below, except with the prior written consent of Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, on behalf of the underwriters.

The 180-day restricted period will be automatically extended under the following circumstances:


	•	if, during the last 17 days of the 180-day restricted period, we issue an earnings release or announce material news or a material event, the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event; or

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	•	if, prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release.

Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC currently do not anticipate shortening or waiving any of the lock-up agreements and do not have any pre-established conditions for such modifications or waivers. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC may, however, with the approval of our board of directors, release for sale in the public market all or any portion of the shares subject to the lock-up agreement.

Stock Options and Warrants

As of March 31, 2010, 3,897,406 shares of common stock were issuable upon the exercise of stock options outstanding, of which 1,394,008 shares would be vested if purchased upon exercise of these options as of March 31, 2010. Following this offering, we intend to file registration statements on Form S-8 under the Securities Act to register all of the shares of common stock subject to outstanding options and options and other awards issuable pursuant to our prior option plan and our 2010 stock incentive plan, as well as to register the resale of the shares of common stock issued under our restricted stock plan. Approximately one year after this offering, we also intend to file a registration statement on Form S-3 under the Securities Act to register the resale of the shares of common stock issued to Ascension Health upon exercise of its warrants.

As of March 31, 2010, 446,190 shares of voting common stock and 833,334 shares of non-voting common stock were issuable upon the exercise of outstanding warrants. Any shares purchased by our non-affiliates pursuant to the cashless exercise feature of the warrants to purchase voting common stock will be freely tradable under Rule 144(b)(1), subject to the 180-day lock-up period described above. Upon the closing of this offering, all outstanding warrants to purchase shares of voting common stock that are not exercised prior to this offering will be cancelled. Upon the conversion of all outstanding shares of non-voting common stock into shares of voting common stock prior to the closing of this offering, any warrants to purchase non-voting common stock that are not exercised prior to this offering will remain outstanding following this offering and will be warrants to purchase shares of voting common stock.

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CERTAIN U.S. FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of certain U.S. federal income and estate tax consequences of the purchase, ownership and disposition of our common stock. This discussion applies only to a non-U.S. holder (as defined below) of our common stock. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof, all of which are subject to change, possibly with retroactive effect. This discussion is limited to investors that hold our common stock as capital assets for U.S. federal income tax purposes. Furthermore, this discussion does not address all aspects of U.S. federal income and estate taxation that may be applicable to investors in light of their particular circumstances, or to investors subject to special treatment under U.S. federal income or estate tax law, such as financial institutions, insurance companies, tax-exempt organizations, entities that are treated as partnerships for U.S. federal tax purposes, dealers in securities or currencies, expatriates, persons deemed to sell our common stock under the constructive sale provisions of the Code and persons that hold our common stock as part of a straddle, hedge, conversion transaction or other integrated investment. In addition, this discussion does not address any U.S. federal gift tax consequences or any state, local or foreign tax consequences. Prospective investors should consult their tax advisors regarding the U.S. federal, state, local alternative minimum and foreign income, estate and other tax consequences of the purchase, ownership and disposition of our common stock.

For purposes of this summary, the term “non-U.S. holder” means a beneficial owner of our common stock that is not, for U.S. federal income and estate tax purposes:


	•	a citizen or resident of the United States;

	•	a corporation or other entity subject to tax as a corporation for such purposes that is created or organized under the laws of the United States or any political subdivision thereof;

	•	a partnership (including any entity or arrangement treated as a partnership for such purposes);

	•	an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

	•	a trust (1) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (2) that has made a valid election to be treated as a U.S. person for such purposes.

If a partnership (including any entity or arrangement treated as a partnership for such purposes) owns our common stock, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partners in a partnership that owns our common stock should consult their tax advisors as to the particular U.S. federal income and estate tax consequences applicable to them.

Dividends

Dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under an applicable income tax treaty and the manner of claiming the benefits of such treaty. A non-U.S. holder that is eligible for a reduced rate of withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for refund with the Internal Revenue Service.

Dividends that are effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States and, if certain income tax treaties apply, that are attributable to a non-U.S. holder’s permanent establishment in the United States are not subject to the withholding tax

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described above but instead are subject to U.S. federal income tax on a net income basis at applicable graduated U.S. federal income tax rates. A non-U.S. holder must satisfy certain certification requirements for its effectively connected dividends to be exempt from the withholding tax described above. Dividends received by a foreign corporation that are effectively connected with its conduct of a trade or business in the United States may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be taxed on gain recognized on a disposition of our common stock unless:


	•	the non-U.S. holder is an individual who holds our common stock as a capital asset, is present in the United States for 183 days or more during the taxable year of the disposition and meets certain other conditions;

	•	the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States and, if certain income tax treaties apply, is attributable to a non-U.S. Holder’s permanent establishment in the United States; or

	•	we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock.

We do not believe that we have been, currently are, or will become, a United States real property holding corporation. If we were or were to become a United States real property holding corporation at any time during the applicable period, however, any gain recognized on a disposition of our common stock by a non-U.S. holder that did not own (directly, indirectly or constructively) more than 5% of our common stock during the applicable period would not be subject to U.S. federal income tax, provided that our common stock is “regularly traded on an established securities market” (within the meaning of Section 897(c)(3) of the Code).

Individual non-U.S. holders who are subject to U.S. federal income tax because the holders were present in the United States for 183 days or more during the year of disposition are taxed on their gains (including gains from the sale of our common stock and net of applicable U.S. losses from sales or exchanges of other capital assets recognized during the year) at a flat rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Other non-U.S. holders subject to U.S. federal income tax with respect to gain recognized on the disposition of our common stock generally will be taxed on any such gain on a net income basis at applicable graduated U.S. federal income tax rates and, in the case of foreign corporations, the branch profits tax discussed above also may apply.

Federal Estate Tax

Our common stock that is owned or treated as owned for U.S. estate tax purposes by an individual who is a non-U.S. holder at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes. Therefore, U.S. federal estate tax may be imposed with respect to the value of such stock, unless an applicable estate tax or other treaty provides otherwise.

Information Reporting and Backup Withholding

In general, backup withholding will apply to dividends on our common stock paid to a non-U.S. holder, unless the holder has provided the required certification that it is a non-U.S. holder and the payor does not have actual knowledge (or reason to know) that the holder is a U.S. person. Generally, information will be reported to the Internal Revenue Service regarding the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. These information reporting requirements apply even if no tax was required to be withheld. A similar report is

128

sent to the recipient of the dividend and may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.

In general, backup withholding and information reporting will apply to the payment of proceeds from the disposition of our common stock by a non-U.S. holder through a U.S. office of a broker or through the non-U.S. office of a broker that is a U.S. person or has certain enumerated connections with the United States, unless the holder has provided the required certification that it is a non-U.S. holder and the payor does not have actual knowledge (or reason to know) that the holder is a U.S. person.

Backup withholding is not an additional tax. Any amounts that are withheld under the backup withholding rules from a payment to a non-U.S. holder will be refunded or credited against the holder’s U.S. federal income tax liability, if any, provided that certain required information is furnished to the Internal Revenue Service.

Prospective investors should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.

Recent Developments

Legislation was recently enacted into law that will materially change the requirements for obtaining an exemption from U.S. withholding tax and impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities. In general, and depending on the specific facts and circumstances, the failure to comply with certain certification, information reporting and other specified requirements will result in a 30% withholding tax being imposed on “withholdable payments” to such institutions and entities, including payments of dividends and proceeds from the sale of our common stock. These rules will apply to payments made after December 31, 2012 with respect to our common stock. Prospective investors should consult their tax advisers regarding this legislation and the potential implications of this legislation on their investment in our common stock.

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UNDERWRITING

Accretive Health, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC are the joint book-running managers and representatives of the underwriters. J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated are also joint book-running managers on this transaction.


Underwriters		Number of Shares

Goldman, Sachs & Co.
Credit Suisse Securities (USA) LLC
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Robert W. Baird & Co. Incorporated
William Blair & Company, L.L.C.


Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to purchase up to additional shares from Accretive Health and additional shares from the selling stockholders to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by Accretive Health and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares from Accretive Health and additional shares from the selling stockholders.

Paid by Accretive Health


	No Exercise	Full Exercise

Per Share	$	$
Total	$	$

Paid by the Selling Stockholders


	No Exercise	Full Exercise

Per Share	$	$
Total	$	$

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.

Accretive Health, its officers and directors, and holders of substantially all of the outstanding shares of its common stock, including the selling stockholders, have agreed with the underwriters,

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subject to certain exceptions, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of common stock, options or warrants to purchase shares of common stock or securities convertible into, exchangeable for or that represent the right to receive shares of common stock, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, whether now owned or hereafter acquired, during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC, on behalf of the underwriters. This agreement does not apply to any existing employee benefit plans. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period Accretive Health issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, Accretive Health announces that it will release earnings results during the 16-day period beginning on the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

Prior to the offering, there has been no public market for our common stock. The initial public offering price has been negotiated among Accretive Health and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be Accretive Health’s historical performance, estimates of the business potential and earnings prospects of Accretive Health, an assessment of Accretive Health’s management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We have applied to list our common stock on the New York Stock Exchange under the symbol “AH”.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from Accretive Health and the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the

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market price of Accretive Health’s stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each of which is referred to as a Relevant Member State, each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, referred to as the Relevant Implementation Date, it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:


	•	to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

	•	to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

	•	to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or

	•	in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each underwriter has represented and agreed that:


	•	it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

	•	it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

The shares may not be offered or sold by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (2) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (3) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the

132

purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, (2) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the Securities and Futures Act or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the Securities and Futures Act; (2) where no consideration is given for the transfer; or (3) by operation of law.

The securities have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

Upon the completion of this offering and based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, Accretive Health will pay FT Partners a fee of $ for financial advisory services in respect of this offering. This fee will be paid % in cash and % through the issuance of shares of our common stock valued at the initial public offering price per share. Accretive Health has also agreed to indemnify FT Partners against certain losses, claims, damages and liabilities in connection with FT Partners’ financial advisory services. FT Partners has entered into a lock-up agreement with the underwriters with respect to these shares and these shares will also be subject to limitations on resale imposed by Rule 144, each as described under the heading “Shares Eligible for Future Sale” elsewhere in this prospectus. FT Partners’ financial advisory services included assistance in financial and valuation modeling and advice with respect to the initial public offering process and equity capital market alternatives. None of Financial Technology Partners LP, FTP Securities, LLC or any of their affiliates is acting as an underwriter of this offering.

133

Accretive Health estimates that the total expenses of the offering payable by it, excluding underwriting discounts and commissions but including expenses of the selling stockholders payable by Accretive Health, will be approximately $ .

Accretive Health and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

Certain of the underwriters and their respective affiliates may in the future perform various financial advisory and investment banking services for the company, for which they received or will receive customary fees and expenses.

Directed Sale Program

At our request, the underwriters have reserved for sale to our officers, directors and employees, immediate family members of the foregoing, and other persons selected by us, up to shares of the common stock offered by this prospectus, at the initial public offering price. Persons who purchase such shares of reserved common stock will be required to agree, during the period ending 180 days after the date of this prospectus, not to sell, transfer, assign, pledge or hypothecate such shares of common stock. This lock-up period will be extended if during the last 17 days of the lock-up period we issue a release about earnings or material news or events relating to us occurs, or, prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period, in which case the restrictions described above will continue to apply until the expiration of the 18-day period beginning on the issuance of the release or the occurrence of the material news or material event.

The number of shares of common stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares of common stock that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares of common stock offered by this prospectus. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sales of the directed shares.

LEGAL MATTERS

The validity of the common stock being offered will be passed upon for us by Wilmer Cutler Pickering Hale and Dorr LLP, Boston, Massachusetts. The underwriters are represented by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, in connection with this offering.

EXPERTS

Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements and schedule at December 31, 2008 and 2009, and for each of the three years in the period ended December 31, 2009, as set forth in their report. We have included our consolidated financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares of common stock to be sold in this offering. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits, schedules and amendments to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement and

134

to the exhibits and schedules to the registration statement filed as part of the registration statement. Statements contained in this prospectus about the contents of any contract or any other document filed as an exhibit are not necessarily complete and, and in each instance, we refer you to the copy of the contract or other documents filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of the registration statement by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. In addition, the SEC maintains an Internet website, located at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC’s Internet website.

Upon the closing of this offering, we will become subject to the full informational and periodic reporting requirements of the Exchange Act. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent registered public accounting firm. We also maintain a website at www.accretivehealth.com. Our website is not a part of this prospectus.

135

Accretive Health, Inc.

Index to Consolidated Financial Statements


	Page

Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations		F-4
Consolidated Statements of Stockholders’ Equity		F-5
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Accretive Health, Inc.

We have audited the accompanying consolidated balance sheets of Accretive Health, Inc. (formerly Healthcare Services Inc. d/b/a Accretive Health) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Accretive Health, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

Chicago, Illinois

March 12, 2010, except for the “Stock Split” section

of Note 2, as to which the date is .

The foregoing report is the form that will be signed upon the completion of the common stock split described in the “Stock Split” section of Note 2 in the consolidated financial statements.

/s/ Ernst & Young LLP

Chicago, Illinois

March 12, 2010

F-2

Accretive Health, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)


	December 31,
	2008			2009			2009
							Pro forma
							(unaudited)

Assets
Current assets:
Cash and cash equivalents	$	51,656		$	43,659		$	43,659
Accounts receivable, net of allowance for doubtful accounts of $82 at December 31, 2008 and 2009		20,206			27,519			27,519
Prepaid assets		1,031			4,283			4,283
Due from related party		1,261			1,273			1,273
Other current assets		1,374			1,337			1,337

Total current assets		75,528			78,071			78,071
Deferred income tax		—			7,739			7,739
Furniture and equipment, net		8,913			12,901			12,901
Goodwill		1,468			1,468			1,468
Other, net		995			3,293			3,293

Total assets	$	86,904		$	103,472		$	103,472

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,066		$	11,967		$	11,967
Accrued service costs		23,547			27,742			27,742
Accrued compensation and benefits		9,147			12,114			12,114
Deferred income tax		—			4,188			4,188
Accrued taxes		1,208			41			41
Other accrued expenses		4,026			3,531			3,531
Deferred revenue		22,987			22,610			22,610
Preference payment		—			—			16,067

Current liabilities		78,981			82,193			98,260
Commitments and contingencies		—			—			—
Stockholders’ equity:
Convertible preferred stock, Series A, $0.01 par value, 32,317 shares authorized, issued and outstanding at December 31, 2008 and 2009		—			—			—
Convertible preferred stock, Series D, $0.01 par value, 1,267,224 shares authorized, issued, and outstanding at December 31, 2008 and 2009		13			13			—
Series B common stock, $0.01 par value, 17,500,000 shares authorized, 8,161,361 and 8,203,299 shares issued and outstanding at December 31, 2008 and 2009, respectively		82			82			—
Series C common stock, $0.01 par value, 8,000,000 shares authorized, 1,271,732 and 1,341,257 shares issued and outstanding at December 31, 2008 and 2009, respectively		13			13			—
Common Stock, $0.01 par value, xxx,xxx,xxx shares Authorized, shares issued and outstanding as of December 31, 2009, pro forma		—			—			108
Additional paid-in capital		38,401			51,777			35,710
Non-executive employee loans for stock option exercises		(263	)		(120	)		(120	)
Accumulated deficit		(30,101	)		(30,452	)		(30,452	)
Cumulative translation adjustment		(222	)		(34	)		(34	)

Total stockholders’ equity		7,923			21,279			5,212

Total liabilities and stockholders’ equity	$	86,904		$	103,472		$	103,472

See accompanying notes to consolidated financial statements

F-3

Accretive Health, Inc.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)


	Year Ended December 31
	2007			2008			2009

Net services revenue	$	240,725		$	398,469		$	510,192
Costs of services		197,676			335,211			410,711

Operating margin		43,049			63,258			99,481
Other operating expenses:
Infused management and technology		27,872			39,234			51,763
Selling, general, and administrative		15,657			21,227			30,153

Total operating expenses		43,529			60,461			81,916
Income (loss) from operations		(480	)		2,797			17,565
Net interest income (expense)		1,710			710			(9	)

Net income before provision for income taxes		1,230			3,507			17,556
Provision for income taxes		456			2,264			2,966

Net income	$	774		$	1,243		$	14,590
Dividends on preferred shares		—			(8,048	)		(8,044	)

Net income (loss) applicable to common shareholders	$	774		$	(6,805	)	$	6,546

Net income (loss) per common share
Basic	$	0.04		$	(0.75	)	$	0.68
Diluted		0.03			(0.75	)		0.57
Weighted-average shares used in calculating net income (loss) per common share
Basic		8,410,226			9,214,916			9,368,672
Diluted		10,296,011			9,214,916			11,213,053
Pro forma earnings (loss) per common share (unaudited)
Basic							$
Diluted							$

See accompanying notes to consolidated financial statements

F-4

Accretive Health, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)


																						Non-Executive
																						Employee
	Convertible				Convertible																	Loans
	Preferred Stock				Preferred Stock				Series B				Series C						Additional			for Stock						Cumulative
	Series A				Series D				Common Stock				Common Stock						Paid-In			Option			Accumulated			Translation						Comprehensive
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Capital			Exercises			Deficit			Adjustment			Total			Income

Balance at December 31, 2006		32,317	$	—		1,267,224	$	13		3,902,374	$	39		4,218,431		$	42		$	20,457		$	(365	)	$	(17,020	)	$	—		$	3,166

Issuance of class B common stock		—		—		—		—		882,384		9		—			—			5,481			—			—			—			5,490			—
Issuance of class C common stock		—		—		—		—		—		—		39,899			—			327			—			—			—			327			—
Exercise of vested stock options		—		—		—		—		—		—		16,021			—			39			—			—			—			39			—
Vesting of previously exercised options		—		—		—		—		—		—		253,811			3			697			—			—			—			700
Repayments of amounts loaned to employees related to stock option exercises, net		—		—		—		—		—		—		—			—			—			45			—			—			45			—
Share repurchases		—		—		—		—		—		—		(66,021	)		(1	)		(655	)		—			—			—			(656	)		—
Issuance of stock warrants		—		—		—		—		—		—		—			—			5,081			—			—			—			5,081			—
Compensation expense related to restricted common stock		—		—		—		—		—		—		—			—			38			—			—			—			38			—
Compensation expense related to stock options		—		—		—		—		—		—		—			—			896			—			—			—			896			—
Currency translation adjustments		—		—		—		—		—		—		—			—			—			—			—			10			10			10
Net income		—		—		—		—		—		—		—			—			—						774			—			774			774

Balance at December 31, 2007		32,317	$	—		1,267,224	$	13		4,784,758	$	48		4,462,141		$	44		$	32,361		$	(320	)	$	(16,246	)	$	10		$	15,910		$	784

Implementation of FASB Interpretation No. 48		—		—		—		—		—		—		—			—			—			—			(97	)		—			(97	)		—
Exchange of Series C to Series B Stock		—		—		—		—		3,309,951		33		(3,309,951	)		(33	)		—			—			—			—			—			—
Issuance of class B common stock		—		—		—		—		66,652		1		—			—			—			—			—			—			1			—
Exercise of vested stock options		—		—		—		—		—		—		3,750			—			18			—			—			—			18			—
Vesting of previously exercised options		—		—		—		—		—		—		150,375			2			649			—			—			—			651			—
Repayments of amounts loaned to employees related to stock option exercises, net		—		—		—		—		—		—		—			—			—			57			—			—			57			—
Share repurchases		—		—		—		—		—		—		(34,583	)		—			(1,510	)		—			—			—			(1,510	)		—
Issuance of stock warrants		—		—		—		—		—		—		—			—			3,332			—			—			—			3,332			—
Compensation expense related to restricted common stock		—		—		—		—		—		—		—			—			5			—			—			—			5			—
Compensation expense related to stock options		—		—		—		—		—		—		—			—			3,546			—			—			—			3,546			—
Currency translation adjustments		—		—		—		—		—		—		—			—			—			—			—			(232	)		(232	)		(232	)
Dividends declared		—		—		—		—		—		—		—			—			—			—			(15,001	)		—			(15,001	)		—
Net income		—		—		—		—		—		—		—			—			—			—			1,243			—			1,243			1,243

Balance at December 31, 2008		32,317	$	—		1,267,224	$	13		8,161,361	$	82		1,271,732		$	13		$	38,401		$	(263	)	$	(30,101	)	$	(222	)	$	7,923		$	1,011

F-5

Accretive Health, Inc.

Consolidated Statements of Stockholders’ Equity — (Continued)

(In thousands, except share amounts)


																					Non-Executive
																					Employee
	Convertible				Convertible																Loans
	Preferred Stock				Preferred Stock				Series B				Series C					Additional			for Stock						Cumulative
	Series A				Series D				Common Stock				Common Stock					Paid-In			Option			Accumulated			Translation						Comprehensive
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount		Capital			Exercises			Deficit			Adjustment			Total			Income

Balance at December 31, 2008		32,317	$	—		1,267,224	$	13		8,161,361	$	82		1,271,732		$	13	$	38,401		$	(263	)	$	(30,101	)	$	(222	)	$	7,923

Exercise of vested stock options		—		—		—		—		—		—		29,750			—		209			—			—			—			209			—
Vesting of previously exercised options		—		—		—		—		—		—		41,125			—		215			—			—			—			215			—
Issuance of class B common stock		—		—		—		—		41,938		—		—			—		—			—			—			—			—			—
Repayments of amounts loaned to employees related to stock option exercises, net		—		—		—		—		—		—		—			—		—			143			—			—			143			—
Share repurchases		—		—		—		—		—		—		(1,350	)		—		(13	)		—			—			—			(13	)		—
Issuance of stock warrants		—		—		—		—		—		—		—			—		4,509			—			—			—			4,509			—
Compensation expense related to stock options		—		—		—		—		—		—		—			—		6,917			—			—			—			6,917			—
Excess tax benefits from equity-based awards		—		—		—		—		—		—		—			—		1,539			—			—			—			1,539			—
Currency translation adjustments		—		—		—		—		—		—		—			—		—			—			—			188			188			188
Dividends declared		—		—		—		—		—		—		—			—		—			—			(14,941	)		—			(14,941	)		—
Net income		—		—		—		—		—		—		—			—		—			—			14,590			—			14,590			14,590

Balance at December 31, 2009		32,317	$	—		1,267,224	$	13		8,203,299	$	82		1,341,257		$	13	$	51,777		$	(120	)	$	(30,452	)	$	(34	)	$	21,279		$	14,778

See accompanying notes to consolidated financial statements

F-6

Accretive Health, Inc.

Consolidated Statements of Cash Flows

(In thousands)


	Year Ended December 31
	2007			2008			2009

Operating activities
Net income	$	774		$	1,243		$	14,590
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and Amortization		1,307			2,540			3,921
Employee stock based compensation		934			3,551			6,917
Expense associated with the issuance of stock warrants		5,081			3,332			4,509
Deferred income taxes		—			—			(3,552	)
Loss on disposal of equipment		—			70			—
Changes in operating assets and liabilities:
Accounts receivable		(15,091	)		(4,309	)		(7,313	)
Prepaid and other current assets		(2,182	)		(1,381	)		(3,217	)
Accounts payable		1,266			15,546			(6,113	)
Accrued service costs		7,242			3,715			4,195
Accrued compensation and benefits		3,263			3,563			2,960
Other accrued expenses		2,642			173			(253	)
Accrued taxes		—			1,208			(1,168	)
Deferred revenue		6,599			10,275			(377	)

Net cash provided by operating activities		11,835			39,525			15,099

Investing activities
Purchase of a business net of cash acquired		(211	)		—			—
Purchases of furniture and equipment		(1,837	)		(1,843	)		(3,514	)
Acquisition of software		(1,639	)		(4,988	)		(4,348	)
Collection of note receivable		416			698			618

Net cash used in investing activities		(3,271	)		(6,133	)		(7,244	)

Financing activities
Proceeds from issuance of class B common stock		5,490			1			—
Proceeds from issuance of class C common stock from employee stock option exercise		510			150			214
Collection of non-executive employee notes receivable		45			57			143
Excess tax benefit from equity based awards		—			—			1,539
Deferred offering costs		—			—			(2,939	)
Payment of dividends		—			(15,001	)		(14,941	)
Repurchase of common stock		(656	)		(1,510	)		(13	)

Net cash provided by (used in) financing activities		5,389			(16,303	)		(15,997	)

Effect of exchange rate changes in cash		10			(178	)		145

Net increase (decrease) in cash and cash equivalents		13,963			16,911			(7,997	)
Cash and cash equivalents at beginning of period		20,782			34,745			51,656

Cash and cash equivalents at end of period	$	34,745		$	51,656		$	43,659

Supplemental disclosures of cash flow information
Interest paid	$	—		$	—		$	160
Taxes paid		791			1,137			8,254
Exercise of unvested stock options		471			132			5
Supplemental disclosures of noncash financing transactions
Shares issued in connection with the acquisition of a business	$	327		$	—		$	—
Issuance of notes receivable to non-executive employees		—			(585	)		—
Vesting of previously exercised stock options		700			651			215

See accompanying notes to consolidated financial statements

F-7

Accretive Health, Inc.

Notes to Consolidated Financial Statements


1.	Description of Business

Accretive Health, Inc. (the “Company”) is a leading provider of healthcare revenue cycle management services. The Company’s business purpose is to help U.S. hospitals, physicians and other healthcare providers manage their revenue cycle operations more efficiently. The Company’s integrated, end-to-end technology and services offering, which is referred to as Accretive’s solution, helps customers realize sustainable improvements in their operating margins and improve the satisfaction of their patients, physicians and staff. The Company enables these improvements by helping customers increase the portion of the maximum potential revenue received while reducing total revenue cycle costs.


2.	Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Stock Split

Immediately prior to the consummation of the initial public offering of the Company’s common stock, the number of authorized shares will be increased to . In addition, all common share and per share amounts in the consolidated financial statements and notes thereto have been restated to reflect a stock split effective on .

Pro forma (Unaudited)

The pro forma balance sheet data as of December 31, 2009 give effect to (1) the -for-one split of our common stock to be effected prior to the closing of this offering, (2) the conversion of all outstanding shares of non-voting common stock into shares of common stock prior to the closing of this offering, (3) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock upon the closing of this offering and (4) the preferred stock preference payment.

The pro forma balance sheet gives effect to the one-time mandatory preference payment to the Company’s preferred stockholders which is payable upon the completion of an initial public offering. The distribution, estimated at $16,067,425, will be satisfied through the remittance of $ in cash and the issuance of shares of common stock. Pro forma earnings per share data reflects the issuance of these shares as well as the issuance of additional shares of common stock whose proceeds will be used to pay the preference payment.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

The Company regularly evaluates its accounting policies and estimates. In general, estimates are based on historical experience and on assumptions believed to be reasonable given the

F-8

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

Company’s operating environment. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results may differ from these estimates.

Revenue Recognition

The Company’s managed service contracts generally have an initial term of four to five years and various start and end dates. After the initial terms, these contracts renew annually unless canceled by either party. Revenue from managed service contracts consists of base fees and incentive payments.

The Company records net services revenue in accordance with the provisions of Staff Accounting Bulletin 104. As a result, the Company only records revenue once there is persuasive evidence of an arrangement, services have been rendered, the amount of revenue has become fixed or determinable and collectibility is reasonably assured. The Company recognizes base fee revenues on a straight-line basis over the life of the contract. Base fees for managed service contracts which are received in advance of services delivered are classified as deferred revenue in the consolidated balance sheets until services have been provided.

Some of the Company’s service contracts entitle customers to receive a share of the cost savings achieved from operating their revenue cycle. This share is returned to the customers as a reduction in subsequent base fees. Services revenue is reported net of cost sharing, and is referred to as net services revenue.

The Company’s managed service contracts generally allow for adjustments to the base fee. Adjustments typically occur at 90, 180 or 360 days after the contract commences, but can also occur at subsequent dates as a result of factors including changes to the scope of operations and internal and external audits. All adjustments, the timing of which is often dependent on factors outside of the Company’s control and which can increase or decrease revenue and operating margin, are recorded in the period the changes are known and collectibility of any additional fees is reasonably assured. Any such adjustments may cause the Company’s quarter-to-quarter results of operations to fluctuate.

The Company records revenue for incentive payments once the calculation of the incentive payment earned is finalized and collectibility is reasonably assured. The Company uses a proprietary technology and methodology to calculate the amount of benefit each customer receives as a result of the Company’s services. The Company’s calculations are based in part on the amount of revenue each customer is entitled to receive from commercial and private insurance carriers, Medicare, Medicaid and patients. Because the laws, regulations, instructions, payor contracts and rule interpretations governing how the Company’s customers receive payments from these parties are complex and change frequently, estimates of a customer’s prior period benefit could change. All changes in estimates are recorded when new information is available and calculations are completed.

Incentive payments are based on the benefits a customer has received throughout the life of the contract. Each quarter, the Company records its share of the increase in the cumulative benefit the customer has received to date as an increase in revenue. If a quarterly calculation indicates that the cumulative benefits the customer has received to date have decreased, the Company records a reduction in revenue. If the decrease in revenue exceeds the amount previously paid by the customer, the excess is recorded as deferred revenue.

The Company’s services also include collection of dormant patient accounts receivable that have aged 365 days or more directly from individual patients. The Company shares all cash generated from these collections with its customers in accordance with specified arrangements. The Company records

F-9

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

as revenue its portion of the cash received from these collections when each customer’s cash application is complete.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Allowance for Uncollectible Accounts Receivable

The Company extends unsecured credit to its customers based on its assessment of each customer’s creditworthiness. The Company maintains an estimated allowance for doubtful accounts to reduce its gross accounts receivable, which represent amounts due from customers, to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay and the status of any ongoing operations with each applicable customer.

The Company performs quarterly reviews and analyses of each customer’s outstanding balance and assesses, on an account-by-account basis, whether the allowance for doubtful accounts needs to be adjusted based on currently available evidence such as historical collection experience, current economic trends and changes in customer payment terms. In accordance with the Company’s policy, if collection efforts have been pursued and all avenues for collections exhausted, accounts receivable would be written off as uncollectible.

Accrued Service Costs

Accrued service costs represent estimated amounts due to customers and vendors for hospital operating costs for which the Company has not yet received invoices and other costs directly related to managed service contracts.

Fair Value of Financial Instruments

The fair values of cash, accounts receivable, other current assets, and current liabilities approximate their carrying value due to the short-term nature of these financial instruments.

Furniture and Equipment

Furniture and equipment are stated at cost, less accumulated depreciation determined on the straight-line method over the estimated useful lives of the assets as follows:


Leasehold improvements		Shorter of 5 years or lease term
Office furniture		5 years
Capitalized software		3 to 5 years
Computers and other equipment		3 years

Software Development

The Company applies the provisions of Accounting Standards Codification (“ASC”) 350-40, Intangibles — Goodwill and Other — Internal Use Software, which requires the capitalization of costs incurred in connection with developing or obtaining internal use software. In accordance with ASC 350-40, the Company capitalizes the costs of internally-developed, internal use software when an application is in the development stage. This generally occurs after the overall design and functionality of the application has been approved and management has committed to the

F-10

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

application’s development. Capitalized software development costs consist of payroll and payroll-related costs for employee time spent developing a specific internal use software application or related enhancements, and external costs incurred that are related directly to the development of a specific software application.

Goodwill

Goodwill represents the excess purchase price over the net assets acquired for a business that the Company acquired in May 2006. In accordance with ASC 350, Intangibles — Goodwill and Other, goodwill is not subject to amortization but is subject to impairment testing at least annually. The Company’s annual impairment assessment date is the first date of the fourth quarter. The Company conducts its impairment testing on a company-wide basis because it has only one reporting unit. The Company’s impairment tests are based on its current business strategy in light of present industry and economic conditions and future expectations.

As the Company applies its judgment to estimate future cash flows and an appropriate discount rate, the analysis reflects assumptions and uncertainties. The Company’s estimates of future cash flows could differ from actual results. The Company’s 2007, 2008 and 2009 impairment assessments did not result in goodwill impairment.

Foreign Currency

The functional currency of each entity included in the consolidated financial statements is its respective local currency, which is also the currency of the primary economic environment in which it operates. Transactions in foreign currencies are re-measured into functional currency at the rates of exchange prevailing on the date of the transaction. All transaction foreign exchange gains and losses are recorded in the accompanying consolidated statements of operations.

The assets and liabilities of the subsidiaries which use a functional currency other than the U.S. dollar are translated into U.S. dollars at the rate of exchange prevailing on the balance sheet dates. Revenues and expenses are translated into U.S. dollars at the average exchange rate during each month. Resulting translation adjustments are included in the cumulative translation adjustment in the consolidated balance sheets.

Impairments of Long-Lived Assets

The Company evaluates all of its long-lived assets, such as furniture, equipment, software and other intangibles, for impairment in accordance with ASC 360, Property, Plant and Equipment , when events or changes in circumstances warrant such a review. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if there is an impairment and an adjustment to fair value is required.

See Note 8 for discussion of the impairment loss recorded for customer relationships in 2008.

Income Taxes

The Company records deferred tax assets and liabilities for future income tax consequences that are attributable to differences between the carrying amount of assets and liabilities for financial statement purposes and the income tax bases of such assets and liabilities. Deferred tax assets and liabilities are measured based on enacted tax rates that are expected to apply in the year that the temporary differences are expected to be settled. Deferred tax assets and liabilities are adjusted for changes in income tax rates in the period that includes the enactment date. A valuation allowance for

F-11

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

deferred tax assets is provided if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of December 31, 2008 and in all prior periods, a valuation allowance was provided for all net deferred tax assets. As a result of the Company’s improved operations, in 2009 the Company determined that it was no longer necessary to maintain a valuation allowance for all of its deferred tax assets, and therefore released $3.5 million of the valuation allowance.

Beginning January 1, 2008, with the adoption of ASC 740-10 Income Taxes — Overall , the Company recognizes the financial statement effects of a tax position only when it is more likely than not that the position will be sustained upon examination. Tax positions taken or expected to be taken that are not recognized under the pronouncement are recorded as liabilities.

As a result of the Company’s adoption of ASC 740-10, the Company recognized a $0.2 million increase to reserves for uncertain tax positions, of which $0.1 million was recorded as a cumulative effect adjustment to retained earnings. The remaining $0.1 million related to current year changes and was recorded as an expense in 2008.

The Company recognizes interest and penalties relating to income tax matters in the income tax provision.

Share-Based Compensation

Share-based compensation expense results from awards of restricted common stock and grants of stock options and warrants to employees, directors, outside consultants, customers, vendors and others. The Company recognizes the costs associated with option and warrant grants using the fair value recognition provisions of ASC 718, Compensation — Stock Compensation . Generally, ASC 718 requires the value of all share-based payments to be recognized in the statement of operations based on their estimated fair value at date of grant amortized over the grant’s vesting period. The Company uses the straight-line method to amortize compensation costs over the grants’ respective vesting periods.

Legal Proceedings

In the normal course of business, the Company is involved in legal proceedings or regulatory investigations. The Company evaluates the need for loss accruals using the requirements of ASC 450, Contingencies . When conducting this evaluation, the Company considers factors such as the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. The Company records an estimated loss for any claim, lawsuit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can reasonably be estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate, then the Company records the minimum amount in the range as its loss accrual. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded.

New Accounting Standards and Disclosures

In June 2009, the FASB issued ASC 105, Generally Accepted Accounting Principles . The guidance in ASC 105 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009; adoption of ASC 105 had no impact on the Company’s consolidated financial statements.

F-12

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

In December 2007, the FASB issued ASC 805, Business Combinations . The guidance in ASC 805 requires the Company to continue to follow the guidance in SFAS No. 141 for certain aspects of business combinations, with additional guidance provided defining the acquirer, recognizing and measuring the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, assets and liabilities arising from contingencies, defining a bargain purchase, and recognizing and measuring goodwill or a gain from a bargain purchase. In addition, under ASC 805, adjustments associated with changes in tax contingencies and valuation allowances that occur after the measurement period, not to exceed one year, are recorded as adjustments to income. This statement is effective for all business combinations for which the acquisition date is on or after the beginning of an entity’s first fiscal year that begins after December 15, 2008; however, the guidance in this standard regarding the treatment of income tax contingencies and valuation allowances is retroactive to business combinations completed prior to January 1, 2009. The Company adopted ASC 805 on January 1, 2009. The adoption had no material impact on the Company’s consolidated financial statements.

In June 2008, the FASB issued an amendment to ASC 260, Earnings Per Share , as codified by ASC 260-10. The guidance in ASC 260-10 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. ASC 260-10 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The Company adopted ASC 260-10 effective January 1, 2009. The adoption had no material impact on the Company’s consolidated financial statements. See Note 15.

In April 2009, the FASB issued an amendment to ASC 825, Financial Instruments , as codified by ASC 825-10. The guidance in ASC 825-10 requires publicly-traded companies, as defined in ASC 270, Interim Reporting , to provide disclosures on the fair value of financial instruments in interim financial statements. Since ASC 825-10 requires only additional disclosures in interim financial statements concerning the financial instruments, the adoption of ASC 825-10 effective June 30, 2009 did not have any impact on the Company’s consolidated financial statements presented herein.

In May 2009, the FASB issued ASC 855, Subsequent Events . ASC 855 establishes general standards of accounting for and disclosures of subsequent events that occur after the balance sheet date but prior to the issuance of financial statements. The statement requires additional disclosure regarding the date through which subsequent events have been evaluated by the entity as well as whether that date is the date the financial statements were issued. This statement became effective for the Company’s consolidated financial statements as of June 30, 2009.

In February 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-09 to amend ASC 855 which applies with immediate effect. The ASU removes the requirement to disclose the date through which subsequent events were evaluated in both originally issued and reissued financial statements for SEC Filers.

In October 2009, the FASB issued ASU No. 09-13, Revenue Recognition — Multiple Deliverable Revenue Arrangements (“ASU 09-13”). ASU 09-13 updates the existing multiple-element revenue arrangements guidance currently included in FASB ASC 605-25. The revised guidance provides for two significant changes to the existing multiple element revenue arrangements guidance. The first change relates to the determination of when the individual deliverables included in a multiple element arrangement may be treated as separate units of accounting. The second change modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. Together, these changes are likely to result in earlier recognition of revenue and related costs for multiple-element arrangements than under the previous guidance. This guidance also significantly expands the disclosures required for multiple-element revenue arrangements. The revised multiple element revenue arrangements guidance will be effective for the first annual reporting period

F-13

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

beginning on or after June 15, 2010, however, early adoption is permitted, provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently evaluating the impact of the adoption of ASU 09-13 and expects that the adoption of the ASU will have no material impact on the Company’s consolidated financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.


3.	Net Services Revenue

The Company’s net services revenue consisted of the following for each of the three years ending December 31 (in thousands):


	2007		2008		2009

Net base fees for managed service contracts	$	212,086	$	350,085	$	434,281
Incentive payments for managed service contracts		25,491		38,971		64,033
Other services		3,148		9,413		11,878

Total	$	240,725	$	398,469	$	510,192


4.	Infused Management and Technology Expenses

Infused management and technology expenses consist primarily of the wages, bonuses, benefits, share-based compensation, travel and other costs associated with deploying the Company’s employees on customer sites to guide and manage customers’ revenue cycle operations. The employees that the Company deploys on customer sites typically have significant experience in revenue cycle operations, technology, quality control or other management disciplines. The other significant portion of these expenses is an allocation of the costs associated with maintaining, improving and deploying the Company’s integrated proprietary technology suite and an allocation of the amortization relating to software development costs capitalized.


5.	Segments and Concentrations

All of the Company’s significant operations are organized around the single business of providing end-to-end management services of revenue cycle operations for U.S.-based hospitals and other medical providers. Accordingly, for purposes of disclosure under ASC 280, Segment Reporting , the Company has only one operating and reporting segment.

All of the Company’s net services revenue and trade accounts receivable are derived from healthcare providers domiciled in the United States.

While managed independently and governed by separate contracts, several of the Company’s customers are affiliated with a single healthcare system, Ascension Health. Pursuant to the Company’s master services agreement with Ascension Health, the Company provides services to Ascension Health’s affiliated hospitals that execute separate contracts with the Company. The Company’s aggregate net services revenue from these hospitals was $214.2 million, $281.7 million, and $307.5 million during the years ended December 31, 2007, 2008 and 2009, respectively. The Company had $8.0 million and $17.7 million of accounts receivable from hospitals affiliated with Ascension Health as of December 31, 2008 and 2009, respectively.

In addition, another customer, which is not affiliated with Ascension Health, accounted for 10.6% and 9.1% of the Company’s total net services revenue in the years ended December 31, 2008 and

F-14

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

2009, respectively. No other non-Ascension Health customer accounted for more than 10% of the Company’s total net services revenue in any of the periods presented.


6.	Due from Related Party

Pursuant to the acquisition of a business in May 2006, the sellers, a majority of which are now employees of the Company, are obligated to indemnify the Company for federal and state income taxes related to periods up to and including the date of the acquisition. The net amount due to the Company related to this indemnity was $1.3 million as of both December 31, 2008 and 2009, and is presented as due from related party in the consolidated balance sheets. This amount is secured by 139,671 shares of the Company’s Series C common stock held in escrow.


7.	Furniture and Equipment

Furniture and equipment consist of the following (in thousands):


	Year Ended
	December 31,
	2008			2009

Construction in progress	$	113		$	845
Capitalized software		8,443			13,575
Computer equipment		2,120			3,582
Leasehold improvements		1,117			1,770
Other equipment		621			608
Office furniture		742			709

		13,156			21,089
Less accumulated depreciation		(4,243	)		(8,188	)

	$	8,913		$	12,901

Net furniture and equipment located in India accounted for approximately 2.6% and 6.7% of total net assets at December 31, 2008 and 2009, respectively. The Company recorded $1.2 million, $2.4 million, and $3.9 million of depreciation and amortization expense related to its furniture and equipment for the years ended December 31, 2007, 2008 and 2009.


8.	Impairment Loss

In 2008, the Company determined that the customers that were served by a business at the time of its acquisition by the Company were unlikely to generate significant future revenues. As a result, management considered the customer relationships intangible asset to be impaired and have no future economic value. Therefore, the $0.1 million remaining net book value of this asset was charged to amortization expense at December 31, 2008, which is included in selling, general, and administrative expenses in the consolidated statement of operations. There have been no further impairments through December 31, 2009.


9.	Non-Executive Employee Loans

In March 2006, certain non-executive employees of the Company exercised options to purchase an aggregate of 1,083,201 shares of Series C common stock. To facilitate this stock option exercise, the Company permitted these employees to deliver promissory notes to the Company representing the exercise price related to these option exercises. The aggregate amount loaned to employees for this purpose was approximately $0.3 million. Certain employees elected under Section 83(b) of the Internal

F-15

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

Revenue Code to be taxed on the difference between the stock’s fair value at the purchase date and the option exercise price. In addition, pursuant to the promissory notes, the Company advanced an additional $0.1 million to such employees to facilitate the payment of such federal and state income tax obligations.

Each of the individual promissory notes bears interest at 5% per annum. The principal of each note is payable annually in five equal installments, commencing on March 1, 2007. Each promissory note is secured by the shares of the Company’s Series C common stock associated with the employee’s stock option exercise. If an employee sells any shares issued pursuant to his or her stock option exercise, then a pro rata portion of the associated promissory note becomes immediately due. Any unpaid balance on an employee’s promissory note becomes due and payable 60 days after such employee ceases to work for the Company.

The amounts receivable from these notes, $0.3 million and $0.1 million at December 31, 2008 and 2009, respectively, have been deducted from stockholders’ equity.


10.	Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 1,350,000 shares of preferred stock, of which 32,317 shares have been designated as Series A, 1,267,224 shares have been designated as Series D, and the remaining 50,459 shares have neither been designated nor issued.

Dividend Rights

The holders of Series A and Series D preferred stock are not entitled to receive any dividends unless declared by the Company’s Board of Directors (the “Board”). In the event the Board declares a dividend on any shares of common stock, the holders of Series A and Series D preferred stock are entitled to receive a dividend on the same terms and at the same rate.

Liquidation Preference

Upon liquidation, the Series A and Series D stockholders rank equally with each other and senior to common stockholders and to all other classes or series of stock issued by the Company, except such classes or series of stock that rank pari passu with or senior to the Series A and Series D stock and such ranking is approved by a majority of the Series A and a majority of the Series D preferred stockholders. Upon liquidation, each holder of Series A and Series D preferred stock is entitled to receive an amount per share equal to the original purchase price plus any accrued but unpaid dividends (the “Termination Amount”). All assets remaining available for distribution will be distributed ratably to the holders of common stock, Series A preferred stock and Series D preferred stock. In the event the assets available for distribution to the holders of the Series A and Series D preferred stock are insufficient to pay in full the Termination Amount, the available assets will be distributed to such holders in proportion to the full amount each holder is entitled to receive.

In the event of a qualifying public offering, as defined in the Company’s Fourth Amended and Restated Certification of Incorporation, the Company must pay to each holder of Series A and Series D preferred stock an amount in cash equal to the Termination Amount, unless at the stockholder’s option, the holder chooses to receive shares of common stock valued at the per common share price offered in the qualifying public offering. In addition, the Company’s Series A preferred stock and Series D preferred stock will automatically convert into shares of Series B common stock at the time of the qualifying public offering.

Neither the Series A preferred stock nor the Series D preferred stock is redeemable.

F-16

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

Voting Rights

Holders of each Series A preferred stock and Series D preferred stock have the right to a number of votes equal to the number of shares of Series B common stock that are issuable upon conversion of such share of Series A preferred stock and Series D preferred stock.

Conversion Rights

Holders of Series A preferred stock have the right to convert the Series A preferred stock at any time into shares of Series B common stock at the rate of the original purchase price divided by the conversion price, subject to adjustment. Holders of the Series D preferred stock have the right to convert the Series D preferred stock at any time into shares of Series B common stock at the rate of the original purchase price divided by the conversion price, subject to adjustment. In the event of a qualifying public offering, as defined in the Company’s Fourth Amended and Restated Certificate of Incorporation, the Company’s Series A preferred stock and Series D preferred stock will automatically convert into shares of Series B common stock at the time of the offering.

As of December 31, 2009, each outstanding share of Series A preferred stock was convertible into 306.5 shares of Series B common stock and each share of Series D preferred stock was convertible into one share of Series B common stock.

Common Stock

The Company is authorized to issue 25,500,000 shares of common stock, of which 17,500,000 are designated as Series B common stock and 8,000,000 are designated as Series C common stock. The Company has reserved 14,436,863 and 15,062,334 shares at December 31, 2008 and 2009, respectively, for the issuance of common stock upon exercise of outstanding stock options and warrants, and conversion of shares of Series A preferred stock and Series D preferred stock.

Each share of Series B common stock is entitled to one vote. Shares of Series C common stock have no voting privileges. Holders of Series B common stock and Series C common stock are entitled to receive dividends when and if declared by the Board, subject to the prior rights of holders of all classes of stock outstanding. All of the Company’s outstanding common stock at December 31, 2008 and 2009 is restricted with regard to transfer rights.

Restricted Stock Plan

In March 2004, the Board authorized the Company’s Restricted Stock Plan. The Restricted Stock Plan provides for the grant of restricted Series B or Series C common stock to employees, directors, and outside consultants. The Company’s Board, or a committee designated by the Board administers the Restricted Stock Plan and has authority to determine the terms and conditions of awards, including the number of shares subject to each award, the vesting schedule of the awards, and the selection of grantees.

Series B Common Stock

In March 2004, the Company awarded 3,000,000 restricted shares of Series B common stock, having a fair market value on that date of $0.0256 per share to an employee under the Restricted Stock Plan. The shares vested over four years, beginning in November 2003, subject to the employee’s continued employment. Stock-based compensation expense of $0.02 million was recorded during the year ended December 31, 2007.

F-17

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

In May 2007, the Company issued and sold 669,284 restricted shares of Series B common stock to a customer for an aggregate price of $5.5 million under the Restricted Stock Plan.

Series C Common Stock

In June 2004, the Company issued 3,175,000 restricted shares of Series C common stock, having a fair market value on that date of $0.0256 per share to certain employees and directors under the Restricted Stock Plan. In January 2005, 90,000 restricted shares of Series C common stock, having a fair market value on that date of $1.03 per share, were issued to a director under the Restricted Stock Plan. The shares have various vesting schedules ranging from immediate vesting to vesting over a period of 48 months, subject to continued employment or service on the Board. Stock compensation expense of $0.02 million was recorded during the year ended December 31, 2007 related to these awards.

Exchange of Series B and Series Class C Restricted Common Stock

Effective December 2008, the Company and certain employees and directors entered into an agreement pursuant to which such employees and directors exchanged a total of 3,309,951 shares of Series C common stock for a like number of Series B common stock.

Dividends

The Company paid a cash dividend in the aggregate amount of $15.0 million, or $0.7203 per common equivalent share, to holders of record as of July 11, 2008 of the Company’s common stock and preferred stock.

The Company paid a cash dividend in the aggregate amount of $14.9 million, or $0.72 per common equivalent share, to holders of record as of September 1, 2009 of the Company’s common stock and preferred stock.

Warrants

Effective in October 2004, the Company entered into a Supplemental Warrant Agreement with Ascension Health, its founding customer, which provided for the right to purchase up to 902,374 shares of Series B common stock based upon the achievement of specified milestones relating to the customer’s sales and marketing assistance. In May and September 2007, the Company and Ascension Health agreed to amend and restate the Supplemental Warrant Agreement to reduce the number of shares covered by the warrant to 446,190 and to extend the period of time covered by the Supplemental Warrant Agreement. The measurement date for each purchase right earned under the warrant was the date when the founding customer’s performance was complete, which was the date that the Company entered into a managed service contract with a customer for which the founding customer provided marketing assistance. The purchase price of the shares is equal to the most recent per share price of the Company’s Series B common stock in a capital raising transaction or, if there has not been a capital raising transaction within the preceding six months, the exercise price of the Company’s most recently granted employee stock options.

During December 2007, the founding customer earned the right to purchase 223,095 shares of Series B common stock under the Amended Supplemental Warrant Agreement. The warrants have an exercise price of $17.36 per share. The Company recorded $4.2 million as marketing expenses during the year ended December 31, 2007 in conjunction with the issuance of this warrant.

During March 2008, the founding customer earned the right to purchase 111,548 shares of Series B common stock under the Amended Supplemental Warrant Agreement. The warrants have an

F-18

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

exercise price of $40.17 per share. The Company recorded $2.4 million as marketing expenses during the year ended December 31, 2008 in conjunction with the issuance of this warrant.

During March 2009, the founding customer earned the right to purchase 111,547 shares of Series B common stock under the Amended Supplemental Warrant Agreement. The warrants have an exercise price of $51.05 per share. The Company recorded $2.8 million as marketing expenses during the year ended December 31, 2009 in conjunction with the issuance of this warrant.

The Supplemental Warrant Agreement, and all individual warrants issued thereunder, expire on the earlier of the tenth anniversary of the last award issued under this warrant, March 2019, or the effective date of an initial public offering.

Effective November 2004, the Company entered into a Protection Warrant Agreement with the founding customer whereby the Company granted the customer anti-dilution rights by entering into an agreement whereby the founding customer is granted warrants to purchase the Company’s Series B common stock from time to time at an exercise price of $0.01 per share when the customer’s original ownership percentage declines as a result of the Company offering more common share equivalents. The Protection Warrant Agreement, and all individual warrants issued thereunder, expire on the earlier of November 7, 2014, or the effective date of an initial public offering.

In the years ended December 31, 2007, 2008 and 2009, warrants to purchase 58,175, 23,261 and 34,789 shares of Series B common stock, respectively, were earned under the Protection Warrant. As a result of these grants, revenue recorded was reduced by $0.9 million, $0.9 million and $1.7 million during the years ended December 31, 2007, 2008 and 2009, respectively.

During the years ended December 31, 2007, 2008 and 2009, the founding customer purchased 213,100, 66,652 and 41,938 shares of the Company’s Series B common stock, respectively, for $0.01 per share, pursuant to the Protection Warrant Agreement. As of December 31, 2009, the founding customer has the right to purchase an additional 7,635 shares for $0.01 per share under the agreement.

In conjunction with the start of its business, in February 2004, the Company executed a term sheet with a consulting firm and its principal contemplating that the Company would grant the consulting firm a warrant, with an exercise price equal to the fair market value of the Company’s common stock upon grant, to purchase shares of the Company’s common stock then representing 2.5% of the Company’s equity in exchange for exclusive rights to certain revenue cycle methodologies, tools, technology, benchmarking information and other intellectual property, plus up to another 2.5% of the Company’s equity at the time of grant if the consulting firm’s introduction of the Company to senior executives at prospective customers resulted in the execution of managed service contracts between the Company and such customers. In January 2005, the Company granted the consulting firm a warrant to purchase 833,334 shares of the Company’s Series C common stock for $1.12 per share, representing 5.0% of the Company’s equity at that time. The warrant expires on the earlier of January 15, 2015 or a change of control of the Company.

The Company uses the Black-Scholes option pricing model to determine the estimated fair value of all of the above warrants at the date granted. The significant assumptions used in the model were:


	Year Ended December 31,
	2007	2008	2009

Future dividends	—	—	—
Risk-free interest rate	2.75% to 4.21%	3.45%	2.91%
Expected volatility	50%	50%	50%
Expected life	6.8 years	6.6 years	5.6 years

F-19

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

Stock Options

In December 2005, the Board approved a stock option plan, which provides for the grant of stock options to employees, directors and consultants. The plan was amended and restated in February 2006. As of December 31, 2009, the plan permitted the issuance of a maximum of 7,151,526 shares of common stock and 3,610,402 shares were available for grant. Under the terms of the plan, all options will expire if they are not exercised within ten years after the grant date. Substantially all of the options granted vest over four years at a rate of 25% per year on each grant date anniversary. Options can be exercised immediately upon grant, but upon exercise the shares issued are subject to the same vesting and repurchase provisions that applied before the exercise.

The Company uses the Black-Scholes option pricing model to determine the estimated fair value of each option as of its grant date. These inputs are subjective and generally require significant analysis and judgment to develop. The following table sets forth the significant assumptions used in the Black-Scholes model and the calculation of stock-based compensation cost during 2007, 2008 and 2009:


	Year Ended December 31,
	2007	2008	2009

Future dividends	—	—	—
Risk-free interest rate	2.3% to 5.5%	2.8% to 4.0%	1.6% to 3.2%
Expected volatility	50%	50%	50%
Expected life	6.25 years	6.25 years	6.25 years
Forfeitures	7.5% annually	3.75% annually	4.25% annually

Since the Company’s stock is not actively traded, the Company’s management estimated its expected volatility by reviewing the historical volatility of the common stock of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward its future expected results. Judgment was used in selecting these companies, as well as in evaluating the available historical and implied volatility for these companies.

All employees were aggregated into one pool for valuation purposes. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant.

The plan has not been in existence a sufficient period for the Company’s historical experience to be used when estimating expected life. Furthermore, data from other companies is not readily available. Therefore, the expected life of each stock option was calculated using a simplified method based on the average of each option’s vesting term and original contractual term.

An estimated forfeiture rate derived from the Company’s historical data and its estimates of the likely future actions of option holders has been applied when recognizing the stock-based compensation cost of the options.

F-20

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table sets forth a summary of option activity under the Plan for the years ended December 31, 2007, 2008 and 2009:


						Weighted-
						Average
				Weighted-		Remaining
				Average		Contractual
				Exercise		Term		Aggregate
	Shares			Price		(in years)		Intrinsic Value
								(In thousands)

Outstanding at January 1, 2007		1,202,428		$	3.55
Granted		768,030			13.36
Exercised — vested		(16,021	)		2.42
Exercised — non-vested		(37,148	)		13.08
Cancelled		(28,000	)		2.29
Forfeited		(148,229	)		3.66

Outstanding at December 31, 2007		1,741,060			7.69		8.5	$	16,836
Granted		443,000			41.25
Exercised — vested		(3,750	)		4.74
Exercised — non-vested		(8,550	)		15.51
Cancelled		(11,250	)		5.82
Forfeited		(79,000	)		9.10

Outstanding at December 31, 2008		2,081,510		$	14.77		7.9	$	85,342
Granted		703,500			52.41
Exercised — vested		(29,750	)		7.05
Exercised — non-vested		(1,250	)		3.15
Cancelled		(34,750	)		5.21
Forfeited		(116,685	)		37.25

Outstanding at December 31, 2009		2,602,575		$	24.13		7.5	$	86,074

Outstanding and vested at December 31, 2009		1,313,883		$	10.71		6.5	$	61,076

Amounts received by the Company from the exercise of unvested stock options are included in other accrued expenses in the consolidated balance sheets until vesting occurs.

The weighted-average grant date fair value of options granted in the years ended December 31, 2007, 2008 and 2009, was $13.36, $41.25 and $52.41 per share, respectively. The total intrinsic value of the options exercised in the years ended December 31, 2007, 2008 and 2009 was $0.3 million, $0.2 million and $1.4 million, respectively. The total fair value of options vested in the years ended December 31, 2007, 2008 and 2009 was $1.0 million, $2.8 million and $5.4 million, respectively.

Total share-based compensation cost recognized for the years ended December 31, 2007, 2008 and 2009 was $0.9 million, $3.6 million and $6.9 million, respectively, with related income tax benefits of approximately $0.4 million, $1.4 million and $2.8 million, respectively. As of December 31, 2009 there was $20.5 million of total unrecognized share-based compensation cost related to stock options granted under the Plan, which the Company expects to recognize over a weighted-average period of 3.0 years.

F-21

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)


11.	401 (k) Retirement Plan

The Company maintains a 401(k) retirement plan that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all employees are eligible to participate. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equal to $16,500 in 2009, and have the amount of the reduction contributed to the 401(k) plan. The Company currently matches employee contributions up to 50% of the first 3% of base compensation that a participant contributes to the plan. In 2007, 2008 and 2009, employees who were Directors, Vice President, or higher levels were excluded from the matching contribution feature of the plan. For the years ended December 31, 2007, 2008 and 2009, total Company contributions to the plan were $0.1 million, $0.2 million and $0.2 million, respectively.


12.	Operating Leases

The Company rents office space and equipment under a series of operating leases, primarily for its Chicago corporate office and India operations. Lease payments are amortized to expense on a straight-line basis over the lease term. As of December 31, 2009, the Chicago corporate office consisted of approximately 28,000 square feet in a multi-story office building. The Company intends to exercise an option to rent additional 22,000 square feet of office space on an adjacent floor, pursuant to its lease agreement, starting June 1, 2010. Concurrently, the Company will have an ability to return 6,500 square feet of office space on a non-adjacent floor. After the Company’s takes possession of the additional 22,000 square feet of office space, the lease will automatically be extended for a period of ten years.

The Company’s financial institution has issued a $0.2 million irrevocable letter of credit to the landlord on behalf of the Company. This letter of credit serves as a security deposit for payment of the Company’s obligations under the lease. As of December 31, 2009, the Company had set aside $0.2 million to guarantee its obligation to repay the financial institution in the event that the financial institution is required to perform under the letter of credit. This amount is included in cash in the Company’s consolidated balance sheet.

Total rent expense was $0.6 million, $1.0 million and $1.5 million for the years ended December 31, 2007, 2008 and 2009, respectively.

At December 31, 2009, the aggregate minimum lease commitments under all noncancelable operating leases are as follows (in thousands):


2010	$	1,839
2011		1,974
2012		1,770
2013		1,623
2014		1,724
Thereafter		10,557

Total	$	19,487

F-22

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)


13.	Income Taxes

For the years ended December 31, 2007, 2008 and 2009, the Company’s tax provision consists of the following (in thousands):


	Current		Deferred			Total

Year ended December 31, 2007:
U.S. federal	$	141	$	—		$	141
State and local		312		—			312
Foreign		3		—			3

	$	456	$	—		$	456

Year ended December 31, 2008:
U.S. federal	$	66	$	—		$	66
State and local		2,177		—			2,177
Foreign		21		—			21

	$	2,264	$	—		$	2,264

Year ended December 31, 2009
U.S. federal	$	4,377	$	(3,206	)	$	1,171
State and local		2,095		(339	)		1,756
Foreign		137		(98	)		39

	$	6,609	$	(3,643	)	$	2,966

Reconciliation of the difference between the actual tax rate and the U.S. federal income tax rate is as follows:


	2007			2008			2009

Federal statutory tax rate		34	%		34	%		35	%
Increase (reduction) in income tax rate resulting from:
Change in the valuation allowance		(11	)		(15	)		(23	)
India tax holiday		(2	)		(5	)		(2	)
Meals and entertainment and other permanent differences		6			3			1
Alternative minimum tax		11			(4	)		—
State and local income taxes, net of federal benefits		17			42			6
Anti-dilution warrants issued to customers		—			9			—
Change in tax rate		(18	)		—			—
Other, net		—			1			—

Actual tax rate		37	%		65	%		17	%

F-23

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table sets forth the Company’s net deferred tax assets (liabilities) as of December 31, 2007, 2008 and 2009 (in thousands):


	2007			2008			2009

Deferred tax assets:
Alternative minimum tax credit
carryover	$	34		$	241		$	—
Net operating loss carryforwards		2,491			2,538			143
Employee stock compensation		234			1,407			4,186
Stock warrants		2,553			2,855			4,159
Charitable contributions		—			105			—
Other		28			57			74

Total gross deferred tax assets		5,340			7,203			8,562
Less valuation allowance		(4,733	)		(3,629	)		(139	)

Net deferred tax assets		607			3,574			8,423
Deferred tax liabilities:
Deferred revenue		—			(2,471	)		(2,056	)
Fixed assets and intangibles		(607	)		(1,103	)		(2,816	)

Total deferred tax liabilities		(607	)		(3,574	)		(4,872	)

Net deferred tax asset	$	—		$	—		$	3,551

As of December 31, 2008, the Company had recorded a valuation allowance for the full amount of its net deferred tax assets because its cumulative net tax loss during the three-year period ended December 31, 2008 resulted in management concluding that it was not more likely than not that the net deferred tax assets will be realized.

During the year ended December 31, 2009 the Company reduced the valuation allowance recorded against the Company’s net deferred tax assets due to a change in the estimate of the future realization of the net deferred tax assets. The reduction resulted in a tax benefit of $3.5 million.

At December 31, 2009, the Company has cumulative net operating loss carryforwards of approximately $0.2 million which are available to offset future state taxable income in future periods.

The Company has not recognized a deferred tax liability for the undistributed earnings of its foreign subsidiary that arose in 2007, 2008 and 2009 because the Company considers these earnings to be indefinitely reinvested outside of the United States. As of December 31, 2007, 2008 and 2009 the undistributed earnings of this subsidiary were $0.1 million, $0.5 million, and $0.7 million, respectively.

The 2008 and 2009 current tax provision includes $0.02 million and $0.1 million, respectively, for income taxes arising from the pre-tax income of the Company’s India subsidiaries. The tax provisions include the impact of a 90% tax holiday in India. The Company’s benefits from this tax holiday were approximately $0.1 million, $0.2 million, and $0.3 million for the years ended December 31, 2007, 2008 and 2009, respectively. The tax benefit of this tax holiday was $0.02 per diluted share for the years ended December 31, 2008 and 2009. The impact per diluted share of the tax holiday was immaterial for the year ended December 31, 2007.

F-24

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

The Company’s uncertain tax positions as of December 31, 2009, totaled $0.3 million. The following table summarizes the activity related to the unrecognized tax benefits (in thousands):


Unrecognized tax benefits as of December 31, 2007	$	118
Increases in positions taken in a current period		130

Unrecognized tax benefits as of December 31, 2008	$	248
Decreases in positions taken in a prior period		(139	)
Increases in positions taken in a current period		196

Unrecognized tax benefits as of December 31, 2009	$	305

As of December 31, 2009, approximately $0.3 million of the total gross unrecognized tax benefits represented the amount that, if recognized, would result in a reduction of the effective income tax rate in future periods.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. U.S. federal income tax returns for 2006 through 2008 are currently open for examination. State jurisdictions vary for open tax years. The statute of limitations for most states ranges from 3 to 6 years.

The Company recognizes interest and penalties related to income tax matters as income tax expense.


14.	Legal Proceedings

From time to time, the Company has been and may become involved in legal or regulatory proceedings arising in the ordinary course of business. The Company is not presently a party to any material litigation or regulatory proceeding and the Company’s management is not aware of any pending or threatened litigation or regulatory proceeding that could have a material adverse effect on the Company’s business, operating results, financial condition or cash flows.


15.	Earnings (Loss) Per Common Share

Earnings per share (“EPS”) is calculated in accordance with ASC 260, Earnings Per Share . The guidance in ASC 260 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.

Under the two-class method, earnings are allocated between common stock and participating securities. The accounting guidance also states that the presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. The Company’s Series B and Series C common stock have equal participation rights and therefore the Company has presented earnings per common share for Series B and Series C common stock as one class.

F-25

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)

The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. The Company’s reported net earnings is reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders for purposes of calculating earnings per share.

The following table sets forth the computation of basic and diluted earnings per share under the two-class method (in thousands of dollars, except for share and per share amounts):


	Years Ended December 31,
	2007		2008			2009

Net income as reported	$	774	$	1,243		$	14,590
Less: Distributed earnings available to participating securities		—		8,148			8,174
Less: Undistributed earnings available to participating securities		451		—			—

Numerator for basic earnings (loss) per share - Undistributed and distributed earnings available to common shareholders		323		(6,905	)		6,416
Add: Undistributed earnings allocated to participating securities		23		—			—
Less: Undistributed earnings reallocated to participating securities		20		—			—

Numerator for diluted earnings (loss) per share - Undistributed and distributed earnings available to common shareholders	$	326	$	(6,905	)	$	6,416

Denominator for basic earnings (loss) per share - Weighted-average common shares		8,410,226		9,214,916			9,368,672
Effect of dilutive securities		1,885,785		—			1,844,381

Denominator for diluted earnings (loss) per share - Weighted-average common shares adjusted for dilutive securities		10,296,011		9,214,916			11,213,053

Earnings (loss) per share:
Basic net income (loss) per share	$	0.04	$	(0.75	)	$	0.68
Diluted net income (loss) per share		0.03		(0.75	)		0.57

Because of their anti-dilutive effect, 11,172,592, 14,124,994, and 12,076,100 common share equivalents, comprised of convertible preferred shares, stock options and warrants, have been excluded from the diluted earnings (loss) per share calculation for the years ended December 31, 2007, 2008 and 2009, respectively.

On February 3, 2010, the Board granted 1,325,831 options to the members of executive management, employees, and non-employee directors. These stock options have an exercise price equal to $57.66 per share (the fair value of the Company’s common stock as of such date), provided that if an initial public offering occurs at a higher price prior to May 15, 2010 the exercise price will be increased to the price per share at which shares are initially offered to the public. Assuming the exercise price of these options remains $57.66 per share, the unrecognized compensation cost that will be recognized over the vesting period of these grants is approximately $33.0 million.

F-26

Accretive Health, Inc.

Notes to Consolidated Financial Statements — (Continued)


16.	Revolving Credit Facility

On September 30, 2009, the Company entered into a $15 million line of credit with the Bank of Montreal, which may be used for working capital and general corporate purposes. Any amounts outstanding under the line of credit accrue interest at LIBOR plus 4% and are secured by substantially all of the Company’s assets. Advances under the line of credit are limited to a borrowing base and a cash deposit account which will be established at the time borrowings occur. The line of credit has an initial term of two years and is renewable annually thereafter. As of December 31, 2009, the Company had no amounts outstanding under this line of credit. The line of credit contains restrictive covenants which limit the Company’s ability to, among other things, enter into other borrowing arrangements and pay future dividends. The Company recorded $0.15 million of interest expense as a result of the origination fee paid in conjunction with closing this facility.

F-27

Accretive Health, Inc.

Common Stock


Goldman, Sachs & Co.	Credit Suisse


J.P. Morgan	Morgan Stanley


Baird	William Blair & Company

Part II

Information Not Required in Prospectus


Item 13.	*Other Expenses of Issuance and Distribution*

The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, other than underwriting discounts and commissions, all of which will be paid by the Registrant. All amounts are estimated except the Securities and Exchange Commission registration fee and the FINRA filing fee.


	Amount

Securities and Exchange Commission registration fee	$	11,160
Financial Industry Regulatory Authority fee		20,500
New York Stock Exchange listing fee		250,000
Accountants’ fees and expenses		*
Legal fees and expenses		*
Financial advisory fee(1)		*
Blue Sky fees and expenses		*
Transfer Agent’s fees and expenses		*
Printing and engraving expenses		*
Miscellaneous		*

Total Expenses	$	*


*		To be filed by amendment.

(1)		Consists of a cash fee of $ and shares of our common stock valued at $ , based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus.


Item 14.	*Indemnification of Directors and Officers*

Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our restated certificate of incorporation that will become effective upon the closing of this offering provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other

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adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of Accretive Health) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of Accretive Health, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of Accretive Health to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer of Accretive Health, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of Accretive Health, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.

We have entered into indemnification agreements with each of our directors and our executive officers. These indemnification agreements may require us, among other things, to indemnify our directors and executive officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as one of our directors or executive officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us with the meaning of the Securities Act of 1933, as amended, against certain liabilities.


Item 15.	*Recent Sales of Unregistered Securities*

Set forth below is information regarding our issuances of capital stock and our grants of warrants and options to purchase shares of capital stock within the past three years. Also included is the consideration, if any, received by us for such shares, warrants and options and information relating to

II-2

the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.

(a) Issuances of Capital Stock

(1) In May 2006, we issued an aggregate of 99,757 shares of non-voting common stock, valued at $5.26 per share (based on the estimated fair value of the shares on that date) for an aggregate value of $524,722, to a total of 15 former stockholders of SureDecisions, Inc. in connection with our acquisition of SureDecisions in May 2006. In June 2007, we issued an aggregate of 39,899 additional shares of non-voting common stock, valued at $8.20 per share (based on the estimated fair value of the shares on that date) for an aggregate value of $327,172, as earn-out consideration to the former stockholders of SureDecisions.

(2) In May 2007, we issued 669,284 shares of voting common stock to Ascension Health at a price of $8.20 per share for a total purchase price of $5,488,128.

(3) In December 2008, we issued an aggregate of 3,309,952 shares of voting common stock in exchange for 3,309,952 shares of non-voting common stock held by a total of 10 of our directors, officers and their affiliates. These shares are subject to the terms and conditions set forth in our restricted stock plan, the restricted stock award agreements entered into between us and our stockholders in connection with the original issuance of the shares of non-voting common stock and our stockholders’ agreement pursuant to which these persons have certain registration rights.

No underwriters were involved in the foregoing issuances of securities. The shares of common stock described in paragraphs (a)(1) and (a)(2) of Item 15 were issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act as sales by an issuer not involving any public offering. The shares of common stock described in paragraph (a)(3) of Item 15 were issued in exchange for shares of our non-voting common stock held by our existing stockholders exclusively, with no other consideration, commission or other remuneration paid or given directly or indirectly for soliciting such exchange, in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(9).

(b) Warrant Grants and Exercises

Between January 1, 2006 and April 22, 2010, we granted warrants to Ascension Health to purchase an aggregate of 775,515 shares of voting common stock with exercise prices ranging from $0.01 per share to $51.05 per share. Of these warrants, 446,190 were issued to Ascension Health based upon the achievement of specified milestones relating to sales and marketing assistance that it provided to us. Between January 1, 2006 and April 22, 2010, Ascension Health purchased an aggregate of 329,325 shares of voting common stock upon warrant exercises for aggregate consideration of $3,293.

The warrants and shares of voting common stock issuable upon the exercise of the warrants described in this paragraph (b) of Item 15 were issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act as sales by an issuer not involving any public offering.

Between January 1, 2006 and April 22, 2010, we granted options to purchase an aggregate of 4,304,861 shares of non-voting common stock, with exercise prices ranging from $3.15 to $58.65 per share, to employees, directors and consultants pursuant to our stock option plan. Between January 1, 2006 and April 22, 2010, we issued an aggregate of 865,965 shares of non-voting common stock upon exercise of unvested options for aggregate consideration of $2,587,593 and 319,205 shares of non-voting common stock upon exercise of vested options for aggregate consideration of $701,717. Our prior option plan permits the exercise of unvested options; until vested, shares issued upon exercise of unvested options remain subject to our right of repurchase.

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The options and shares of non-voting common stock issuable upon the exercise of the options described in this paragraph (c) of Item 15 were issued pursuant to written compensatory plans or arrangements with our employees, directors and consultants in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 701 promulgated under the Securities Act. All recipients of options and shares pursuant to this exemption either received adequate information about us or had access, through employment or other relationships, to such information. In some cases, the options and shares of non-voting common stock issuable upon the exercise of the options described in this paragraph (c) of Item 15 were issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act as sales by an issuer not involving any public offering.

All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of voting common stock and non-voting common stock described in paragraphs (a), (b) and (c) of Item 15 included appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer.

(d) Issuance of Shares for Financial Advisory Services

Contemporaneously with the closing of this offering and based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover of this prospectus, the Registrant will issue shares of common stock to Financial Technology Partners LP and/or FTP Securities, LLC in partial payment of a fee due for financial advisory services provided in connection with this offering. The balance of such fee will be paid in cash, as listed in Item 13 above. The financial advisory services of Financial Technology Partners LP and FTP Securities, LLC included assistance in financial and valuation modeling and advice with respect to the initial public offering process and equity capital market alternatives, and neither Financial Technology Partners LP nor FTP Securities, LLC acted as an underwriter of this offering. The issuance of shares to Financial Technology Partners, LLC and/or FTP Securities, LLC to will be exempt from registration under Section 4(2) of the Securities Act. When issued, these securities will be deemed restricted securities for purposes of the Securities Act, and all certificates representing these securities will include appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer.


Item 16.	*Exhibits and Financial Statement Schedules*

(a) Exhibits

The exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference herein.

(b) Financial Statement Schedules

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Accretive Health, Inc.

We have audited the consolidated financial statements of Accretive Health, Inc. (formerly Healthcare Services d/b/a Accretive Health) as of December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, and have issued our report thereon dated March 12, 2010, except for the “Stock Split” section of Note 2 as to which the date is , 2010 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(b) of Form S-1 of this Registration Statement. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Chicago, Illinois

March 12, 2010

The foregoing report is the form that will be signed upon completion of the stock split described in the “Stock Split” section of Note 2 in the consolidated financial statements.

/s/ Ernst & Young LLP

Chicago, Illinois

March 12, 2010

II-5

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Accretive Health, Inc.
December 31, 2009
(In thousands)


Col. A	Col. B		Col. C				Col. D		Col. E
	Balance at		Charged to
	Beginning of		Costs and		Charged to Other				Balance at
Description	Period		Expenses		Accounts		Deductions		End of Period

Allowance for Doubtful Accounts
Year Ended December 31, 2009	$	82	$	—	$	—	$	0	$	82
Year Ended December 31, 2008	$	432	$	0	$	—	$	350	$	82
Year Ended December 31, 2007	$	72	$	360	$	—	$	—	$	432
Deferred Tax Valuation Allowance
Year Ended December 31, 2009	$	3,629	$	—	$	—	$	3,490	$	139
Year Ended December 31, 2008	$	4,733	$	—	$	—	$	1,104	$	3,629
Year Ended December 31, 2007	$	4,867	$	0	$	—	$	134	$	4,733


Item 17.	*Undertakings*

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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(3) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Amendment No. 4 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on the 23 ^rd day of April, 2010.

ACCRETIVE HEALTH, INC.


	By:	/s/ Mary A. Tolan

Mary A. Tolan

Founder, President and Chief Executive Officer

Pursuant to the requirements of the Securities Act, this Amendment No. 4 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date


/s/ Mary A. Tolan Mary A. Tolan	Director, Founder, President and Chief Executive Officer (Principal Executive Officer)	April 23, 2010

/s/ John T. Staton John T. Staton	Chief Financial Officer and Treasurer (Principal Financial Officer)	April 23, 2010

/s/ James M. Bolotin James M. Bolotin	Corporate Controller (Principal Accounting Officer)	April 23, 2010

* J. Michael Cline	Founder and Chairman of the Board	April 23, 2010

* Edgar M. Bronfman, Jr.	Director	April 23, 2010

* Steven N. Kaplan	Director	April 23, 2010

* Denis J. Nayden	Director	April 23, 2010

* George P. Shultz	Director	April 23, 2010

* Arthur H. Spiegel, III	Director	April 23, 2010

II-8


Signature		Title	Date


* Mark A. Wolfson		Director	April 23, 2010

*By:	/s/ John T. Staton John T. Staton Attorney-in-fact

II-9

EXHIBIT INDEX

Some of the agreements included as exhibits to this registration statement contain representations and warranties by the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (1) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (2) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (3) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (4) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding contractual provisions are required to make the statements in this registration statement not misleading.


Exhibit
Number			Description

	1	.1**	Form of Underwriting Agreement
	3	.1*	Fourth Amended and Restated Certificate of Incorporation of the Registrant, as amended
	3	.2	Form of Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering
	3	.3*	Bylaws of the Registrant
	3	.4	Form of Amended and Restated Bylaws of the Registrant, to be effective upon the closing of the offering
	4	.1	Specimen Certificate evidencing shares of Common Stock
	5	.1**	Opinion of Wilmer Cutler Pickering Hale and Dorr LLP
	10	.1	Amended and Restated Stock Option Plan, as amended
	10	.2*	Form of Acknowledgement of Grant, used to evidence option grants under the Amended and Restated Stock Option Plan
	10	.3	Restricted Stock Plan, as amended
	10	.4*	Form of Restricted Stock Award Agreement under the Restricted Stock Plan, as amended
	10	.5*	Third Amended and Restated Stockholders’ Agreement, dated as of February 22, 2009, among the Registrant and the parties named therein, as amended
	10	.6*	Form of Share Exchange Agreement, entered into in February 2009, with each of Etienne H. Deffarges, Steven N. Kaplan, Gregory N. Kazarian, The Shultz 1989 Family Trust, Spiegel Family LLC and John T. Staton Declaration of Trust
	10	.7*	Lease Agreement, dated as of May 4, 2005, between the Registrant and Zeller Management Corporation, as amended by First Lease Amendment, dated as of January 30, 2007, and Second Lease Amendment, dated as of November 26, 2008
	10	.8+	Amended and Restated Master Services Agreement, dated as of December 13, 2007, between the Registrant and Ascension Health
	10	.9*	Restricted Stock Agreement, dated as of November 7, 2004, between the Registrant and Ascension Health
	10	.10*	Protection Warrant Agreement between the Registrant and Ascension Health
	10	.11*	Supplemental Warrant Agreement between the Registrant and Ascension Health
	10	.12*	Amended and Restated Supplemental Warrant Agreement, effective as of May 31, 2007, between the Registrant and Ascension Health
	10	.13*	Second Amended and Restated Supplemental Warrant Agreement, effective as of September 30, 2007, between the Registrant and Ascension Health
	10	.14*	Subscription Agreement, dated as of May 15, 2007, between the Registrant and Ascension Health
	10	.15*	Term Sheet, dated February 17, 2004, between the Registrant and Michael Zimmerman


Exhibit
Number			Description

	10	.16*	Warrant and License Agreement, dated as of January 2005, among the Registrant, Michael Zimmerman and Zimmerman and Associates
	10	.17*	Employment Agreement, dated as of January 2004, between the Registrant and Mary A. Tolan, as amended
	10	.18*	Employment Agreement, dated as of June 17, 2005, between the Registrant and John T. Staton, as amended
	10	.19*	Offer Letter, dated December 9, 2003, between the Registrant and Gregory N. Kazarian, as amended
	10	.20*	Form of Indemnification Agreement, entered into between the Registrant and each director and executive officer
	10	.21+	Credit Agreement, dated as of September 30, 2009, between the Registrant and Bank of Montreal
	10	.22+	Security Agreement, dated as of September 30, 2009, among the Registrant, Bank of Montreal and specified subsidiaries of the Registrant
	10	.23	2010 Stock Incentive Plan
	10	.24	Form of Incentive Stock Option Agreement under the 2010 Stock Incentive Plan
	10	.25	Form of Nonstatutory Stock Option Agreement under the 2010 Stock Incentive Plan
	21	.1	Subsidiaries of the Registrant
	23	.1	Consent of Ernst & Young LLP
	23	.2**	Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1)
	24	.1*	Powers of Attorney


*		Previously filed.

**		To be filed by amendment.

+		Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.

Exhibit 3.2

RESTATED CERTIFICATE OF INCORPORATION

ACCRETIVE HEALTH, INC.

(originally incorporated on July 2, 2003 under the name Healthcare Services, Inc.)

FIRST: The name of the Corporation is Accretive Health, Inc.

SECOND: The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company.

THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

FOURTH: The total number of shares of all classes of stock that the Corporation shall have authority to issue is 505,000,000 shares, consisting of (i) 500,000,000 shares of Common Stock, $0.01 par value per share (“Common Stock”), and (ii) 5,000,000 shares of Preferred Stock, $0.01 par value per share (“Preferred Stock”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK .

1. General . The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.

2. Voting . The holders of the Common Stock shall have voting rights at all meetings of stockholders, each such holder being entitled to one vote for each share thereof held by such holder; provided , however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (which, as used herein, shall mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation. There shall be no cumulative voting.

The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders

of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.

3. Dividends . Subject to any preferential dividend or other rights of any then outstanding Preferred Stock, the holders of shares of Common Stock shall be entitled to receive dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board of Directors from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends and distributions.

4. Liquidation . Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to any preferential or other rights of any then outstanding Preferred Stock, holders of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.

B. PREFERRED STOCK .

Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock that may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law.

Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the General Corporation Law of the State of Delaware, to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of the State of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law.

The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote thereon, voting as a single class, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.

FIFTH: Except as otherwise provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the

manner now or hereafter prescribed by statute and this Certificate of Incorporation, and except as set forth in Article EIGHTH, all rights conferred upon stockholders, directors or any other persons by and pursuant to this Certificate of Incorporation are granted subject to this reservation.

SIXTH: In furtherance and not in limitation of the powers conferred upon it by the General Corporation Law of the State of Delaware, and subject to the terms of any series of Preferred Stock, the Board of Directors shall have the power to adopt, amend, alter or repeal the Bylaws of the Corporation by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. The stockholders may not adopt, amend, alter or repeal the Bylaws of the Corporation, or adopt any provision inconsistent therewith, unless such action is approved, in addition to any other vote required by this Certificate of Incorporation, by the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors. Notwithstanding any other provision of law, this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors shall be required to amend, alter or repeal, or to adopt any provision inconsistent with, this Article SIXTH.

SEVENTH: Except to the extent that the General Corporation Law of the State of Delaware, as the same exists or hereafter may be amended, prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no person who is or was a director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Article Seventh, unless otherwise required by law, shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment, repeal or adoption of such inconsistent provision, provided , however , that if the General Corporation Law of the State of Delaware is amended to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended.

EIGHTH: The Corporation shall provide indemnification as follows:

1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation . The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit

plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), liabilities, losses, judgments, fines, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner that Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner that Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

2. Actions or Suits by or in the Right of the Corporation . The Corporation shall indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner that Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 2 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including attorneys’ fees) that the Court of Chancery of Delaware or such other court shall deem proper.

3. Indemnification for Expenses of Successful Party . Notwithstanding any other provisions of this Article EIGHTH, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, Indemnitee shall be indemnified against all expenses (including attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. Without limiting the foregoing, Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect to any action, suit or proceeding, or in defense of any claim, issue or matter therein or any appeal therefrom, that is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Corporation, (iii) a

plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe his or her conduct was unlawful.

4. Notification and Defense of Claim . As a condition precedent to an Indemnitee’s right to be indemnified, such Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving such Indemnitee for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee. After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in connection with such action, suit, proceeding or investigation, other than as provided below in this Section 4. Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit, proceeding or investigation, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article EIGHTH. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be required to indemnify Indemnitee under this Article EIGHTH for any amounts paid in settlement of any action, suit, proceeding or investigation effected without its written consent. The Corporation shall not settle any action, suit, proceeding or investigation in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement.

5. Advancement of Expenses . Subject to the provisions of Section 6 of this Article EIGHTH, in the event of any threatened or pending action, suit, proceeding or investigation of which the Corporation receives notice under this Article EIGHTH, any expenses (including attorneys’ fees) incurred by or on behalf of Indemnitee in defending an action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter; provided, however , that the payment of such expenses incurred by or on behalf of Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article EIGHTH; and provided further that no such advancement of expenses

shall be made under this Article EIGHTH if it is determined (in the manner described in Section 6) that (i) Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe his or her conduct was unlawful. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment.

6. Procedure for Indemnification and Advancement of Expenses . In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article EIGHTH, an Indemnitee shall submit to the Corporation a written request. Any such indemnification and advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of Indemnitee, except in the case of a claim for an advancement of expenses, the applicable period shall be 30 days, unless (i) the Corporation has assumed the defense pursuant to Section 4 of this Article EIGHTH (and none of the circumstances described in Section 4 of this Article EIGHTH that would nonetheless entitle the Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (ii) the Corporation determines within such applicable period that Indemnitee did not meet the applicable standard of conduct set forth in Section 1, 2 or 5 of this Article EIGHTH, as the case may be. Any such indemnification, unless ordered by a court, shall be made with respect to requests under Section 1 or 2 only as authorized in the specific case upon a determination by the Corporation that the indemnification of Indemnitee is proper because Indemnitee has met the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written opinion, or (d) by the stockholders of the Corporation.

7. Remedies . The right to indemnification or advancement of expenses as granted by this Article EIGHTH shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 of this Article EIGHTH that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. In any suit brought by Indemnitee to enforce a right to indemnification, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall have the burden of proving that Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article EIGHTH. Indemnitee’s expenses (including attorneys’ fees) reasonably incurred in connection with successfully establishing Indemnitee’s right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. Notwithstanding the foregoing, in any suit brought by Indemnitee to enforce a right to

indemnification hereunder it shall be a defense that the Indemnitee has not met any applicable standard for indemnification set forth in the General Corporation Law of the State of Delaware.

8. Limitations . Notwithstanding anything to the contrary in this Article EIGHTH, except as set forth in Section 7 of this Article EIGHTH, the Corporation shall not indemnify an Indemnitee pursuant to this Article EIGHTH in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. Notwithstanding anything to the contrary in this Article EIGHTH, the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund indemnification payments to the Corporation to the extent of such insurance reimbursement.

9. Subsequent Amendment . No amendment, termination or repeal of this Article EIGHTH or of the relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Article EIGHTH, shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal (except to the extent such amendment, termination or repeal permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto).

10. Other Rights . The indemnification and advancement of expenses provided by this Article EIGHTH shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), this Certificate of Incorporation, the Bylaws of the Corporation, an agreement or vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of Indemnitee. Nothing contained in this Article EIGHTH shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article EIGHTH. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article EIGHTH.

11. Partial Indemnification . If an Indemnitee is entitled under any provision of this Article EIGHTH to indemnification by the Corporation for some or a portion of the expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974) or amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of

such expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974) or amounts paid in settlement to which Indemnitee is entitled.

12. Insurance . The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.

13. Savings Clause . If this Article EIGHTH or any portion hereof shall be held invalid, illegal or unenforceable on any ground whatsoever by any court of competent jurisdiction, (a) the validity, legality and enforceability of the remaining provisions of this Article EIGHTH shall not in any way be effected or impaired thereby; and (b) the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974) and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article EIGHTH that shall not have been invalidated and to the fullest extent permitted by applicable law, provided further, that to the fullest extent possible, the provisions of this Article EIGHTH (including, without limitation, each such portion of this Article EIGHTH containing any such provisions held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

14. Definitions . Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of the State of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).

NINTH: This Article NINTH is inserted for the management of the business and for the conduct of the affairs of the Corporation.

1. General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

2. Number of Directors; Election of Directors . Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of directors of the Corporation shall be established by the Board of Directors. Election of directors need not be by written ballot, except as and to the extent provided in the Bylaws of the Corporation.

3. Classes of Directors . Subject to the rights of holders of any series of Preferred Stock to elect directors, the Board of Directors shall be and is divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The

Board of Directors is authorized to assign members of the Board of Directors already in office to Class I, Class II or Class III at the time such classification becomes effective.

4. Terms of Office . Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; provided further , that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, resignation or removal.

5. Quorum . The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors fixed pursuant to Section 2 of this Article NINTH shall constitute a quorum of the Board of Directors. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

6. Action at Meeting . Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by this Certificate of Incorporation.

7. Removal . Subject to the rights of holders of any series of Preferred Stock, directors of the Corporation may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors.

8. Vacancies . Subject to the rights of holders of any series of Preferred Stock, any vacancies or newly-created directorships in the Board of Directors, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy or to fill a position resulting from a newly-created directorship shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of a successor and to such director’s earlier death, resignation or removal.

9. Stockholder Nominations and Introduction of Business, Etc . Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the Bylaws of the Corporation.

10. Amendments to Article . Notwithstanding any other provision of law, this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article NINTH.

TENTH: Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provision of law, this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH.

ELEVENTH: Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, but such special meetings may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article ELEVENTH.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates, integrates and amends the certificate of incorporation of the Corporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, has been executed by its duly authorized officer this ___day of May, 2010.


	ACCRETIVE HEALTH, INC.
	By:
		Mary A. Tolan
		President and Chief Executive Officer

Exhibit 3.4

AMENDED AND RESTATED BYLAWS

ACCRETIVE HEALTH, INC.

Adopted April 22, 2010,

to be effective upon the closing of the Company's initial public offering

TABLE OF CONTENTS


			Page
ARTICLE I

STOCKHOLDERS				1
	1.1	Place of Meetings		1
	1.2	Annual Meeting		1
	1.3	Special Meetings		1
	1.4	Notice of Meetings		1
	1.5	Voting List		1
	1.6	Quorum		2
	1.7	Adjournments		2
	1.8	Voting and Proxies		2
	1.9	Action at Meeting		2
	1.10	Nomination of Directors		3
	1.11	Notice of Business at Annual Meetings		6
	1.12	Conduct of Meetings		8
	1.13	No Action by Consent in Lieu of a Meeting		9

ARTICLE II

DIRECTORS				9
	2.1	General Powers		9
	2.2	Number, Election and Qualification		9
	2.3	Chairman of the Board; Vice Chairman of the Board		9
	2.4	Classes of Directors		9
	2.5	Terms of Office		9
	2.6	Quorum		10
	2.7	Action at Meeting		10
	2.8	Removal		10
	2.9	Vacancies		10
	2.10	Resignation		10
	2.11	Regular Meetings		10
	2.12	Special Meetings		11
	2.13	Notice of Special Meetings		11
	2.14	Meetings by Conference Communications Equipment		11
	2.15	Action by Consent		11
	2.16	Committees		11
	2.17	Compensation of Directors		12
	2.18	Directors Emeritus		12

ARTICLE III

OFFICERS				12
	3.1	Titles		12
	3.2	Election		12


			Page
	3.3	Qualification		13
	3.4	Tenure		13
	3.5	Resignation and Removal		13
	3.6	Vacancies		13
	3.7	President; Chief Executive Officer		13
	3.8	Vice Presidents		13
	3.9	Secretary and Assistant Secretaries		13
	3.10	Treasurer and Assistant Treasurers		14
	3.11	Salaries		14
	3.12	Delegation of Authority		14

ARTICLE IV

CAPITAL STOCK				14
	4.1	Issuance of Stock		14
	4.2	Stock Certificates; Uncertificated Shares		15
	4.3	Transfers		15
	4.4	Lost, Stolen or Destroyed Certificates		16
	4.5	Record Date		16
	4.6	Regulations		16

ARTICLE V

GENERAL PROVISIONS				16
	5.1	Fiscal Year		16
	5.2	Corporate Seal		16
	5.3	Waiver of Notice		17
	5.4	Voting of Securities		17
	5.5	Evidence of Authority		17
	5.6	Certificate of Incorporation		17
	5.7	Severability		17
	5.8	Pronouns		17

ARTICLE VI

AMENDMENTS				17

ARTICLE I
STOCKHOLDERS

1.1 Place of Meetings . All meetings of stockholders shall be held at such place as may be designated from time to time by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President or, if not so designated, at the principal office of the corporation.

1.2 Annual Meeting . The annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President (which date shall not be a legal holiday in the place where the meeting is to be held).

1.3 Special Meetings . Except as otherwise required by applicable law or the Certificate of Incorporation, special meetings of stockholders for any purpose or purposes may be called at any time only by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, and may not be called by any other person or persons. The Board of Directors may postpone or reschedule any previously scheduled special meeting of stockholders. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

1.4 Notice of Meetings . Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the General Corporation Law of the State of Delaware.

1.5 Voting List . The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The list shall presumptively determine the

identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

1.6 Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of capital stock is required by law or the Certificate of Incorporation, the holders of a majority in voting power of the shares of such class or classes or series of the capital stock of the corporation issued and outstanding and entitled to vote on such matter, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on such matter. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. Shares of its own stock belonging to the corporation or to another corporation, if a majority of the voting power of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly by the corporation, shall neither be entitled to vote nor be counted for quorum purposes, provided, however, that the foregoing shall not limit the right of the corporation or any such other corporation to vote shares held by it in a fiduciary capacity.

1.7 Adjournments . Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the chairman of the meeting or by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business that might have been transacted at the original meeting.

1.8 Voting and Proxies . Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by the General Corporation Law of the State of Delaware by the stockholder or such stockholder’s authorized agent and delivered (including by electronic transmission) to the Secretary of the corporation. No such proxy shall be voted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.

1.9 Action at Meeting . When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be

decided by the vote of the holders of shares of stock having a majority in voting power of the votes cast by the holders of all of the shares of stock present or represented at the meeting and voting affirmatively or negatively on such matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each such class or series, the holders of a majority in voting power of the shares of stock of that class or series present or represented at the meeting and voting affirmatively or negatively on such matter), except when a different vote is required by law, the Certificate of Incorporation or these Bylaws. When a quorum is present at any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election.

1.10 Nomination of Directors .

(a) Except for (1) any directors entitled to be elected by the holders of preferred stock, (2) any directors elected in accordance with Section 2.9 hereof by the Board of Directors to fill vacancies or newly-created directorships or (3) as otherwise required by applicable law or stock exchange regulation, at any meeting of stockholders, only persons who are nominated in accordance with the procedures in this Section 1.10 shall be eligible for election as directors. Nomination for election to the Board of Directors at a meeting of stockholders may be made (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who (x) timely complies with the notice procedures in Section 1.10(b), (y) is a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such meeting and (z) is entitled to vote at such meeting.

(b) To be timely, a stockholder’s notice must be received in writing by the Secretary at the principal executive offices of the corporation as follows: (1) in the case of an election of directors at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that (x) in the case of the annual meeting of stockholders of the corporation to be held in 2011 or (y) in the event that the date of the annual meeting in any other year is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, a stockholder’s notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs; or (2) in the case of an election of directors at a special meeting of stockholders, provided that the Board of Directors, the Chairman of the Board or the Chief Executive Officer has determined, in accordance with Section 1.3, that directors shall be elected at such special meeting and provided further that the nomination made by the stockholder is for one of the director positions that the Board of Directors, the Chairman of the Board or the Chief Executive Officer, as the case may be, has determined will be filled at such special meeting, not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (x) the 90th day prior to such special meeting and (y) the tenth day following the day on which notice of the date of such special meeting was mailed or public disclosure of the date of such special meeting was made, whichever first occurs. In no event shall the adjournment or postponement of a meeting (or the public disclosure thereof)

commence a new time period (or extend any time period) for the giving of a stockholder’s notice.

The stockholder’s notice to the Secretary shall set forth: (A) as to each proposed nominee (1) such person’s name, age, business address and, if known, residence address, (2) such person’s principal occupation or employment, (3) the class and series and number of shares of stock of the corporation that are, directly or indirectly, owned, beneficially or of record, by such person, (4) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among (x) the stockholder, the beneficial owner, if any, on whose behalf the nomination is being made and the respective affiliates and associates of, or others acting in concert with, such stockholder and such beneficial owner, on the one hand, and (y) each proposed nominee, and his or her respective affiliates and associates, or others acting in concert with such nominee(s), on the other hand, including all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made or any affiliate or associate thereof or person acting in concert therewith were the “registrant” for purposes of such Item and the proposed nominee were a director or executive officer of such registrant, and (5) any other information concerning such person that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (B) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is being made (1) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (2) the class and series and number of shares of stock of the corporation that are, directly or indirectly, owned, beneficially or of record, by such stockholder and such beneficial owner, (3) a description of any agreement, arrangement or understanding between or among such stockholder and/or such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are being made or who may participate in the solicitation of proxies in favor of electing such nominee(s), (4) a description of any agreement, arrangement or understanding (including any derivative or short positions, swaps, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into by, or on behalf of, such stockholder or such beneficial owner, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner with respect to shares of stock of the corporation, (5) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, (6) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice and (7) a representation whether such stockholder and/or such beneficial owner intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock reasonably believed by such stockholder or such beneficial owner to be sufficient to elect the nominee (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies from stockholders in support of such nomination (and such representation shall be included in any such solicitation materials).

Not later than 10 days after the record date for the meeting, the information required by Items (A)(1)-(5) and (B)(1)-(5) of the prior sentence shall be supplemented by the stockholder giving the notice to provide updated information as of the record date. In addition, to be effective, the stockholder’s notice must be accompanied by the written consent of the proposed nominee to serve as a director if elected. The corporation may require any proposed nominee to furnish such other information as the corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the corporation or whether such nominee would be independent under applicable Securities and Exchange Commission and stock exchange rules and the corporation’s publicly disclosed corporate governance guidelines. A stockholder shall not have complied with this Section 1.10(b) if the stockholder (or beneficial owner, if any, on whose behalf the nomination is made) solicits or does not solicit, as the case may be, proxies in support of such stockholder’s nominee in contravention of the representations with respect thereto required by this Section 1.10.

(c) The chairman of any meeting shall have the power and duty to determine whether a nomination was made in accordance with the provisions of this Section 1.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group that solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with the representations with respect thereto required by this Section 1.10), and if the chairman should determine that a nomination was not made in accordance with the provisions of this Section 1.10, the chairman shall so declare to the meeting and such nomination shall not be brought before the meeting.

(d) Except as otherwise required by law, nothing in this Section 1.10 shall obligate the corporation or the Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the corporation or the Board of Directors information with respect to any nominee for director submitted by a stockholder.

(e) Notwithstanding the foregoing provisions of this Section 1.10, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting to present a nomination, such nomination shall not be brought before the meeting, notwithstanding that proxies in respect of such nominee may have been received by the corporation. For purposes of this Section 1.10, to be considered a “qualified representative of the stockholder”, a person must be authorized by a written instrument executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such written instrument or electronic transmission, or a reliable reproduction of the written instrument or electronic transmission, at the meeting of stockholders.

(f) For purposes of this Section 1.10, “public disclosure” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

1.11 Notice of Business at Annual Meetings .

(a) At any annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (1) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (2) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (3) properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, (i) if such business relates to the nomination of a person for election as a director of the corporation, the procedures in Section 1.10 must be complied with and (ii) if such business relates to any other matter, the business must constitute a proper matter under Delaware law for stockholder action and the stockholder must (x) have given timely notice thereof in writing to the Secretary in accordance with the procedures in Section 1.11(b), (y) be a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such annual meeting and (z) be entitled to vote at such annual meeting.

(b) To be timely, a stockholder’s notice must be received in writing by the Secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that (1) in the case of the annual meeting of stockholders of the corporation to be held in 2011 or (2) in the event that the date of the annual meeting in any other year is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, a stockholder’s notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (x) the 90th day prior to such annual meeting and (y) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting (or the public disclosure thereof) commence a new time period (or extend any time period) for the giving of a stockholder’s notice.

The stockholder’s notice to the Secretary shall set forth: (A) as to each matter the stockholder proposes to bring before the annual meeting (1) a brief description of the business desired to be brought before the annual meeting, (2) the text of the proposal (including the exact text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws, the exact text of the proposed amendment), and (3) the reasons for conducting such business at the annual meeting, and (B) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is being made (1) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (2) the class and series and number of shares of stock of the corporation that are, directly or indirectly, owned, beneficially or of record, by such stockholder and such beneficial owner, (3) a description of any material interest of such stockholder or such beneficial owner and the respective affiliates and associates of, or others acting in concert with, such stockholder or such beneficial owner in such business, (4) a description of any agreement, arrangement or understanding between or among such stockholder and/or such beneficial owner and any other person or persons (including their names) in connection with the proposal of such business or who may participate in the solicitation of proxies in favor of such proposal, (5) a

description of any agreement, arrangement or understanding (including any derivative or short positions, swaps, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into by, or on behalf of, such stockholder or such beneficial owner, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner with respect to shares of stock of the corporation, (6) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the business proposed pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, (7) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting and (8) a representation whether such stockholder and/or such beneficial owner intends or is part of a group that intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to approve or adopt the proposal (and such representation shall be included in any such proxy statement and form of proxy) and/or (y) otherwise to solicit proxies from stockholders in support of such proposal (and such representation shall be included in any such solicitation materials). Not later than 10 days after the record date for the meeting, the information required by Items (A)(3) and (B)(1)-(6) of the prior sentence shall be supplemented by the stockholder giving the notice to provide updated information as of the record date. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting of stockholders except in accordance with the procedures in this Section 1.11; provided that any stockholder proposal that complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Exchange Act and is to be included in the corporation’s proxy statement for an annual meeting of stockholders shall be deemed to comply with the notice requirements of this Section 1.11. A stockholder shall not have complied with this Section 1.11(b) if the stockholder (or beneficial owner, if any, on whose behalf the proposal is made) solicits or does not solicit, as the case may be, proxies in support of such stockholder’s proposal in contravention of the representations with respect thereto required by this Section 1.11.

(c) The chairman of any annual meeting shall have the power and duty to determine whether business was properly brought before the annual meeting in accordance with the provisions of this Section 1.11 (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group that solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s proposal in compliance with the representation with respect thereto required by this Section 1.11), and if the chairman should determine that business was not properly brought before the annual meeting in accordance with the provisions of this Section 1.11, the chairman shall so declare to the meeting and such business shall not be brought before the annual meeting.

(d) Except as otherwise required by law, nothing in this Section 1.11 shall obligate the corporation or the Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the corporation or the Board of Directors information with respect to any proposal submitted by a stockholder.

(e) Notwithstanding the foregoing provisions of this Section 1.11, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder)

does not appear at the annual meeting to present business, such business shall not be considered, notwithstanding that proxies in respect of such business may have been received by the corporation.

(f) For purposes of this Section 1.11, the terms “qualified representative of the stockholder” and “public disclosure” shall have the same meaning as in Section 1.10.

1.12 Conduct of Meetings .

(a) Unless otherwise provided by the Board of Directors, meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman’s absence by the Vice Chairman of the Board, if any, or in the Vice Chairman’s absence by the Chief Executive Officer, or in the Chief Executive Officer’s absence by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors. The Secretary shall act as secretary of the meeting, but in the Secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

(b) The Board of Directors may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

(c) The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted.

(d) In advance of any meeting of stockholders, the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders,

the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the corporation. Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. Every vote taken by ballots shall be counted by a duly appointed inspector or duly appointed inspectors.

1.13 No Action by Consent in Lieu of a Meeting . Stockholders of the corporation may not take any action by written consent in lieu of a meeting.

ARTICLE II
DIRECTORS

2.1 General Powers . The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation.

2.2 Number, Election and Qualification . Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of directors of the corporation shall be established by the Board of Directors. Election of directors need not be by written ballot. Directors need not be stockholders of the corporation.

2.3 Chairman of the Board; Vice Chairman of the Board . The Board of Directors may appoint from its members a Chairman of the Board and a Vice Chairman of the Board, neither of whom need be an employee or officer of the corporation. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the corporation’s Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.7 of these Bylaws. If the Board of Directors appoints a Vice Chairman of the Board, such Vice Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors or the Chairman of the Board. Unless otherwise provided by the Board of Directors, the Chairman of the Board or, in the Chairman’s absence, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and stockholders.

2.4 Classes of Directors . Subject to the rights of holders of any series of Preferred Stock to elect directors, the Board of Directors shall be and is divided into three classes: Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The allocation of directors among classes shall be determined by resolution of the Board of Directors.

2.5 Terms of Office . Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at

the corporation’s first annual meeting of stockholders held after the effectiveness of these Bylaws; each director initially assigned to Class II shall serve for a term expiring at the corporation’s second annual meeting of stockholders held after the effectiveness of these Bylaws; and each director initially assigned to Class III shall serve for a term expiring at the corporation’s third annual meeting of stockholders held after the effectiveness of these Bylaws; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, resignation or removal.

2.6 Quorum . The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors established by the Board of Directors pursuant to Section 2.2 of these Bylaws shall constitute a quorum of the Board of Directors. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

2.7 Action at Meeting . Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, unless a greater number is required by law or by the Certificate of Incorporation.

2.8 Removal . Subject to the rights of holders of any series of Preferred Stock, directors of the corporation may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the votes that all the stockholders would be entitled to cast in an election of directors or class of directors.

2.9 Vacancies . Subject to the rights of holders of any series of Preferred Stock, vacancies or newly-created directorships on the Board of Directors, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy or to fill a position resulting from a newly-created directorship shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of a successor or until such director’s earlier death, resignation or removal.

2.10 Resignation . Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event.

2.11 Regular Meetings . Regular meetings of the Board of Directors may be held without notice at such time and place as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.

2.12 Special Meetings . Special meetings of the Board of Directors may be held at any time and place designated in a call by the Chairman of the Board, the Chief Executive Officer, the President, two or more directors, or by one director in the event that there is only a single director in office.

2.13 Notice of Special Meetings . Notice of the date, place and time of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (a) in person or by telephone at least 24 hours in advance of the meeting, (b) by sending written notice by reputable overnight courier, telecopy, facsimile or electronic transmission, or delivering written notice by hand, to such director’s last known business, home or electronic transmission address at least 48 hours in advance of the meeting, or (c) by sending written notice by first-class mail to such director’s last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.

2.14 Meetings by Conference Communications Equipment . Directors may participate in meetings of the Board of Directors or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.

2.15 Action by Consent . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents or electronic transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

2.16 Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation with such lawfully delegable powers and duties as the Board of Directors thereby confers, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these Bylaws or the Board of Directors. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of law, shall have and may exercise all the powers and

authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers that may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these Bylaws for the Board of Directors. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

2.17 Compensation of Directors . Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary entities in any other capacity and receiving compensation for such service.

2.18 Directors Emeritus . The Board of Directors may, from time to time, by majority vote, elect one or more of its former directors who has served the corporation with distinction to serve as a “Director Emeritus” for one or more consecutive one-year terms, or for such other term as the Board of Directors may determine, or until his or her earlier resignation or removal by a majority of the Board of Directors. Directors Emeritus may be invited to attend meetings of the Board of Directors or any committee of the Board of Directors. Directors Emeritus shall not be permitted to vote on matters brought before the Board of Directors or any committee thereof and shall not be counted for the purposes of determining whether a quorum of the Board of Directors or the committee is present. Directors Emeritus shall be entitled to receive reimbursement for expenses of meeting attendance, fees or other compensation as approved by the Board of Directors. Directors Emeritus may be removed at any time by the Board of Directors. A Director Emeritus shall not have any of the responsibilities or liabilities of a director, nor any of a director’s rights, powers or privileges. References in the corporation’s Certificate of Incorporation and these Bylaws to “directors” shall not mean or include Directors Emeritus.

ARTICLE III
OFFICERS

3.1 Titles . The officers of the corporation shall consist of a Chief Executive Officer, a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, which may include one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate.

3.2 Election . The Chief Executive Officer, President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.

3.3 Qualification . No officer need be a stockholder. Any two or more offices may be held by the same person.

3.4 Tenure . Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each officer shall hold office until such officer’s successor is elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, resignation or removal.

3.5 Resignation and Removal . Any officer may resign by delivering a written resignation to the corporation at its principal office or to the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. Any officer may be removed at any time, with or without cause, by vote of a majority of the directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the corporation.

3.6 Vacancies . The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of Chief Executive Officer, President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is elected and qualified, or until such officer’s earlier death, resignation or removal.

3.7 President; Chief Executive Officer . Unless the Board of Directors has designated another person as the corporation’s Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The Chief Executive Officer shall have general charge and supervision of the business of the corporation subject to the direction of the Board of Directors, and shall perform all duties and have all powers that are commonly incident to the office of the chief executive or that are delegated to such officer by the Board of Directors. The President shall perform such other duties and shall have such other powers as the Board of Directors or the Chief Executive Officer (if the President is not the Chief Executive Officer) may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer or the President (if the President is not the Chief Executive Officer), the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the Chief Executive Officer and when so performing such duties shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.

3.8 Vice Presidents . Each Vice President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors.

3.9 Secretary and Assistant Secretaries . The Secretary shall perform such duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time

to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.

3.10 Treasurer and Assistant Treasurers . The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation.

The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer.

3.11 Salaries . Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors.

3.12 Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

ARTICLE IV
CAPITAL STOCK

4.1 Issuance of Stock . Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any shares of the authorized capital stock of the corporation held in

the corporation’s treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such lawful consideration and on such terms as the Board of Directors may determine.

4.2 Stock Certificates; Uncertificated Shares . The shares of the corporation may be held in certificated or uncertificated form. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, representing the number and class of shares held by such holder in the corporation. Each such certificate shall be signed in a manner that complies with Section 158 of the General Corporation Law of the State of Delaware.

Each certificate for shares of stock that are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these Bylaws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of each certificate representing shares of such class or series of stock, provided that in lieu of the foregoing requirements there may be set forth on the face or back of each certificate representing shares of such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests a copy of the full text of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 202(a) or 218(a) of the General Corporation Law of the State of Delaware or, with respect to Section 151 of the General Corporation Law of the State of Delaware, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

4.3 Transfers . Shares of stock of the corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of shares of stock of the corporation shall be made only on the books of the corporation or by transfer agents designated to transfer shares of stock of the corporation. Subject to applicable law, shares of stock represented by certificates shall be transferred only on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these

Bylaws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these Bylaws.

4.4 Lost, Stolen or Destroyed Certificates . The corporation shall issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity and posting of such bond as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar.

4.5 Record Date . The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not precede the date on which the resolution fixing the record date is adopted, and such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates.

If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

4.6 Regulations . The issue, transfer, conversion and registration of shares of stock of the corporation shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE V
GENERAL PROVISIONS

5.1 Fiscal Year . Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January of each year and end on the last day of December in each year.

5.2 Corporate Seal . The corporate seal shall be in such form as shall be approved by the Board of Directors.

5.3 Waiver of Notice . Whenever notice is required to be given by law, by the Certificate of Incorporation or by these Bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether given before, at or after the time of the event for which notice is to be given, shall be deemed equivalent to notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in any such waiver. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

5.4 Voting of Securities . Except as the Board of Directors may otherwise designate, the Chief Executive Officer, the President or the Treasurer may waive notice of, vote, or appoint any person or persons to vote, on behalf of the corporation at, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or securityholders of any other entity, the securities of which may be held by this corporation.

5.5 Evidence of Authority . A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.

5.6 Certificate of Incorporation . All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as it may be amended and in effect from time to time.

5.7 Severability . Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.

5.8 Pronouns . All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

ARTICLE VI
AMENDMENTS

These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation.

Exhibit 4.1

This Certifies that is the owner of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF ACCRETIVE HEALTH, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated FOUNDER, PRESIDENT AND CHIEF EXECUTIVE OFFICER AH CUSIP 00438V 10 3 CHIEF FINANCIAL OFFICER AND TREASURER INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE DELAWARE 2003 ACCRETIVE HEALTH, INC. ACCRETIVE HEALTH, INC. COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY. LLC (New York, NY) TRANSFER AGENT AND REGISTRAR BY: AUTHORIZED SIGNATURE SEE REVERSE FOR CERTAIN DEFINITIONS PRODUCTION COORDINATOR: DENISE LITTLE 931-490-1706 PROOF OF APRIL 8, 2010 ACCRETIVE HEALTH, INC.

A statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights as established, from time to time, by the Certificate of Incorporation of the Corporation and by any certificate of determination, the number of shares constituting each class and series, and the designations thereof, may be obtained by the holder hereof upon request and without charge at the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM

—

as tenants in common

UNIF GIFT MIN ACT —

Custodian

TEN ENT

—

as tenants by the entireties

(Cust)

(Minor)

JT TEN

—

as joint tenants with right of

under Uniform Gifts to Minors

survivorship and not as tenants in common

Act

(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, hereby sell, assign and transfer unto


PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)


		Shares
of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint


		Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

Dated


X

NOTICE:		THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed


By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

Exhibit 10.1

HEALTHCARE SERVICES, INC.

AMENDED AND RESTATED STOCK OPTION PLAN

HEALTHCARE SERVICES, INC, a Delaware corporation (the “ Company ”), has adopted this Healthcare Services, Inc. Amended and Restated Stock Option Plan (as the same may be amended from time to time, the “ Plan ”), on February 22, 2006, for the benefit of its eligible employees, directors and outside consultants. The Plan amends and restates the Company’s Stock Option Plan adopted on December 29, 2005. The Plan, and offers and sales of securities pursuant hereto, are intended to meet the requirements of, and qualify under, Rules 701 and 506 promulgated under the Securities Act, as such rules may be amended from time to time, and offers and sales of securities pursuant hereto are therefore intended to be exempt from the registration requirements of the Securities Act. The Plan is effective as of December 1, 2003 (the “ Effective Date ”).

The purpose of the Plan is to enable the Accretive Companies to obtain and retain the services of key employees, corporate directors and outside consultants considered essential to the long-range success of the Company by offering them an opportunity to acquire stock in the Company.

ARTICLE I
DEFINITIONS

General . Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise.

1.1 Accretive Companies. “Accretive Companies” shall mean the Company and its Subsidiaries, as they exist from time to time.

1.2 Acknowledgement. “Acknowledgement” shall mean a written agreement executed by a Participant pursuant to which such Participant acknowledges and agrees that an Award made to such Participant is subject to the terms and conditions of the Plan.

1.3 Administrator . “Administrator” shall mean the Compensation Committee of the Board or, at the sole discretion of the Board, such other Committee as the Board may designate.

1.4 Award . “Award” shall mean an award of an Option granted under the Plan.

1.5 Award Agreement . “Award Agreement” shall mean a written agreement executed by an authorized officer of the Company and the Participant (including without limitation an offer letter or an employment agreement which has been accepted by an employee) which shall contain such terms and conditions with respect to an Award as the Administrator or the Chief Executive Officer of the Company shall determine, consistent with the Plan.

1.6 Board . “Board” shall mean the Board of Directors of the Company.

1.7 Capital Stock . “Capital Stock” shall mean, collectively, the Common Stock and the Preferred Stock.

1.8 Cause . “Cause” shall mean, as determined in the good faith judgment of the Board, commission by the Participant of (a) a felony, (b) an act or omission constituting dishonesty, disloyalty, moral turpitude or professional misconduct with respect to the Company or its affiliates, (c) an act or omission constituting fraud against the Company or its affiliates, or (d) a material breach of the Plan or an Award Agreement.

1.9 Change of Control . “Change of Control” shall mean (A) the consummation of any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of the voting shares of the company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company to a Third Party Purchaser, (C) any sale of a majority of the voting shares of the Company to a Third Party Purchaser or (D) any liquidation or dissolution of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred if in the event of a recapitalization, consolidation or merger (including a reverse merger) of the Company, (i) persons who, as of the date immediately prior to such recapitalization, consolidation or merger, constitute the Company’s Board of Directors (the “ Incumbent Directors ”) constitute at least a majority of the Board of Directors following such recapitalization, consolidation or merger and (ii) the Chief Executive Officer of the Company as of the date hereof remains as the Chief Executive Officer of the Company and a member of the Board of Directors following such recapitalization, consolidation or merger.

1.10 Code . “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.11 Committee . “Committee” shall mean any committee of the Board duly appointed by the Board.

1.12 Common Stock . “Common Stock” shall mean all classes of common stock of the Company, $0.01 par value per share.

1.13 Exchange Act . “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.14 Fair Value . “Fair Value” of a Share as of a particular date means:

(a) if any class of Common Stock is listed on an established stock exchange or exchanges (including for this purpose, the NASDAQ National Market), the arithmetic mean of the highest and lowest sale prices of such Common Stock for such trading day on the primary exchange upon which such Common Stock trades, as measured by volume, as published in The Wall Street Journal, or, if no sale price was quoted for such date, then as of the next preceding date on which such a sale price was quoted; or

(b) if no class of Common Stock is then listed on an exchange or the NASDAQ National Market, the average of the closing bid and asked prices per share for any class of Common

Stock in the over-the-counter market on such date (in the case of (a) or (b), subject to adjustment as and if necessary and appropriate to set an exercise price not less than 100% of the fair market value of a Share on the date an Award is granted); or

(c) if no class of Common Stock is then listed on an exchange or quoted in the over-the-counter market, an amount determined to be the fair market value of a Share by the Administrator in good faith and in a manner established by the Board from time to time, taking into account such factors as the Board, in its exercise of good faith discretion, shall deem appropriate.

Notwithstanding anything in the Plan to the contrary, the Fair Value of a Share as of a particular date shall be determined in a manner prescribed by Section 409A of the Code and guidance issued thereunder for determining the fair market value of service recipient stock. The Fair Value of rights or property other than Shares means the fair market value thereof as determined by the Administrator on the basis of such factors as it may deem appropriate.

1.15 Option . “Option” shall mean a right granted to a Participant to purchase Shares at a specified price for a specified period of time, subject to the terms and conditions of the Plan.

1.16 Option Period. “Option Period” means the period beginning on the date of grant of an Award and ending at the close of business on the tenth (10th) anniversary of such date of grant.

1.17 Option Price. “Option Price” means the price at which Shares may be purchased under an Award as provided in Section 5.2 .

1.18 Participant . “Participant” shall mean an employee, director or outside consultant of any Accretive Company who is granted an Award under the Plan. In addition, for purposes of the repurchase provisions of Sections 5.9 , 5.10 and 10.6 , “Participant” shall also be deemed to include any Person who acquires any Award, any Shares or any interest in any Award or any Shares pursuant to a Disposition in accordance with Section 6.2(ii) or by will or by the laws of descent and distribution or by a designation of Beneficiary effective upon the death of a Participant.

1.19 Person . “Person” shall mean any individual, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding (a) the Accretive Companies, (b) any employee stock ownership or other employee benefit plan maintained by the Company and (c) an underwriter or underwriting syndicate that has acquired the Company’s securities solely in connection with a public offering thereof.

1.20 Preferred Stock . “Preferred Stock” shall mean all classes of preferred stock of the Company, $0.01 par value per share.

1.21 Public Market . “Public Market” shall mean a market for the common stock of the Company that shall be deemed to exist at such time as the common stock of the Company has been sold to the public pursuant to one or more registration statements filed with, and declared effective by, the federal Securities and Exchange Commission in accordance with the Securities Act.

1.22 Securities Act . “Securities Act” shall mean the Securities Act of 1933, as amended.

1.23 Series C Common Stock . “Series C Common Stock” shall mean the Series C non- voting common stock of the Company, par value $0.01 per share, as adjusted pursuant to Section 2.3 .

1.24 Shares. “Shares” means shares of Series C Common Stock issued or issuable upon exercise of an Award granted under the Plan, along with such other securities (including additional shares of Series C Common Stock) issued or issuable to a Participant (either prior to or subsequent to exercise of an Award) with respect to shares of Series C Common Stock issued or issuable upon exercise of an Award, as a result of stock subdivision, stock combination or any other form of recapitalization or a similar transaction affecting the Company’s securities.

1.25 Stockholders Agreement . “Stockholders Agreement” means the Second Amended and Restated Stockholders’ Agreement dated as of December 1, 2005, as amended from time to time, by and among the Company and certain of its stockholders.

1.26 Subsidiary . “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

1.27 Third Party Purchaser . “Third Party Purchaser” means any Person or group of Persons, none of whom is, immediately prior to the subject transaction, a stockholder of the Company or an Affiliate of a stockholder of the Company.

1.28 Vesting Restrictions . Notwithstanding anything in the Plan to the contrary, any Share(s) received upon the exercise of an unvested Option shall be subject to “Vesting Restrictions”, which Vesting Restrictions shall lapse on the date on which the Option (or the applicable portion thereof) exercised to acquire such Share(s) vests pursuant to Section 5.3 .

ARTICLE II
SHARES SUBJECT TO PLAN

2.1 Shares Subject to Plan . The shares of stock subject to Awards shall be Series C Common Stock. The aggregate number of Shares which may be issued upon exercise of any and all such Awards under the Plan shall not exceed 2,454,862 (subject to adjustment as provided in Section 2.3 ). The Shares to be issued upon exercise of Awards granted under the Plan will be made available, at the discretion of the Administrator, either from authorized but unissued Shares or from previously issued Shares reacquired by the Company.

2.2 Availability of Unissued Shares . Shares which are delivered by a Participant or withheld by the Company, in payment of the tax withholding thereon may again be awarded hereunder. Shares which are reacquired by the Company pursuant to the Plan will again become available for the grant of further Awards under the Plan as part of the Shares available under Section 2.1 .

2.3 Adjustments . The grant of an Award will not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any

part of its business or assets. In the event of any Company stock dividend, stock split, reverse stock split, combination or exchange of shares, recapitalization or other change in the capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company stockholders other than a normal cash than dividend), sale by the Company of all or a substantial portion of its assets (measured either on a stand-alone or consolidated basis), reorganization, rights offering, a partial or complete liquidation, or any other corporate transaction or event involving the Company and having an effect similar to any of the foregoing, then the Administrator may adjust or substitute, as the case may be, the number of Shares available for Awards under the Plan, the number of Shares covered by outstanding Awards, the exercise price per Share of outstanding Options, and any other characteristics or terms of the Awards as the Administrator shall deem necessary or appropriate to reflect equitably the effects of such changes to the Participants.

2.4 Reservation of Shares . The Company, during the term of the Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

ARTICLE III
GRANTING OF AWARDS

3.1 Grant . Either the Administrator or the Chief Executive Officer shall have authority to grant Awards under the Plan at any time or from time to time. However, the Chief Executive Officer shall not have the authority to grant an Award under the Plan to herself. An Award of Options shall entitle the Participant to receive Shares upon the exercise of such Options, subject to the Participant’s satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or the applicable Award Agreement (the terms and provisions of which may differ from other Award Agreements) including without limitation, payment of the Option Price.

3.2 Award Agreement . The grant of an Award shall occur as of the date the Administrator or the Chief Executive Officer determines. However, the Chief Executive Officer shall not have the authority to determine the grant date of any Award under the Plan to herself. Each Award Agreement (and Acknowledgement, if applicable) shall be in such form as is approved by the Board from time to time, shall embody the terms and conditions of such Option and shall be subject to the express terms and conditions set forth in the Plan. Such Award Agreement shall become effective upon execution by the Company and the Participant.

3.3 Eligibility .

(a) Options may be awarded to any employee, director or outside consultant of any Accretive Company (including persons who have previously received other Awards under the Plan) as in the Administrator’s or Chief Executive Officer’s opinion should be granted Options.

(b) The selection of Award recipients from the pool of eligible employees, directors and outside consultants of any Accretive Company shall be within the sole and absolute discretion of the Administrator or the Chief Executive Officer; provided , however , that the Chief Executive Officer shall not have the authority to grant an Award under the Plan to herself. No

Participant shall be allowed to purchase or receive Shares under the Plan unless such Person has executed an Award Agreement and, if the Participant does not expressly acknowledge and agree in the Award Agreement that the Award made to such Participant thereunder is subject to the terms and conditions of the Plan, an Acknowledgement with respect to such Award.

ARTICLE IV
ADMINISTRATION

4.1 Administration of the Plan . The Plan will be administered by the Board and the Administrator. The Board may change the Administrator of the Plan, in its sole discretion; provided , however , that a majority of the members of any Committee serving as the Administrator shall consist of directors who are not also employees of an Accretive Company.

4.2 Duties and Powers of Administrator . It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the authority to interpret the Plan and the agreements pursuant to which Awards are granted or awarded, to adopt such rules and regulations for the administration, interpretation, and application of the Plan as are consistent therewith, to interpret, amend or revoke any such rules, and to make any other determinations which it believes necessary or advisable for the administration of the Plan. The Administrator and the Chief Executive Officer shall each have the power to select the eligible employees, directors or outside consultants of the Accretive Companies to be granted Options, to determine the number of shares to be subject to the Option to be granted to each eligible Person selected and to determine the time or times when Options will be granted. However, the Chief Executive Officer shall not have any of these powers with respect to any grant of Options to herself. Any such grant or award under the Plan need not be the same with respect to each Participant. The Board may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan.

4.3 Majority Rule; Unanimous Written Consent . The Administrator shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Administrator.

4.4 Good Faith Actions . All actions taken and all interpretations and determinations made by the Administrator, the Chief Executive Officer or the Board (if the Board is not the Administrator) in good faith shall be final and binding upon all Participants, the Company and all other interested parties with respect to all matters relating to the Plan or any Award under the Plan. None of the Chief Executive Officer, members of any Committee appointed as Administrator or, as applicable, the Board, shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards.

4.5 At Will Employment . Nothing in the Plan or in any Award Agreement (or Acknowledgement, if applicable) hereunder shall confer upon any Participant any right to continue in the employ of the Accretive Companies or shall interfere with or restrict in any way the rights of any Accretive Company, which rights are hereby expressly reserved, to discharge any Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written employment agreement between the Participant and the Company and/or any Subsidiary.

ARTICLE V
TERMS AND CONDITIONS; METHOD OF EXERCISE

5.1 Option Period . An Award shall be exercisable pursuant to the terms hereunder during the Option Period with respect thereto. The unexercised portion of the Award shall immediately expire and be deemed forfeited at the close of business on the tenth (10th) anniversary of the date of grant of such Award.

5.2 Option Price . The Option Price per Share purchasable under an Award shall be determined by the Board or the Administrator in good faith and shall be set forth in the Award Agreement (or, if not set forth therein, the Acknowledgment related thereto); provided , however , that the Option Price per Share shall not be less than the Fair Value per Share on the date the Award is granted. It is the intent of the Company that each Award granted hereunder shall be granted with an Option Price that, as of the date of grant of such Award, is equal to or greater than the fair market value of a Share. If it is determined by the Administrator, the Board, any court of competent jurisdiction or any governmental authority that the Option Price of an Award on the date such Award was granted was less than the fair market value of a Share, then the Option Price for such Award shall be amended for all purposes to equal an amount equal to the fair market value of a Share on the date of such grant.

5.3 Vesting of Awards . Unless otherwise prescribed in an Award Agreement, Acknowledgement, employment or other written agreement between the Company and a Participant, all Options granted with respect to an Award which have not been previously forfeited shall vest ratably on each of the first four (4) anniversaries of the date of grant of such Award. In addition, the Administrator may at any time accelerate the vesting of any Award. Where terms of vesting are set forth in an Award Agreement, Acknowledgement, employment or other written agreement between the Company and a Participant, the terms of that agreement shall govern the vesting of the applicable Award and shall supersede the provisions of this Section 5.3 .

5.4 Exercisability . Awards shall be exercisable (to the extent not expired or forfeited) at any time during the Option Period. A Participant may make the election permitted under Section 83(b) of the Code (“ Section 83(b) Election ”), to include in gross income in the taxable year in which the Share(s) subject to Vesting Restrictions are transferred to him or her, the Fair Value of each such Share at the time of transfer, less the Option Price for such Share, notwithstanding that such Share is subject to a substantial risk of forfeiture within the meaning of the Code, or he or she may elect to include in gross income the Fair Value of the Share(s) subject to Vesting Restrictions, less the Option Price for such Share(s), as of the date on which such Vesting Restrictions lapse. Each Section 83(b) Election shall be subject to the following conditions: (i) the Participant’s election must be made on or before the date on which the amount of tax to be withheld is determined and (ii) the Participant’s election shall be irrevocable. If a Participant makes a Section 83(b) Election, such Participant shall notify the Company of such election within ten (10) days of filing the notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code. During a Participant’s lifetime, Awards shall only be exercisable by the Participant or, in the event the Participant is declared incompetent, the Participant’s legally appointed representative.

5.5 Method of Exercise . A Participant may exercise an Award, to the extent then exercisable, in whole or in part, at any time during the Option Period by the Participant’s giving written notice of exercise on a form provided by the Administrator (if available) to the Company specifying the number of Shares subject to the Award to be purchased. Such notice shall be accompanied by payment in full of the purchase price by cash or check or such other form of payment as the Company may accept. If approved by the Administrator, payment in full or in part may also be made (i) by delivering Shares already owned by the Participant for a period of at least six (6) months prior to payment having a total Fair Value on the date of such delivery equal to the Option Price; (ii) to the extent permitted by the Sarbanes-Oxley Act of 2002 and other applicable law, by the execution and delivery of a note or other full recourse evidence of indebtedness (and any security agreement thereunder) satisfactory to the Administrator; (iii) by the delivery of cash or the extension of credit by a broker-dealer to whom the Participant has submitted a notice of exercise or otherwise indicated an intent to exercise an Award (in accordance with Part 220, Chapter II, Title 12 of the Code of Federal Regulations, so-called “cashless” exercise); (iv) by certifying ownership of shares owned by the Participant to the satisfaction of the Administrator for later delivery to the Company as expected by the Administrator; and (v) by any combination of the foregoing. No Shares will be issued until full payment therefore has been made and the Participant has executed any and all agreements that the Company may require the Participant to execute. Participant will have all of the rights of a stockholder of the Company holding the Shares that are subject to such Award (including, if applicable, the right to vote the Shares and the right to receive dividends), when the Participant has given written notice of exercise, has paid in full for such Shares, executed all relevant agreements, and such Shares have been recorded on the Company’s official records as having been issued and transferred.

5.6 Shares Held in Escrow . With respect to each Share issued to a Participant pursuant to an exercise under Section 5.5 , the Secretary of the Company, or such other escrow holder as the Administrator may appoint, shall retain physical custody of the certificate representing such Share until such time as there is a Public Market, or, if later, the date upon which any Vesting Restrictions on such shares lapse, whereupon, subject to Section 9.2 , the certificate representing the Shares shall be delivered to the Participant. At the request of the Administrator at any time, each Participant owning Shares held or to be held in escrow shall promptly deliver to the escrow holder a stock power, endorsed in blank, relating to such Shares, in such form as is requested by the Administrator.

5.7 Rights as Stockholders . No person shall have any rights of a stockholder as to Shares subject to an Award until, after proper exercise of the Award or other action required, such Shares have been recorded on the Company’s official stockholder records as having been issued and transferred. Subject to Section 5.8 , upon delivery of the Shares to the escrow holder pursuant to Section 5.6 , the Participant shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said Shares, subject to the non-voting restriction of the Series C Common Stock, including the right to receive all dividends and other distributions paid or made with respect to the shares.

5.8 Termination Other than for Cause . If a Participant’s employment or, with respect to a director or outside consultant, period of service, with the Accretive Companies terminates other than for Cause (including without limitation a termination by an Accretive Company without cause, a voluntary termination by Participant, the expiration of any preexisting arrangement or a termination as a result of the death or disability of Participant), then, notwithstanding anything to

the contrary set forth in any agreement between the Company and the Participant, (a) the unvested portion of the Award shall immediately expire and be deemed forfeited upon such termination, (b) any vested but unexercised portion of the Award shall be fully exercisable for a period of sixty (60) days and any such vested but unexercised portion of the Award which is not exercised within such sixty (60) day period shall immediately expire and be deemed forfeited at the open of business on the date which is sixty one (61) days following such termination, and (c) any Shares owned by such Participant which are subject to Vesting Restrictions shall be subject to repurchase by the Company, in its sole discretion, at a price equal to the lesser of the Option Price paid for each such Share or the Fair Value of each such Share at the time of such termination; provided , however , that such repurchase right shall terminate with respect to a Share subject to Vesting Restrictions at such time as such Vesting Restrictions lapse. In order to exercise any repurchase rights hereunder, the Company shall notify the Participant of its election of such option and shall pay such purchase price in cash within one-hundred eighty (180) days following such termination. The Company shall receive customary representations and warranties as to ownership, title, authority to sell and the like from the Participant regarding such sale, and shall receive such other evidence, including applicable inheritance and estate tax waivers, as may reasonably be necessary, in the sole discretion of the Administrator. If a Participant fails to comply with the provisions of this Section 5.8 , the Company shall be entitled to treat such failure as breach of the Plan for which the Company shall be entitled to specific performance and/or damages.

5.9 Termination for Cause . If a Participant’s employment or, with respect to a director or outside consultant, period of service, with the Accretive Companies terminates for Cause, then, notwithstanding anything to the contrary set forth in any agreement between any Accretive Company and the Participant (a) any Shares owned by such Participant other than Shares subject to Vesting Restrictions shall be subject to repurchase by the Company, in its sole discretion, at a price equal to the Option Price paid for each such Share, provided , however , that such repurchase right shall terminate at such time as there is a Public Market, (b) any Shares owned by such Participant which are subject to Vesting Restrictions shall be subject to repurchase by the Company, in its sole discretion, at a price equal to the lesser of the Option Price paid for each such Share or the Fair Value of each such Share at the time of such termination; provided , however , that such repurchase right shall terminate with respect to a Share subject to Vesting Restrictions at such time as such Vesting Restrictions lapse, and (c) the entire Award shall immediately expire and be deemed forfeited upon such termination. In order to exercise any repurchase rights hereunder, the Company shall notify the Participant of its election of such option and shall pay such purchase price in cash within one-hundred eighty (180) days following such termination. The Company shall receive customary representations and warranties as to ownership, title, authority to sell and the like from the Participant regarding such sale, and shall receive such other evidence, including applicable inheritance and estate tax waivers, as may reasonably be necessary, in the sole discretion of the Administrator. If a Participant fails to comply with the provisions of this Section 5.9 , the Company shall be entitled to treat such failure as breach of the Plan for which the Company shall be entitled to specific performance and/or damages.

5.10 Repurchase Rights . Following the termination of a Participant’s employment which is initiated by the employee, notwithstanding anything to the contrary set forth in any agreement between any Accretive Company and the Participant, any and all Shares owned by such Participant and not repurchased pursuant to Section 5.8 or Section 5.9 , shall be subject to repurchase by the Company at any time, in its sole discretion, at a price equal to the Fair Value for

each such Share, provided , however , that such repurchase right shall terminate at such time as there is a Public Market. In order to exercise this right, the Company shall notify the Participant of its election of such option, the number of Shares being repurchased, the repurchase price and the date of closing of the repurchase. The Company shall receive customary representations and warranties as to ownership, title, authority to sell and the like from the Participant regarding such sale, and shall receive such other evidence, including applicable inheritance and estate tax waivers, as may reasonably be necessary, in the sole discretion of the Administrator. If a Participant fails to comply with the provisions of this Section 5.10 , the Company shall be entitled to treat such failure as breach of the Plan for which the Company shall be entitled to specific performance and/or damages.

5.11 Change of Control .

(a) In the event of a Change of Control, each Share subject to Vesting Restrictions (“ Restricted Share ”) may be replaced with shares of the capital stock of the successor corporation (or parent thereof) which are subject to the same vesting schedule applicable to the Restricted Share pursuant to Section 5.3 above and such escrow arrangements as the Administrator shall deem appropriate. In the event that any successor corporation (or parent thereof) does not effect such a replacement of an outstanding Restricted Share as described in this Section 5.11(a) , each such Restricted Share shall become fully vested and exercisable on the date that is immediately prior to the effective date of the Change of Control.

(b) The Company shall attempt to have all outstanding repurchase rights under the Plan assigned to the successor corporation (or parent thereof) in the event of a Change of Control. However, to the extent the successor corporation (or parent thereof) does not accept such assignment, the outstanding repurchase rights shall terminate automatically upon the effective date of the Change of Control.

ARTICLE VI
RESTRICTIONS ON DISPOSITION OF SHARES

6.1 Restrictions on Disposition . No Participant may, directly or indirectly, voluntarily or involuntarily, sell, transfer, gift, negotiate, pledge, hypothecate, assign or any other way dispose of any Award, any Shares or any interest in any Award or any Shares (collectively, “ Dispose ” or a “ Disposition ”) other than by will or by the laws of descent and distribution or by a designation of Beneficiary effective upon the death of the Participant. Any attempted or purported Disposition of Shares in violation hereof shall be void ab initio and the Company shall have no obligation to recognize any such attempted or purported Disposition.

6.2 Exceptions to Restrictions on Disposition . The restrictions set forth in Section 6.1 shall not apply to any of the following Dispositions of Shares not subject to Vesting Restrictions: (i) any repurchase or redemption by the Company from a Participant of Shares, provided that such repurchase or redemption is effectuated in accordance with and is not in contravention of the terms of this Agreement, Delaware law, or as set forth in the Third Amended and Restated Certificate of Incorporation of the Company, as the same may be amended from time to time; (ii) to a Participant’s spouse, children, sisters or brothers (collectively, “ Family Members ” and, individually a “ Family Member ”) or any trust, limited partnership or limited liability company primarily for the benefit of a Participant or a Participant’s Family Member or Family Members,

provided that any such transferee or recipient of Shares in such Disposition shall agree in writing to be bound by, and the Shares so transferred shall remain subject to, the terms and conditions of the Plan; or (iii) to any Person in accordance with the terms of Articles VII or VIII . Notwithstanding anything in the Plan to the contrary, Shares subject to Vesting Restrictions shall be non-transferable to any person or entity (other than the Company in accordance with Section 5.8 or Section 5.9 ) and shall be subject to substantial risk of forfeiture as described in Section 5.8 and Section 5.9 .

6.3 Termination of Restrictions on Disposition . The restrictions on Disposition arising under this Article VI with respect to Shares other than Shares subject to Vesting Restrictions shall terminate at such time as there is a Public Market; provided , however , that the restrictions on Disposition arising under this Article VI with respect to Shares subject to Vesting Restrictions shall terminate at such time as such Vesting Restrictions with respect to such Shares shall lapse.

ARTICLE VII
DRAG ALONG

7.1 Drag-Along Obligations . If any stockholder of the Company or group of stockholders of the Company (“ Sellers ”) agrees to directly or indirectly effect a Change of Control, by merger, sale or otherwise, each Participant shall, upon the request of Sellers: (i) be required to exercise all vested Options and sell all of the Shares owned by such Participant pursuant to such proposed Change of Control transaction, (ii) to the extent applicable, vote for any such Change of Control transaction, and (iii) agree to become a party to any proposed agreement to consummate the Change of Control and to execute any agreement, certificate or other documents required to be executed in connection with such Change of Control transaction, including making such representations and warranties as, but not more extensive than, those made by Sellers, provided that no Participant shall be required to indemnify the purchaser in an amount in excess of the proceeds received by such Participant from such Change of Control net of all costs, expenses and taxes attributable to such Change of Control. The Change of Control shall be on the same terms and conditions with respect to the Participant as it is with respect to the Sellers (including the payment of the same consideration per share for each share of common stock of the Company sold). If a Participant fails to comply with the provisions of this Section 7.1 , Sellers shall be entitled to treat such failure as breach of the Plan by such Participant for which Sellers shall be entitled to specific performance and/or damages.

7.2 Termination of Drag-Along Obligations . The drag-along obligations arising under this Section 7 shall terminate at such time as there is a Public Market.

ARTICLE VIII
TAG-ALONG RIGHTS

8.1 Tag Along Rights . For so long (and only for so long) as a Participant is an employee, director or outside consultant of an Accretive Company, with respect to any proposed Disposition of shares of Capital Stock by any stockholder or a group of stockholders to a Person which would constitute a Change of Control (such other Person being hereafter referred to as the “ Proposed Purchaser ”), such transferring stockholder(s) shall be required to provide that such Participant along with each of the other stockholders having tag-along rights as provided in the

Plan, the Stockholders Agreement or in a Restricted Stock Award Agreement (referred to herein collectively as the “ Tag-Along Stockholders ”) shall have the right to require the Proposed Purchaser to purchase from each of them up to the number of whole shares of Capital Stock owned by each such Tag-Along Stockholder equal to the number derived by multiplying the total number of shares of Capital Stock that the transferring stockholders propose to sell by a fraction, the numerator of which shall be the total number of shares of Capital Stock (including Capital Stock issuable upon exercise of any warrants or options) owned by such Tag-Along Stockholder, and the denominator of which shall be the total number of shares of Capital Stock (including Capital Stock issuable upon exercise of any warrants or options) owned by the transferring stockholder(s) and all such Tag-Along Stockholders. Any shares purchased from Tag-Along Stockholders pursuant to this Section 8.1 shall be at the same price per share and otherwise at the same time and upon the same terms and conditions as the proposed transfer by the transferring stockholder(s); provided , however , that for purposes hereof, the price per share of each share of Preferred Stock shall be deemed to be the actual price per share received for each such share of Preferred Stock less the original purchase price of such share of Preferred Stock and any accrued and unpaid dividends on such share of Preferred Stock as of the date of such transfer. For purposes of this Agreement, all consideration received or receivable by a transferring stockholder from the Proposed Purchaser (and/or its affiliates), howsoever denominated, shall be deemed payment for the shares of Capital Stock transferred by the transferring stockholder.

8.2 Notice of Potential Sale . The transferring stockholder(s) shall notify, or cause to be notified, each Participant and the Board in writing of each such proposed transfer subject to the provisions of this Article VIII . Such notice shall set forth: (A) the number of shares of each class of Capital Stock proposed to be purchased, (B) the name and address of the Proposed Purchaser, (C) the proposed consideration and terms and conditions of payment offered by the Proposed Purchaser, (D) the aggregate amount of the original purchase price and all accrued and unpaid dividends on all shares of Preferred Stock proposed to be purchased and (D) that the Proposed Purchaser has been informed of the “tag-along right” provided for in this Article VIII and that the Proposed Purchaser has agreed to purchase Shares in accordance with the terms hereof.

8.3 Exercise of Tag Along Rights . The tag-along right may be exercised by any Participant who, at the time of such proposed transfer is an employee, director or outside consultant of an Accretive Company, by delivery of a written notice to the transferring stockholder(s) (the “ Tag-Along Notice ”) and to the Board within thirty (30) days following the receipt of the notice specified in Section 8.2 . The Tag-Along Notice shall state the number of Shares that such Participant proposes to include in such transfer to the Proposed Purchaser, determined in accordance with Section 8.1 , and the number of additional shares such Participant desires to include in such transfer. The maximum number of additional shares that each such Participant shall be entitled to sell shall be determined by multiplying the total number of shares of Capital Stock that, under the formula in Section 8.1 , all Tag-Along Stockholders could have elected to sell to the Proposed Purchaser but did not so elect, by a fraction, the numerator of which shall be the total number of shares of Capital Stock (including Common Stock issuable upon exercise of any warrants or options) owned by such Participant electing to sell additional shares and the denominator of which shall be the total number of shares of Capital Stock (including Common Stock issuable upon exercise of any warrants or options) owned by all Tag-Along Stockholders (including such Participant) who delivered Tag-Along Notices indicating a willingness to sell additional shares. In the event that the Proposed Purchaser refuses to purchase such shares from the

Tag-Along Stockholders on the same terms and conditions as it purchases shares from the transferring stockholder(s) in the proposed Disposition, then the transferring stockholder(s) shall not be permitted to sell any shares to the Proposed Purchaser in the proposed Disposition. If no Tag-Along Notice is received during the 30-day period referred to in this Section 8.3 , the transferring stockholder(s) shall have the right to transfer their shares on terms and conditions no more favorable than those stated in the notice under Section 8.2 and in accordance with the provisions of this Article VIII .

8.4 Conditions . Any provision herein to the contrary notwithstanding, the exercise of the tag-along right by an eligible Participant shall be conditioned upon the agreement by such Participant to become a party to any proposed agreement for the sale of shares by the transferring stockholder(s), and to execute any agreement, certificate or other document required by the Proposed Purchaser to be executed in connection with such sale; provided , however , that no Participant shall be required to give representations or warranties, or enter into covenants, more extensive than those given by the transferring stockholder(s) or to provide indemnities disproportionately (based upon the percentage of sales proceeds to be received) to those provided by the transferring stockholder(s). Failure of any Participant to comply with the provisions of this Section 8.4 shall constitute a breach of this Agreement and waiver of such Participant’s tag-along right under Article VIII .

8.5 Termination . Tag along rights arising under this Article VIII (a) shall not apply to Shares subject to Vesting Restrictions on the date of the proposed transfer, and (b) shall terminate at such time as there is a Public Market.

ARTICLE IX
REGISTRATION RIGHTS

9.1 Registration Rights . Unless otherwise required by the lead underwriter engaged to perform an initial public offering of the Company’s securities, as promptly as practicable after such time as there is a Public Market and the Company is eligible to do so, the Company shall (i) file a registration statement on Form S-8 (or any successor form) registering the resale of securities issued under the Plan, including the Shares, (ii) if a Participant is or may be deemed to be an affiliate of the Company, include in such registration statement a Prospectus prepared in accordance with the requirements of Form S-3 which, pursuant to General Instruction C of Form S-8 (or the corresponding provision of any successor form), may be delivered in connection with the offer and sale of Shares by such Participant, and (iii) use commercially reasonable efforts to have such registration statement declared effective as soon as practicable. The Company shall use commercially reasonable efforts to maintain the effectiveness of the registration statement until such time as all of the Shares are sold or all of the Shares may be sold by the each Participant without restriction pursuant to Rule 144(k) under the Securities Act (or any successor rule).

9.2 Exchange Rights . The Company covenants and agrees that, if at such time as there is a Public Market such Public Market does not relate to the Company’s Series C Common Stock, the Participants shall have the right to exchange the Shares for an equivalent number of shares of the class of Common Stock as to which the Public Market exists. The Company shall affect such exchange promptly upon any Participant’s request, subject to compliance with all applicable laws, rules and regulations.

ARTICLE X
RESTRICTIVE COVENANTS

10.1 General . Each Award represents a substantial economic benefit to the respective Participant. Each Participant, by virtue of such Participant’s role with the Accretive Companies, has access to, and is involved in the formulation of, certain confidential and secret information of the Accretive Companies regarding their operations and each Participant could materially harm the business of the Accretive Companies by competing with an Accretive Company or soliciting employees or customers of an Accretive Company.

10.2 Competition . Each Participant agrees that, so long as he/she is an employee of, director of, or outside consultant to, an Accretive Company and for a period of eighteen (18) months thereafter, regardless of the reason for termination of such employment or service as a director or outside consultant, as applicable, such Participant will not directly or indirectly (as a director, officer, executive employee, manager, consultant, independent contractor, advisor or otherwise) engage in competition with, or own any interest in, perform any services for, participate in or be connected with any business or organization which is engaged in competition with an Accretive Company anywhere in the United States of America; provided , however , that the provisions of this Section 10.2 shall not be deemed to prohibit a Participant’s ownership of not more than five percent (5%) of the total shares of all classes of stock outstanding of any publicly held company. No Participant shall at any time, directly or indirectly, use or purport to authorize any person to use any name, mark, logo or other identifying words or images which are the same as or similar to those used at any time by an Accretive Company in connection with any product or service, whether or not such use would be in a business competitive with that of an Accretive Company.

10.3 Non-Solicitation . Each Participant agrees that, so long as he/she is an employee of, director of, or outside consultant to, an Accretive Company and for a period of twenty four (24) months thereafter, regardless of the reason for termination of such employment or service as a director or outside consultant, as applicable, such Participant will not directly or indirectly (as a director, officer, executive employee, manager, consultant, independent contractor, advisor or otherwise), recruit, solicit, identify for recruitment or solicitation, induce or otherwise take any action intended to (i) cause any employee or consultant of an Accretive Company to leave his or her employment or service as a consultant, as the case may be, with such Accretive Company or (ii) cause any person that was an employee or consultant of an Accretive Company at any time during the two years preceding the date at issue to accept employment of any kind with any Person, including the Participant or any entity with which he/she is affiliated.

10.4 Non-Interference . Each Participant agrees that, so long as he/she is an employee of, director of, or outside consultant to, an Accretive Company and for a period of twenty four (24) months thereafter, regardless of the reason for termination of such employment or service as a director or outside consultant, as applicable, such Participant will not directly or indirectly call upon, accept business from or solicit the trade, business or patronage of any of the customers or known prospective customers of any Accretive Company or of anyone who has heretofore traded and dealt with an Accretive Company, regardless of the location of such customers or prospective customers of the Accretive Companies, with respect to the business of the Accretive Companies, or otherwise divert or attempt to divert any business from any Accretive Company.

10.5 Certain Definitions . For purposes of the Plan, a person or entity (including, without limitation, a Participant) shall be deemed to be a direct competitor of an Accretive Company, or a person or entity (including, without limitation, a Participant) shall be deemed to be engaging in competition with an Accretive Company, if such person or entity in any way conducts, operates, carries out or engages in (i) the business of providing services or solutions targeted at improving revenue cycle services for health care providers, or (ii) such other business or businesses as the Company conducts or reasonably anticipates conducting, as of the date hereof or during the period in which the Participant in question was an employee, director or outside consultant of an Accretive Entity, whether or not overt steps have been taken to so implement such contemplated business during such period.

10.6 Enforcement. Each Participant agrees that the restrictions contained in the Plan are necessary for the protection of the business and goodwill of the Accretive Companies and are considered by such Participant to be reasonable for that purpose and that the scope of restricted activities, the geographic scope and the duration of the restrictions set forth in the Plan are considered by such Participant to be reasonable. Each Participant further agrees that any breach of any of the restrictive covenants in the Plan would cause the Accretive Companies substantial and irrevocable harm for which money damages would be inadequate and therefore, in the event of any such breach or any threatened breach, in addition to such other remedies as may be available, the Accretive Companies shall be entitled to specific performance and injunctive relief. Each Participant further agrees that to the extent any provision or portion of the restrictive covenants of the Plan shall be held, found or deemed to be unreasonable, unlawful or unenforceable by a court of competent jurisdiction, then any such provision or portion thereof shall be deemed to be modified to the extent necessary in order that any such provision or portion thereof shall be legally enforceable to the fullest extent permitted by applicable law. Without limitation to any other remedies available hereunder or at law, each Participant agrees that any Shares owned by such Participant shall be subject to repurchase by the Company, in its sole discretion, at a price, on the terms, and in the manner set forth in Section 5.9 .

ARTICLE XI
MISCELLANEOUS PROVISIONS

11.1 Amendment, Suspension or Termination of the Plan . Except as otherwise provided in this Section 11.1 , the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board without obtaining the approval of any Participant. No stockholder approval of any amendment or revision will be required unless such approval is required by applicable law, rule or regulation. Except in accordance with Section 2.3 , no amendment, suspension or termination of the Plan shall, without the written consent of a Participant, alter or impair the number of Shares subject to an Award granted to such Participant, the Option Price applicable to any Award granted to such Participant or the vesting rights of such Participant with respect to any Award. No Awards may be granted or awarded during any period of suspension or after termination of the Plan.

11.2 Term of Plan . The Plan is effective as of the Effective Date and shall only be terminated by the Board. Termination of the Plan shall not affect any Award granted prior to the termination of the Plan.

11.3 Change of Control . No Change of Control shall result in the acceleration of vesting, unless otherwise provided in the Plan, any Award Agreement or other written agreement between the Company and a Participant.

11.4 Tax Withholding . The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by Federal, state or local tax law to be withheld with respect to the grant, vesting or exercise of any Award and with respect to any distribution made by the Company or disposition of any Shares. The Administrator may, in its discretion and in satisfaction of the foregoing requirement, allow such Participant to elect to have the Company withhold Shares otherwise issuable under such Award (or allow the return of Shares) having a Fair Value equal to the sums required to be withheld.

11.5 Legends; Custody . The certificates representing the Shares issued under the Plan shall bear the following legends giving notice of restrictions on transfer of such shares under the Securities Act and under the Plan as follows:

THE SALE, TRANSFER, HYPOTHECATION, NEGOTIATION, PLEDGE, ASSIGNMENT, ENCUMBRANCE OR OTHER DISPOSITION OF THIS SHARE CERTIFICATE AND THE SHARES OF SERIES C COMMON STOCK REPRESENTED HEREBY ARE RESTRICTED BY AND ARE SUBJECT TO ALL OF THE TERMS, CONDITIONS AND PROVISIONS OF THE HEALTHCARE SERVICES, INC. STOCK OPTION PLAN, WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY ISSUANCE, SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE OTHER THAN IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE STOCK OPTION PLAN SHALL BE NULL AND VOID.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.

The certificates for Shares covered by any Award may include any other legends required by applicable state or Federal securities laws, as determined by the Administrator.

11.6 Effect of Plan Upon Other Compensation Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for any Accretive Company. Nothing in the Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or compensation for employees, directors or consultants of any Accretive Company, or (b) to grant or assume other awards otherwise than under the Plan.

11.7 Compliance with Laws . The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted hereunder are subject to compliance with all applicable Federal and state laws, rules and regulations (including but not limited to state and Federal securities law and Federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The Company will be under no obligation to register or qualify the issuance of Awards or underlying securities under the Securities Act or applicable state securities laws and the Company shall not be obligated to grant, issue, deliver or effect any transfer of Shares granted under the Plan unless such grant, issuance, delivery or transfer is at such time effectively registered or exempt from registration under applicable state and Federal securities laws. Any securities delivered under the Plan shall be subject to such restrictions, and the Person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

11.8 Notices . Any notice hereunder to the Company shall be addressed to Greg Kazarian, Secretary, Healthcare Services, Inc., 401 N. Michigan Avenue, 27th Floor, Chicago, IL 60611, and any notice hereunder to any Participant shall be addressed to such Participant at the last known address for such person on the Company’s books and records, subject to the right of the Company and each Participant to designate at any time hereafter in writing some other address.

11.9 Interpretation . Headings herein are for convenience of reference only, do not constitute a part of the Plan, and will not affect the meaning or interpretation of the Plan. References herein to Sections are references to the referenced Section hereof, unless otherwise specified.

11.10 Governing Law . The Plan and any agreements hereunder, including without limitation all Award Agreements and all Acknowledgements, shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.

* * *

I hereby certify that the foregoing Amended and Restated Stock Option Plan was duly adopted by the Board of Directors of Healthcare Services, Inc. on February 22, 2006.


/s/ Greg Kazarian
Greg Kazarian, Secretary

Amendments to Amended and Restated Stock Option Plan

1. Section 5.5 , fourth sentence, of the Amended and Restated Stock Option Plan, shall be amended to add the following to the end of such sentence:

“in connection with such exercise and/or in connection with any transactions involving the Shares (for example, but not by limitation, lock-up agreements and FINRA questionnaires)”

2. Section 5.9(a) of the Amended and Restated Stock Option Plan shall be amended to delete the proviso, so that Section 5.9(a) shall read in its entirety:

“any Shares owned by such Participant other than Shares subject to Vesting Restrictions shall be subject to repurchase by the Company, in its sole discretion, at a price equal to the Option Price paid for each such Share,”

3. Article X of the Amended and Restated Stock Option Plan shall be deleted in its entirety and replaced with the following:

“ARTICLE X
RESTRICTIVE COVENANTS

10.1 Definitions.

(a) Affiliate . “Affiliate” means any entity controlling or controlled by or under common control with the Company or another Affiliate, at the time of execution of the Agreement and any time thereafter, where “control” is defined as the ownership of at least fifty percent (50%) of the equity or beneficial interest of such entity, and any other entity with respect to which the Company has significant management or operational responsibility (even though Accretive Health may own less than fifty percent (50%) of the equity of such entity).

(b) Confidential Information . “Confidential Information” as used in this Agreement shall include the Company’s trade secrets as defined under Illinois law, as well as any other information or material which is not generally known to the public, and which:

	i)		is generated, collected by or utilized in the operations of the Company’s business and relates to the actual or anticipated business, research or development of the Company; or

	ii)		is suggested by or results from any task assigned to Participant by the Company or work performed by Participant for or on behalf of the Company.

supplier and vendor lists, budget information, contents of any database, contracts, product designs, technical know-how, engineering data, pricing and cost information, research and development work, software, business plans, proprietary data, projections, market research, perceptual studies, strategic plans, marketing information, financial information (including financial statements), sales information, training manuals, employee lists and compensation of employees, and all other competitively sensitive information with respect to the Company, whether or not it is in tangible form, and including without limitation any of the foregoing contained or described on paper or in computer software or other storage devices, as the same may exist from time to time.

10.2 Non -Solicitation . During the time in which Participant performs services for the Company and for a period of eighteen (18) months after the cessation of Participant’s service with the Company, regardless of the reason, Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation:

	(a)		Hire, recruit, solicit or otherwise attempt to employ or retain or enter into any business relationship with, any person who is or was an employee of the Company within the twelve (12) month period immediately preceding the cessation of Participant’s service to the Company; or

	(b)		Solicit the sale of any products or services that are similar to or competitive with products or services offered by, manufactured by, designed by, or distributed by Company, to any person, company or entity which was or is a customer or potential customer of Company for such products or services.

10.3 Non-Disclosure .

	(a)		Participant will not, without the Company’s prior written permission, directly or indirectly, utilize for any purpose other than for a legitimate business purpose solely on behalf of the Company, or directly or indirectly, disclose to anyone outside of the Company, either during or after Participant’s relationship with the Company ends, the Company’s Confidential Information, as long as such matters remain Confidential Information.

	(b)		This Plan shall not prevent Participant from revealing evidence of criminal wrongdoing to law enforcement or prohibit Participant from divulging the Company’s Confidential Information by order of court or agency of competent jurisdiction. However, Participant shall promptly inform the Company of any such situations and shall take such reasonable steps to prevent disclosure of the Company’s Confidential Information until the Company has been informed of such requested disclosure and the Company has had an opportunity to respond to the court or agency.

10.4 Return of Company Property . Participant agrees that, in the event that Participant’s service to the Company is terminated for any reason, Participant shall immediately return all of the Company’s property, including without limitation, (i) tools, pagers, computers, printers, key cards, documents or other tangible property of the Company, and (ii) the Company’s Confidential Information in any media, including paper or electronic form, and Participant shall not retain in Participant’s possession any copies of such information.

10.5 Ownership of Software and Inventions . All discoveries, designs, improvements, ideas, inventions, software, whether patentable or copyrightable or not, shall be works-made-for-hire and Company shall be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, with the rights to use the same in perpetuity in any manner the Company determines in its sole discretion without any further payment after the term of the agreement to Participant whatsoever. If, for any reason, any of such results and proceeds which relate to the business shall not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then Participant hereby irrevocably assigns and agrees to quitclaim any and all of Participant’s right, title and interest thereto including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to Participant whatsoever. Participant shall, from time to time, as may be reasonably requested by the Company, at the Company’s expense, do any and all things which the Company may deem useful or desirable to establish or document the Company’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent Participant has any rights in the results and proceeds of Participant’s services that cannot be assigned in the manner described above, Participant unconditionally and irrevocably waives the enforcement of such rights. Notwithstanding anything to the contrary set forth herein, works developed by the Participant (i) which are developed independently from the work developed for the Company regardless of whether such work was developed before or after the Participant performed services for the Company; or (ii) applications independently developed which are unrelated to the business and which Participant develops during non-business hours using non-business property shall not be deemed work for hire and shall not be the exclusive property of the Company.

10.6 Non-Competition .

(a) During the time in which Participant performs services for the Company and for a period of twelve (12) months after the cessation of Participant’s service with the Company, regardless of the reason, Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation, within the Restricted Area, own, manage, operate, or participate in the ownership, management, operation, or control of, or be employed by or provide services to, any entity which is in competition with the Company.

(b) Notwithstanding anything to the contrary, nothing in this Paragraph 10.6 prohibits Participant from being a passive owner of not more than one percent (1%) of the

outstanding stock of any class of a corporation which is publicly traded, so long as Participant has no active participation in the business of such corporation.

10.7 Acknowledgment . Participant acknowledges and agrees that the restrictions contained in the Plan with respect to time, geographical area and scope of activity are reasonable and do not impose a greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Company and that the Participant has had the opportunity to review the provisions of the Plan with his legal counsel. In particular, the Participant agrees and acknowledges (a) that the Company is currently engaging in business and actively marketing its services and products throughout the United States, (b) that Participant’s duties and responsibilities for the Company are co-extensive with the entire scope of the Company’s business, (c) that the Company has spent significant time and effort developing and protecting the confidentiality of their methods of doing business, technology, customer lists, long term customer relationships and trade secrets, and (d) that such methods, technology, customer lists, customer relationships and trade secrets have significant value.

10.9 Enforcement . Each Participant agrees that the restrictions contained in the Plan are necessary for the protection of the business, the Confidential Information, customer relationships and goodwill of the Company and are considered by such Participant to be reasonable for that purpose and that the scope of restricted activities, the geographic scope and the duration of the restrictions set forth in the Plan are considered by such Participant to be reasonable. Each Participant further agrees that any breach of any of the restrictive covenants in the Plan would cause the Company substantial, continuing and irrevocable harm for which money damages would be inadequate and therefore, in the event of any such breach or any threatened breach, in addition to such other remedies as may be available, the Company shall be entitled to specific performance and injunctive relief. The Plan shall not in any way limit the remedies in law or equity otherwise available to the Company or its Affiliates. Each Participant further agrees that to the extent any provision or portion of the restricted covenants of the Plan shall be held, found or deemed to be unreasonable, unlawful or unenforceable by a court of competent jurisdiction, then any such provision or portion thereof shall be deemed to be modified to the extent necessary in order that any such provision or portion thereof shall be legally enforceable to the fullest extent permitted by applicable law. Without limitation to any other remedies available hereunder or at law, each Participant agrees that any Shares purchased by such Participant under any Award granted under the Plan shall be subject to repurchase by the Company, in its sole discretion, at a price, on the terms, and in the manner set forth in Section 5.9.

10.10 Severability; Modification . It is expressly agreed by Participant that:

(a)

Modification . If, at the time of enforcement of the Plan, a court holds that the duration, geographical area or scope of activity restrictions stated herein are unreasonable under circumstances then existing or impose a greater restraint than is necessary to protect the goodwill and other business interests of the Company, Participant agrees that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law, in all cases giving effect

to the intent of the parties that the restrictions contained herein be given effect to the broadest extent possible; and

	(b)		Severability . Whenever possible, each provision of the Plan will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan is held to be invalid, illegal or unenforceable in any respect under applicable law, such invalidity, illegality or unenforceability will not affect any other provision, but the Plan will be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein.

	(c)		Non-Disparagement . Participant understands and agrees that Participant will not disparage the Company, its officers, directors, administrators, representatives, employees, contractors, consultants or customers and will not engage in any communications or other conduct which might interfere with the relationship between the Company and its current, former, or prospective employees, contractors, consultants, customers, suppliers, regulatory entities, and/or any other persons or entities.”

Approved by Board of Directors: April 14, 2010

Approved by Stockholders: April 14, 2010

Exhibit 10.3

RESTRICTED STOCK PLAN

HEALTHCARE SERVICES, INC.

Amended August, 2004

HEALTHCARE SERVICES, INC (the “Company”), a Delaware corporation, adopted the HealthCare Services, Inc. Restricted Stock Plan (the “Plan”), effective as of January 14, 2004, for the benefit of its eligible employees, directors and outside consultants. This Plan, and offers and sales of securities pursuant hereto, are intended to meet the requirements of, and qualify under, Rules 701 and 506 promulgated under the Securities Act, as such rule may be amended from time to time, and offers and sales of securities pursuant hereto are therefore intended to be exempt from the registration requirements of the Securities Act.

The purpose of the Plan is to enable the Company to obtain and retain the services of key employees, corporate directors and outside consultants considered essential to the long-range success of the Company by offering them an opportunity to own stock in the Company.

The Plan has been Amended to permit additional stock to be distributed under the Plan and to provide certain additional rights to Recipients of Stock which is subject to the Plan.

ARTICLE I
DEFINITION

General . Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise.

1.1 Administrator . “Administrator” shall mean the Board of Directors or, at the sole discretion of the Board a Committee of the Board.

1.2 Award . “Award” shall mean an award of Restricted Stock granted under the Plan.

1.3 Award Agreement . “Award Agreement” shall mean a written agreement executed by an authorized officer of the Company and the Restricted Stockholder which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan.

1.4 Board . “Board” shall mean the Board of Directors of the Company.

1.5 Change in Control . “Change of Control” shall mean any of the following:

(a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and

“associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of either (A) the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Board or (B) the then outstanding shares of the Company’s common stock, par value $0.01 per share (other than as a result of an acquisition of securities directly from the Company); or

(b) the stockholders of the Company shall approve (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than fifty percent (50%) of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred for purposes of the foregoing clause (b) if in the event of a recapitalization, consolidation or merger (including reverse mergers) of the Company, (i) persons who, as of the date hereof, constitute the Company’s Board of Directors (the “Incumbent Directors”) constitute at least a majority of the Board of Directors following such recapitalization, consolidation or merger, provided that any person becoming a director of the Company subsequent to the date hereof shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by a vote of at least a majority of the Incumbent Directors and (ii) the Chief Executive Officer of the Company as of the date hereof remains as the Chief Executive Officer of the Company and a member of the Board of Directors following such recapitalization, consolidation or merger.

1.6 Code . “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.7 Committee . “Committee” shall mean any committee or committees appointed as provided in Section 5.1.

1.8 Class B Common Stock . “Class B Common Stock” shall mean the Class B voting common stock of the Company, par value $0.01 per share, as adjusted pursuant to Section 2.3.

1.9 Class C Common Stock . “Class C Common Stock” shall mean the Class C non- voting common stock of the Company, par value $0.01 per share, as adjusted pursuant to Section 2.3.

1.10 Company . “Company” shall mean HealthCare Services, Inc., a Delaware corporation.

1.11 Exchange Act . “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.12 Fair Market Value . “Fair Market Value” of a share of the Class B or Class C Common Stock as of a particular date means:

(a) if the stock is listed on an established stock exchange or exchanges (including for this purpose, the NASDAQ National Market), the arithmetic mean of the highest and lowest sale prices of the stock for such trading day on the primary exchange upon which the stock trades, as measured by volume, as published in The Wall Street Journal, or, if no sale price was quoted for such date, then as of the next preceding date on which such a sale price was quoted; or

(b) if the stock is not then listed on an exchange or the NASDAQ National Market, the average of the closing bid and asked prices per share for the stock in the over-the-counter market on such date (in the case of (a) or (b), subject to adjustment as and if necessary and appropriate to set an exercise price not less than 100% of the fair market value of the stock on the date an Award is granted); or

(c) if the stock is not then listed on an exchange or quoted in the over-the-counter market, an amount determined by the Administrator in good faith and in a manner established by the Board from time to time, taking into account such factors as the Board, in its exercise of good faith discretion, shall deem appropriate.

The Fair Market Value of rights or property other than capital stock of the Company means the fair market value thereof as determined by the Administrator on the basis of such factors as it may deem appropriate.

1.13 Person . “Person” shall mean any individual, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding (a) the Company and its Subsidiaries, (b) any employee stock ownership or other employee benefit plan maintained by the Company and (c) an underwriter or underwriting syndicate that has acquired the Company’s securities solely in connection with a public offering thereof.

1.14 Plan . “Plan” shall mean the HealthCare Services, Inc. Restricted Stock Plan.

1.15 Restricted Stock . “Restricted Stock” shall mean Class B or Class C Common Stock awarded under Article IV.

1.16 Restricted Stockholder . “Restricted Stockholder” shall mean a Company employee, director or outside consultant granted an award of Restricted Stock under Article IV.

1.17 Securities Act . “Securities Act” shall mean the Securities Act of 1933, as amended.

1.18 Subsidiary . “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

ARTICLE II
SHARES SUBJECT TO PLAN

2.1 Shares Subject to Plan . The shares of stock subject to Awards shall be Class B and Class C Common Stock (the “Restricted Common Stock”). The aggregate number of such shares which may be issued upon any and all such Awards under the Plan shall not exceed 5,283,338 shares (subject to adjustment as provided in Section 2.3). The Restricted Common Stock to be issued under this Plan will be made available, at the discretion of the Administrator, either from authorized but unissued shares of Class B and Class C Common Stock or from previously issued shares of Class B and Class C Common Stock reacquired by the Company.

2.2 Availability of Unissued Shares . Shares of Class B and Class C Common Stock which are delivered by a Restricted Stockholder or withheld by the Company, in payment of the tax withholding thereon may again be awarded hereunder. Shares of Class B and Class C Common Stock which are issued pursuant to an Award and which are reacquired by the Company pursuant to this Plan or the terms of the Award under which such shares were issued, will again become available for the grant of further Awards under this Plan as part of the shares available under Section 2.1.

2.3 Adjustments .

(a) If the Company consummates any merger, consolidation or other reorganization in which holders of shares of Class B and Class C Common Stock are entitled to receive in respect of such shares any additional shares or new or different shares or securities, cash or other consideration (including, without limitation, a different number of shares of Class B or Class C Common Stock), or if the outstanding shares of Class B or Class C Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities through merger, consolidation, sale or exchange of assets of the Company, reorganization, recapitalization, reclassification, combination, stock dividend, stock split, reverse stock split, spin-off, or similar transaction then an appropriate and proportionate adjustment shall be made by the Administrator in its discretion in (i) the maximum number and kind of shares subject to the Plan as provided in Section 2.1; and/or (ii) the price per share (if any) to be paid by the Company to Restricted Stockholders upon exercise by the Company of the right to repurchase the Restricted Stock upon termination of employment (if any); provided, however, that the aggregate purchase price payable for the Restricted Stock shall remain the same.

(b) The grant of an Award will not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

2.4 Reservation of Shares . The Company, during the term of the Plan, shall at all times reserve and keep available such number of shares of Class B and Class C Common Stock as shall be sufficient to satisfy the requirements of the Plan.

2.5 Vesting of Shares . Unless otherwise prescribed in an Award Agreement, employment or other agreement, all shares of Restricted Stock awarded under an Award Agreement which have not been previously forfeited shall vest on an annual basis in accordance with the Award Agreement.

ARTICLE III
GRANTING OF AWARDS

3.1 Award Agreement . Each Award shall be evidenced by an Award Agreement in substantially the form attached hereto as Exhibit A or such other form established by the Administrator from time to time not inconsistent with the terms of the Plan.

3.2 At Will Employment . Nothing in the Plan or in any Award Agreement hereunder shall confer upon any Restricted Stockholder any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Restricted Stockholder at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written employment agreement between the Restricted Stockholder and the Company and/or any Subsidiary.

ARTICLE IV
AWARD OF RESTRICTED STOCK

4.1 Eligibility .

(a) Restricted Stock may be awarded to any Company employee, director or outside consultant.

(b) The selection of Award recipients from the pool of eligible Company employees, directors and outside consultants shall be within the sole and absolute discretion of the Administrator. No employee, director or outside consultant shall be allowed to purchase or receive shares of Restricted Stock under this Plan unless such Person has executed an Award Agreement.

4.2 Award of Restricted Stock .

(a) The Administrator may from time to time, in its sole discretion:

(i) select from among the eligible employees, directors and/or outside consultants (including persons who have previously received other Awards under the Plan) such of them as in its opinion should be granted Restricted Stock;

(ii) determine the purchase price (if any), the number of shares of Restricted Stock subject to the Award, the restrictions applicable to the Award, and the other terms and conditions applicable to such Restricted Stock, consistent with the Plan; provided , however , that the purchase price shall be no less than the par value of the Class B or Class C Common Stock to be purchased, unless otherwise permitted by applicable state law, and in all cases, legal consideration shall be required for each issuance of Restricted Stock; and

(iii) upon the selection of an eligible employee, director or outside consultant to be granted Restricted Stock, instruct the appropriate officer or officers

of the Company to cause such Restricted Stock to be issued and impose such conditions on the issuance of such Restricted Stock as it deems appropriate.

4.3 Rights as Stockholders . Subject to Section 4.4, upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 4.5, the Restricted Stockholder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in his or her Award Agreement and the non-voting restriction of the Class C Common Stock, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that any shares received by the Restricted Stockholder with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization or a similar transaction affecting the Company’s securities without receipt of consideration, and, in the due discretion of the Administrator, any other extraordinary distributions with respect to the Class B or Class C Common Stock, shall be subject to the restrictions set forth in Section 4.4.

4.4 Restriction . All shares of Restricted Stock issued under the Plan (including any shares received by Restricted Stockholders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization or a similar transaction affecting the Company’s securities without receipt of consideration) shall be subject to such restrictions as the Administrator shall provide which are consistent with this Plan and shall be subject to such other restrictions as may be set forth in the Award Agreement. A Restricted Stockholder’s rights in unvested Restricted Stock shall lapse and his unvested Restricted Stock shall be forfeited back to the Company immediately upon his termination of employment or other service with the Company for any reason unless the Administrator shall determine otherwise in its sole discretion.

4.5 Restricted Stock Held in Escrow .

(a) Unvested Restricted Stock . With respect to each share of unvested Restricted Stock, the Secretary of the Company, or such other escrow holder as the Administrator may appoint, shall retain physical custody of the certificate representing such share until the restrictions imposed under the Award Agreement with respect to such unvested Class B or Class C Common Stock expire or shall have been removed, whereupon the certificate representing such share shall be delivered to the Restricted Stockholder; provided, however, that if other shares of still unvested Restricted Stock are also represented by the same stock certificate, then such certificate shall be retired and new certificates representing the vested and unvested portions of the Award shall be issued in place of the existing certificate.

(b) Vested Restricted Stock . With respect to each share of vested Restricted Stock, the Secretary of the Company, or such other escrow holder as the Administrator may appoint, shall retain physical custody of the certificate representing such share until on or about January 1 of each calendar year, whereupon the certificate representing the vested Class B or Class C Common Stock shall be delivered to the Restricted Stockholder.

4.6 Section 83(b) Election . Each Restricted Stockholder may (but shall not be obligated to) make an election under Section 83(b) of the Code to be taxed currently with respect to his or her receipt of any Awards issued pursuant to this Plan. The election permitted under this Section 4.6

shall comply in all respects with Section 83(b) of the Code and the Treasury Regulations promulgated thereunder and shall be made within thirty (30) days from the date of any Award made pursuant to this Plan. A Restricted Stockholder’s election shall be in substantially the same form as the sample election form attached hereto as Exhibit B . Each Restricted Stockholder shall prepare such forms as are required to make an election under Section 83(b) of the Code. The Company shall have no liability to any Restricted Stockholder who fails to make a permitted Section 83(b) election in a timely manner.

ARTICLE V
ADMINISTRATION

5.1 Administration of the Plan . The Plan will be administered by the Board and its properly designated Administrator.. The Board may appoint an Administrator of the Plan which may be a Committee of the Board, in the Board’s sole discretion (provided, however, that a majority of the members of the Committee shall consist of directors who are not also employees of the Company).

5.2 Duties and Powers of Administrator . It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the authority to interpret the Plan and the agreements pursuant to which Awards are granted or awarded, to adopt such rules and regulations for the administration, interpretation, and application of the Plan as are consistent therewith, to interpret, amend or revoke any such rules, and to make any other determinations which it believes necessary or advisable for the administration of the Plan. The Administrator shall have exclusive power to select the eligible employees and directors to be granted Restricted Stock, to determine the number of shares of Restricted Stock to be granted to each eligible Person selected and to determine the time or times when Restricted Stock will be granted. Any such grant or award under the Plan need not be the same with respect to each Restricted Stockholder. The Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan.

5.3 Majority Rule; Unanimous Written Consent . The Administrator shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Administrator.

5.4 Good Faith Actions . All actions taken and all interpretations and determinations made by the Administrator or the Board (if the Board is not the Administrator) in good faith shall be final and binding upon all Restricted Stockholders, the Company and all other interested parties with respect to all matters relating to the Plan or any Award under the Plan. No members of the Committee or, as applicable, the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards.

ARTICLE VI
DRAG ALONG

6.1 Drag-Along Obligations . If any stockholder of the Company or group of stockholders of the Company (“Sellers”) agree to directly or indirectly, voluntarily or involuntarily,

sell, transfer, negotiate, pledge, hypothecate, assign or any other way dispose of (collectively, “Dispose”), by merger, sale or otherwise, all of their shares of capital stock (or other securities of the Company) constituting not less than sixty and one-tenth percent (60.1%) of the shares of capital stock (including common stock issuable upon exercise of any warrant or option) then outstanding, and such sale is contingent on all of the outstanding shares of capital stock (and other securities of the Company) being sold simultaneously, then, provided such proposed sale is pursuant to a bona fide, arms-length agreement with a third party not affiliated with the Sellers, a Restricted Stockholder shall (i) be required to and shall sell all of the Restricted Stock owned by them pursuant to such proposed sale, (ii) to the extent applicable, vote for any such transaction proposed by Sellers, and (iii) agree to become a party to any proposed agreement for the sale of such shares by and to execute any agreement, certificate or other documents required to be executed in connection with such sale, including making such representations and warranties as, but not more extensive than, those made by Sellers, provided that no other stockholder shall be required to indemnify the acquiror of the securities of the Company sold in an amount in excess of the proceeds received by such other stockholder from such sale net of all costs, expenses and taxes attributable to such sale. The sale by a Restricted Stockholder pursuant to this Section 6.1 shall be on the same terms and conditions as the sale by the Sellers (including the payment of the same consideration per share for each share of the same class of securities sold). If a Restricted Stockholder fails to comply with the provisions of this Section 6.1, Sellers shall be entitled to treat such failure as breach of this Agreement for which Sellers shall be entitled to specific performance and/or damages.

6.2 The drag-along obligations arising under this Section 6 shall terminate at such time as there is a Public Market. For purposes of this Section 6.2, the term “Public Market” means a market for the common stock of the Company that shall be deemed to exist at such time as the common stock of the Company, has been sold to the public pursuant to one or more registration statements filed with, and declared effective by, the United States Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended.

ARTICLE VII

REGISTRATION RIGHTS

7.1 As promptly as practicable after such time as there is a Public Market and the Company is eligible to do so, the Company shall (i) file a registration statement on Form S-8 (or any successor form) registering the resale of securities issued under the Plan, including the Restricted Stock, (ii) if Recipient is or may be deemed to be an affiliate of the Company, include in such registration statement a Prospectus prepared in accordance with the requirements of Form S-3 which, pursuant to General Instruction C of Form S-8 (or the corresponding provision of any successor form), may be delivered in connection with the offer and sale of the Restricted Stock by the Recipient, and (iii) use commercially reasonable efforts to have such registration statement declared effective as soon as practicable. The Company shall use commercially reasonable efforts to maintain the effectiveness of the registration statement until such time as all of the Restricted Stock is sold or all of the Restricted Stock may be sold by the Recipient without restriction pursuant to Rule 144(k) under the Securities Act (or any successor rule).

7.2 The Company covenants and agrees that, if at such time as there is a Public Market such Public Market does not relate to the Company’s Class B or C Common Stock, Recipient shall

have the right to exchange the Restricted Stock for an equivalent number of shares of the class of Common Stock as to which the Public Market exists. The Company shall affect such exchange promptly upon Recipient’s request, subject to compliance with all applicable laws, rules and regulations.

ARTICLE VII I
MISCELLANEOUS PROVISIONS

8.1 Not Transferable . No share of Restricted Stock awarded under the Plan, nor any rights and privileges pertaining thereto, may be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered unless and until such share has been issued and all restrictions applicable to such share have lapsed.

8.2 Amendment, Suspension or Termination of the Plan . Except as otherwise provided in this Section 8.2, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board without obtaining the approval of the Restricted Stockholders. No stockholder approval of any amendment or revision will be required unless such approval is required by applicable law, rule or regulation. No amendment, suspension or termination of the Plan shall, without the written consent of the Restricted Stockholder, alter or impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan.

8.3 Term of Plan . The Plan is effective as of January 14, 2004. The Plan shall terminate ten (10) years thereafter, if not earlier terminated by the Board. Termination of the Plan shall not affect any Award granted prior to the termination of the Plan.

8.4 Change in Control . The Administrator may, in its discretion, include such provisions and limitations in any Award Agreement which become effective upon a Change of Control as it may deem equitable and in the best interests of the Company. Notwithstanding the foregoing, no Change in Control shall result in the acceleration of vesting, unless otherwise provided in any Award Agreement, employment agreement or other agreement.

8.5 Tax Withholding . The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Restricted Stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or payment of any Award. The Administrator may, in its discretion and in satisfaction of the foregoing requirement, allow such Restricted Stockholder to elect to have the Company withhold shares of Restricted Common Stock otherwise issuable under such Award (or allow the return of shares of Restricted Common Stock) having a Fair Market Value equal to the sums required to be withheld.

8.6 Legends . The certificates representing the shares of Restricted Common Stock issued under the Plan shall bear the following legends giving notice of restrictions on transfer of such shares under the Securities Act and under the Plan as follows:

THE SALE, TRANSFER, HYPOTHECATION, NEGOTIATION, PLEDGE, ASSIGNMENT, ENCUMBRANCE OR OTHER DISPOSITION OF THIS SHARE CERTIFICATE AND THE SHARES OF CLASS B OR CLASS C COMMON STOCK REPRESENTED HEREBY ARE RESTRICTED BY AND ARE SUBJECT TO ALL OF THE TERMS, CONDITIONS AND PROVISIONS OF A CERTAIN RESTRICTED STOCK AWARD AGREEMENT DATED AS OF AMONG THE RECIPIENT, THE COMPANY AND THE INVESTORS NAMED THEREIN, WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

Any other legends required by applicable state or federal securities laws, as determined by the Administrator.

8.7 Effect of Plan Upon Other Compensation Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or compensation for employees, directors or consultants of the Company or any Subsidiary, or (b) to grant or assume other awards otherwise than under the Plan.

8.8 Compliance with Laws . The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of shares of Restricted Common Stock and the payment of money under the Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The Company will be under no obligation to register or qualify the issuance of Awards or underlying securities under the Securities Act or applicable state securities laws and the Company shall not be obligated to grant, issue, deliver or effect any transfer of shares of Restricted Common Stock granted under the Plan unless such grant, issuance, delivery or transfer is at such time effectively registered or exempt from registration under applicable state and federal securities laws. Any securities delivered under the Plan shall be subject to such restrictions, and the Person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

8.9 Interpretation . Headings herein are for convenience of reference only, do not constitute a part of the Plan, and will not affect the meaning or interpretation of the Plan. References herein to Sections are references to the referenced Section hereof, unless otherwise specified.

8.10 Governing Law . The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.

* * *

I hereby certify that the foregoing Amended Plan was duly adopted by the Board of Directors of HealthCare Services, Inc. on August ___, 2004.

Executed on this ___ day of August, 2004


Greg Kazarian, Secretary


		Exhibit 10.8
Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions.

AMENDED AND RESTATED
MASTER SERVICES AGREEMENT

by and between

Healthcare Services, Inc.

d/b/a

Accretive Health
and

Ascension Health

as of

December 13, 2007

TABLE OF CONTENTS


		Page
Article 1.	DEFINITIONS, CONSTRUCTION, AND AFFILIATE SCHEDULES		1
Article 2.	TERM		7
Article 3.	SERVICES		7
Article 4.	STARTUP OF OPERATIONS		10
Article 5.	STAFFING		11
Article 6.	APPOINTMENT AS ATTORNEY IN FACT		15
Article 7.	AFFILIATE RESPONSIBILITIES		15
Article 8.	THIRD PARTY CONTRACT ADMINISTRATION AND MANAGEMENT		17
Article 9.	CUSTOMER SATISFACTION AND PERFORMANCE REVIEW		19
Article 10.	SERVICE LEVELS		21
Article 11.	SERVICE LOCATIONS		21
Article 12.	PROJECT TEAM		22
Article 13.	GOVERNANCE AND RELATIONSHIP MANAGEMENT		23
Article 14.	PROPRIETARY RIGHTS		23
Article 15.	DATA AND REPORTS		25
Article 16.	CONSENTS		26
Article 17.	CONTINUED PROVISION OF SERVICES		26
Article 18.	PAYMENTS		27
Article 19.	PAYMENT SCHEDULE AND INVOICES		29
Article 20.	TAXES		30
Article 21.	REDUCTION OF OPERATING COSTS		30
Article 22.	AUDIT RIGHTS		31
Article 23.	REGULATORY AND CORPORATE RESPONSIBILITY COMPLIANCE		32
Article 24.	CONFIDENTIALITY		35

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		Page
Article 25.	REPRESENTATIONS AND WARRANTIES		37
Article 26.	DISPUTE RESOLUTION		40
Article 27.	TERMINATION		42
Article 28.	TERMINATION ASSISTANCE		44
Article 29.	EXIT PLAN		44
Article 30.	INDEMNITIES		46
Article 31.	DAMAGES		51
Article 32.	INSURANCE		52
Article 33.	MISCELLANEOUS PROVISIONS		53

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MASTER SERVICES AGREEMENT

MASTER SERVICES AGREEMENT , as amended and restated as of December 13, 2007 by and between Healthcare Services, Inc. d/b/a Accretive Health, a Delaware corporation (“Accretive”) and Ascension Health, a Missouri nonprofit corporation (“Ascension Health”).

W I T N E S S E T H:

WHEREAS, Ascension is a nonprofit, tax-exempt healthcare system serving the patient needs of its health ministry communities;

WHEREAS, Accretive is a company providing revenue cycle operations services;

WHEREAS, the parties entered into a Master Services Agreement on October 14, 2004 to allow Ascension Health and the Affiliates to better serve the community’s need for health care services by engaging in compliant and more efficient patient billing and collection services.

WHEREAS, the parties wish to amend and restate the Master Services Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, for and in consideration of the agreements of the parties set forth below, Ascension Health, Affiliates and Accretive agree as follows:

Article 1. DEFINITIONS, CONSTRUCTION, AND AFFILIATE SCHEDULES

1.01

Definitions. The following defined terms when capitalized (or when the context clearly indicates the parties intended the defined term) shall have the meanings specified below:

	1.01.01		“Accretive Agents” shall mean the subcontractors and agents of Accretive permitted to provide Services pursuant to this MSA.

	1.01.02		“Accretive Employees” shall mean individuals employed by Accretive who are providing services to an Affiliate.

	1.01.03		“Accretive Machines” shall mean those machines and equipment owned or leased by Accretive and used exclusively at the Affiliate Service Locations or used outside the Affiliate Service Location to deliver the Services (e.g. a server) exclusively to Ascension Health. This shall not include laptop computers used by Accretive management staff on an exclusive basis.

	1.01.04		“Accretive Proprietary Software” shall have the meaning set forth in Section 14.02.

	1.01.05		“Accretive Service Locations” shall mean the Service Locations owned, leased, or under the control of Accretive that are set forth in

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Exhibit 1 of the Affiliate Schedules and from which Services are provided.

	1.01.06		“Accretive Software” shall mean the Accretive Proprietary Software and the Accretive Third Party Software, collectively.

	1.01.07		“Accretive Staff’ shall mean the Accretive Employees and Contract Employees who are performing Services under this Agreement.

	1.01.08		“Accretive Third Party Software” shall have the meaning set forth in Section 14.03.

	1.01.09		“Accretive Tools” shall mean all Accretive-specific equipment and Accretive and third party tool kits including software and other materials used by Accretive to provide the Services.

	1.01.10		“Affiliate” means any entity designated by Ascension Health as a health ministry which executes an Affiliate Schedule.

	1.01.11		“Affiliate Contract Year” shall mean each consecutive twelve (12) month period commencing on the Affiliate Effective Date or any anniversary of the Affiliate Effective Date during the Term.

	1.01.12		“Affiliate Effective Date” for an Affiliate Schedule shall mean the date as set forth in the Affiliate Schedule as the Affiliate Effective Date and the date upon which Accretive assumes responsibilities for the Services in accordance with the applicable Affiliate Schedule.

	1.01.13		“Affiliate Facilities” shall have the meaning set forth in Section 7.01.01.

	1.01.14		“Affiliate Machines” shall mean those machines and equipment owned or leased by an Affiliate and utilized by Accretive in performing the Services as set forth in Appendix A of each Affiliate Schedule.

	1.01.15		“Affiliate Proprietary Software” shall have the meaning set forth in Section 14.01.

	1.01.16		“Affiliate Schedule” shall mean an agreement by and among Ascension Health, an Affiliate, and Accretive that amends and supplements this MSA as to the Services to be provided to Affiliate by Accretive under this MSA, a form of which is attached hereto as Exhibit 2.

	1.01.17		“Affiliate Service Locations” shall mean the service locations owned, leased, or under the control of an Affiliate that are set forth in Appendix B to the applicable Affiliate Schedule from which Services

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are provided as may be modified from time to time pursuant to Article 11.

	1.01.18		“Affiliate Software” shall mean the Affiliate Proprietary Software and the Affiliate Third Party Software, collectively.

	1.01.19		“Affiliate Term” shall have the meaning set forth in Section 2.02.

	1.01.20		“Affiliate Third Party Software” shall have the meaning set forth in Section 14.01.

	1.01.21		“Ascension Health Agents” shall mean the subcontractors and agents of Ascension Health and the respective Affiliate(s).

	1.01.22		“Ascension Health Data” shall mean all data and information submitted to Accretive by Ascension Health or Affiliates or acquired by Accretive in connection with the Services.

	1.01.23		“Average Wage Increase” shall mean the average annual increase provided by a respective Affiliate to its non-clinical staff. For purposes of this definition, non-clinical staff shall mean employees not engaged in direct patient care.

	1.01.24		“Base Case” shall mean the financial summary prepared by Ascension Health and Accretive reflecting each Affiliate’s actual and budgeted expenditures for performing the Services during the year preceding the Affiliate Effective Date as shall be set forth in each Affiliate Schedule as Appendix D. Accretive and the Affiliate shall meet [] and [] after the respective Affiliate Effective Date to substantiate and verify the accuracy of the Base Case and make mutually agreeable revisions resulting in an amendment of the Base Fee. To the extent that the Base Fee is adjusted pursuant to this Section, the adjustment will be retroactive to the Affiliate Effective Date. To the extent that the Base Fee is increased the retroactive adjustment will be reflected on the next Base Fee invoice and to the extent the Base Fee is decreased then the retroactive adjustment will be reflected as a credit on the next Base Fee invoice. If the Affiliate and Accretive disagree on revisions to the Base Case, the Joint Review Board shall meet to discuss and agree to changes to the Base Case.

	1.01.25		“Claim” shall mean any claim, action, suit, proceeding, arbitration, or Governmental or Regulatory Authority investigation. “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official, or other instrumentality of the United States or any state, county, city, or other political subdivision or any hospital accrediting agency.

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	1.01.26		“Confidential Information” shall mean all confidential information and documentation of Accretive, Ascension Health and each Affiliate, including (a) with respect to Ascension Health and Affiliates, all Ascension Health Data and other information of Ascension Health and Affiliates or its customers that is not permitted to be disclosed to third parties under applicable laws and regulations and (b) the terms of this MSA.

	1.01.27		“Contract Employees” shall have the meaning set forth in Section 5.01.

	1.01.28		“Designated Sponsor” shall mean the individual designated by an Affiliate to be responsible for oversight and decision-making on behalf of that Affiliate relating to an Affiliate Agreement.

	1.01.29		“Dormant Receivable” shall mean any unpaid patient balance which:

	a)		remains unpaid on the 366th day following the date the invoice reflecting such unpaid patient balance was issued; and

	b)		which is not the subject of a paid-to-date, current financial payment plan between the patient and an Affiliate; and

	c)		has either been referred to an independent third party collection agency which has failed to secure payment and has returned the account to the Affiliate or has been the subject of diligent collection efforts by Accretive, to the reasonable satisfaction of Affiliate, which have not resulted In payment.

	1.01.30		“Federal Health Care Program” shall mean the Medicare program, TRICARE, the Medicaid program, the Maternal and Child Health Services Block Grant program, the Block Grants for State for Social Services program, any state Children’s Health Insurance program, or any similar program.

	1.01.31		“Fees” shall mean the Fees set forth in Section 18.

	1.01.32		“Final Service Date” shall mean the last date Accretive provides Services for an Affiliate or Ascension Health.

	1.01.33		“Force Majeure Event” shall mean any failure or delay of a party due to fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions in the United States, strikes, lockouts, or labor difficulties, court order, third party nonperformance (except the non-performing party’s subcontractors or agents other than as a result of an event that would otherwise be a Force Majeure Event to the parties), health facility emergency or action affecting access to or use of the Affiliate Service Locations, or any other similar cause beyond the reasonable control of

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such party and without the fault or negligence of such party; provided that such failure or delay could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the nonperforming party through the use of alternate sources, disaster recovery plans and procedures, work around plans, or other means.

	1.01.34		“Interest” shall mean the Prime Rate published in the Wall Street Journal (or similar publication if the Wall Street Journal ceases to publish such a rate) which is determined by the Wall Street Journal utilizing the base rate posted by 75% of the nation’s largest banks from time to time.

	1.01.35		“Joint Review Board” shall mean the joint review board as set forth in Section 13.01.

	1.01.36		“Key Accretive Staff’ shall mean the Accretive Staff members who are designated pursuant to Section 12.01.

	1.01.37		“Master Contract Year” shall mean each consecutive twelve (12)- month period commencing on the Master Effective Date or the anniversary of the Master Renewal Date during the Master Term.

	1.01.38		“Master Renewal Date” shall mean January 1, 2008

	1.01.39		“Master Services Agreement,” or “MSA” shall mean this Master Services Agreement, the Affiliate Schedules, the Exhibits, the Appendices, renewed and extended on November ___, 2007 and all amendments thereto. With respect to an Affiliate, MSA shall mean the Master Services Agreement, the Affiliate Schedule applicable to such Affiliate, the Exhibits, the Appendices, and all amendments thereto.

	1.01.40		“Master Term” shall mean the period from the Master Renewal Date until December 31, 2012.

	1.01.41		“Operating Protocols” shall mean the operating protocols attached hereto as Exhibit 3 as they may be amended from time to time.

	1.01.42		“Performance Guaranty” shall have the meaning set forth in Section 19.06 of this MSA.

	1.01.43		“Quarter” shall mean the periods beginning January 1, April 1, July 1, and October 1 and ending March 31, June 30, September 30, and December 31 respectively, except as provided below. At the commencement of Services to any Affiliate, Quarter shall mean that period of time between the Affiliate Effective Date and the beginning of the next Quarter as defined above.

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	1.01.44		“Related Entity” or “Related Entities” shall mean any entity or entities in which either Accretive, Ascension Health or any Affiliate (as the context requires): (i) is its sole corporate member; (ii) owns more than a 20% ownership interest; or (iii) has voting control of the membership interests or managing board.

	1.01.45		“Retained Resources” shall mean those assets or obligations retained by an Affiliate, and for which Accretive will have responsibility for managing, administering, and maintaining.

	1.01.46		“Retained Resources Agreements” shall mean those agreements for the Retained Resources, copies of which shall be provided to Accretive by the respective Affiliate (e.g. unassigned equipment leases and third party services agreements).

	1.01.47		“Retained Resource Vendor” shall mean a party obligated to provide resources or services to an Affiliate under a Retained Resources Agreement.

	1.01.48		“Roll-Out Plan” shall have the meaning set forth in Section 4.01.

	1.01.49		“Service Locations” shall mean those Affiliate Service Locations and Accretive Service Locations and such other locations designated by Ascension Health as agreed upon by the parties pursuant to Section 11.01 from which the Services are provided.

	1.01.50		“Services” shall have the meaning set forth in Section 3.02 and the Operating Protocols.

	1.01.51		“Site(s)” shall mean the locations or facilities of an Affiliate identified in Appendix C of the respective Affiliate Schedules and to which Accretive will provide the Services specified in such Affiliate Schedule.

	1.01.52		“Software” shall mean object or executable code and related documentation customarily supplied with such code. Software does not include source code and related documentation unless otherwise expressly indicated.

	1.01.53		“Termination Assistance Services” shall mean (1) the cooperation of Accretive with Ascension Health in effecting the orderly transfer of the Services to a third party or the resumption of the Services by the respective Affiliate upon request by Ascension Health and (2) the performance by Accretive of such services as may be requested by Ascension Health in connection with the transfer of the Services to a third party or the resumption of the Services by the respective Affiliate.

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	1.02		References. This Master Services Agreement is one contract that consists of a Master Services Agreement, Affiliate Schedules, and Exhibits, Appendices, and Schedules to the foregoing together with any existing and future amendments, modifications and supplements however denominated to any of the foregoing. All references to, and mentions of, this MSA shall include all of the foregoing, unless the context clearly requires otherwise. References to any law shall mean references to the law in changed or supplemented form or to a newly adopted law replacing a previous law.

	1.03		Headings. The article and section headings and the table of contents are for reference and convenience only and shall not be considered in the interpretation of this MSA, or the Affiliate Schedules. References in this document to section numbers are references to section numbers in the MSA unless the context otherwise requires.

	1.04		MSA, and Affiliate Schedules. The terms and conditions set forth in this MSA will govern Accretive’s provision of Services to each of the Sites identified in the Affiliate Schedules, except as may be amended by an Affiliate Schedule in respect of the Site covered by such Affiliate Schedule. Ascension Health may invite Accretive to bid on providing services to existing and additional Related Entities. If Accretive is selected as the vendor to provide services to any Related Entity, such Related Entity and Accretive shall enter into an Affiliate Schedule.

	1.05		Interpretation of Documents. In the event of a conflict between this document and any Affiliate Schedule, the terms of the Affiliate Schedule shall prevail with respect to such Affiliate.

Article 2. TERM

	2.01		MSA. The term of this MSA shall commence on the Master Renewal Date and continue until the end of the Master Term, unless this MSA is otherwise extended or renewed pursuant to this Article 2 or terminated earlier pursuant to Article 27 (the “Master Term”). The MSA shall automatically renew for successive one (1) year terms unless either party provides notice not to renew pursuant to Section 27.04.

	2.02		Affiliate Schedule. The initial term of an Affiliate Schedule shall commence on the Affiliate Effective Date and shall continue for a period of five (5) years and will automatically renew for successive one (1) year terms thereafter unless either Ascension Health or Accretive provides notice not to renew pursuant to Section 27.04 (the “Affiliate Term”). In no event will an Affiliate Schedule survive expiration of this MSA.

Article 3. SERVICES

3.01

Appointment of Accretive. Ascension Health hereby appoints Accretive as the provider of the revenue cycle services set forth in this MSA and Accretive accepts such appointment and agrees to provide the Services on the terms and conditions stated herein.

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(a)

Services. Commencing as of the Affiliate Effective Date and continuing throughout the Affiliate Term, Accretive shall provide to the Affiliates: (1) revenue cycle services as more specifically set forth in the Standard Scope of Services established in the Operating Protocols, unless otherwise provided for in the Affiliate Schedule; (2) services otherwise identified in this MSA as being part of the Services; (3) services (but not staffing levels) included in the Affiliate Base Case, to the extent such services can be objectively demonstrated to be “in-scope” by Affiliate from an examination of the Affiliate Base Case and its supporting documentation prepared in the normal course of business; and (4) tasks, functions and responsibilities not specifically described but inherent in and incidental to the performance of matters described in the MSA ((1) through (4) collectively, the “Services”). It is contemplated by the parties that Accretive Health may develop additional service offerings beyond those identified as Services. Accretive Health agrees to present a summary of those service offerings for review and approval to Ascension Health prior to presenting those offerings to an Affiliate.

	3.02		Delegation of Authority. Subject to the (i) direction of the Board of Trustees and senior management of an Affiliate that executes an Affiliate Schedule under this MSA and (ii) the terms and conditions of this MSA and the applicable Affiliate Schedule, Ascension Health and an Affiliate that executes an Affiliate Schedule delegate to Accretive the authority to conduct, manage, supervise and coordinate all aspects of the day-to-day operation of the revenue cycle operations services for Affiliates as of the Affiliate Effective Date. Notwithstanding the foregoing, the Board of Trustees of a respective Affiliate and such Affiliate shall retain complete responsibility for the overall supervision and control of the business, assets and properties of the Affiliate. The Board of Trustees of the Affiliate shall exercise all policy decisions in accordance with the fiduciary obligations customarily residing with such a board and subject to the requirements of state and federal laws. Accretive shall perform all of its duties and obligations under this MSA reporting to the Affiliate’s Designated Sponsor and in conformity with the policies and procedures of the respective Affiliate, as adopted by the Affiliate from time to time.

	3.03		Compliance. All Services shall comply with all applicable laws, regulations and authority.

	3.04		Recordkeeping. Accretive will supervise the preparation and maintenance of all files and records related to the Services provided to each Affiliate including, but not limited to, patient accounting, billing, patient records and collection records. The preparation and management of the foregoing files and records shall comply with applicable state and federal statutes and with all applicable policies and procedures of Affiliate. All records shall be retained by Accretive in accordance with Affiliate’s record retention policies and applicable law. As part of the Services, Accretive shall upon (1) Affiliate’s request, or (2) the cessation of the Termination Assistance Services pursuant to each Affiliate Schedule or this MSA, except as otherwise agreed to by the parties, (a) Accretive shall promptly return to

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			Affiliate, in the format and on the media in use as of the date of the request, all or the portion requested of the records applicable to the Services. With the exception of patient care records which shall be returned to Affiliate as provided herein, in the event such records cannot be returned to Affiliate, Accretive shall erase or destroy all or a portion of Ascension Health Data in Accretive’s possession prior to the cessation of the Termination Assistance Services pursuant to each Affiliate Schedule. As part of the Services, Accretive shall maintain backup files and microfiche in accordance with applicable laws and regulations, each Affiliate’s policies and procedures in a manner mutually agreed upon by Accretive and the respective Affiliate.

	3.05		Return of Data. Archival tapes or other media utilized by Accretive and containing any Affiliate records or Ascension Health Data shall be used solely for back-up purposes and shall be returned or destroyed pursuant to this Section 3.05.

	3.06		Tax Exempt Status and Charity Care Policies. The parties expressly acknowledge that in furtherance of its charitable mission Ascension Health and the Affiliates have charity care and billing and collection policies, procedures and guidelines.(“Charity Care Policies”). Such policies may apply to both insured and uninsured patients and may require discounts to be given to both patients in financial need and those who are not. As of the Master Effective Date, the Ascension Charity Care Policies are referred to as Ascension Health policies 9 and 16. Additionally, certain Affiliates may have Charity Care Policies which supplement the charity care that would be provided for by policies 9 and 16. Accretive agrees to abide by: (a) all charity care and billing and collection policies of Ascension Health, or any amendment, replacements or additions thereto, (e.g. currently policies 9 and 16),and (b) all charity care and billing and collection policies of Affiliates, or any amendment, replacements or additions thereto, which are consistent with Ascension Charity Care Policies. The parties further agree that there will be no targeting of uninsured patients in the course of implementing charge master and pricing initiatives. The parties acknowledge that Ascension Health and each of the Affiliates are organizations that are exempt from federal tax under Section 501(c)(3) of the Internal Revenue Code and that notwithstanding any other provision of this MSA, neither Ascension Health nor any of the Affiliates shall be required to take any action or perform in a manner which jeopardizes their respective tax-exempt status.

	3.07		Discretion to Bill. The parties expressly acknowledge that in furtherance of Affiliates’ operations, Affiliates reserve the right to waive or adjust fees charged for services to the respective Affiliate’s patients.

	3.08		Accretive Licenses and Permits. As part of the Services, Accretive is responsible for obtaining, and has financial responsibility for, all necessary licenses, consents, approvals, permits, and authorizations required by applicable legislative enactments and regulations to be obtained in order to perform the Services. Affiliate shall reasonably cooperate with and assist Accretive in obtaining any such licenses, consents, approvals, permits, and authorizations.

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3.09

Accretive Processes. As part of the Services, Accretive shall regularly update the tools, utilities, processes, methods, and procedures used by Accretive to provide the Services to the extent they are generally upgraded for other customers of Accretive without additional charge and are applicable to the Services provided under this MSA. Where not otherwise specified in this MSA, Accretive will perform the Services using processes, documentation and methodologies designed to improve delivery of the Services.

Article 4. STARTUP OF OPERATIONS

	4.01		Roll-Out Plan. As part of the Services and before execution of the respective Affiliate Schedule or within the period of time specified in the respective Affiliate Schedule, Accretive shall develop, upon Affiliate’s approval, a detailed roll-out plan in accordance with the Operating Protocols (the “Roll- Out Plan”). Accretive and Affiliate shall work collaboratively to assure the successful implementation of the Roll-Out Plan.

	4.02		Ascension Health and Affiliate Review and Participation. Accretive shall allow Ascension Health and the respective Affiliate to monitor, test, and otherwise participate in the startup of operations as, from time to time, requested. The highest level Accretive Employee responsible for an Affiliate’s roll-out shall periodically meet at regular intervals with such Affiliate’s Designated Sponsor until completion of the Roll-Out Plan in order to review the status of the Roll-Out Plan.

	4.03		Negative Impact. Accretive shall implement the startup of operations without causing an unplanned material disruption of Affiliate’s operations (which may be caused by but is not limited to, errant billing; disruption of communication with patients, physicians, health plans, etc.; or failure to comply with laws and regulations). To the extent an unplanned material disruption occurs due to a delay, other than a delay that is excused because it: (i) is not caused by Accretive (which includes Affiliates insistence upon a provision in the Roll- Out Plan over the written objections of Accretive); (ii) has been consented to by Affiliate in writing; or (iii) is an event of Force Majeure affecting the transition, Accretive shall reimburse Ascension Health or the respective Affiliate for the “public relations cost” (and no such cost shall be deemed Consequential Damages) incurred to mitigate the impact to Affiliate’s employees, medical staff, contractors, and patients of the delay. The parties agree that “public relations costs” may include third party public relations costs, advertising and publications costs related to communications regarding the delay and related items. The “public relations costs” shall not include any costs related to Ascension Health or Affiliate personnel or any costs related to any communication through an existing Ascension Health or Affiliate communication vehicle. The “public relations costs” paid under this MSA shall not exceed $250,000.00 in any eighteen (18) month period. Accretive, Ascension Health and Affiliate shall reasonably cooperate with each other to coordinate any such public relations efforts.

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4.04

Transfer of Leases and Agreements. On the respective Affiliate Effective Date Accretive shall assume the agreements set forth on Appendix E of the respective Affiliate Schedule (“Assigned Agreements”). Accretive may, to the extent permitted by the Assigned Agreements, renew, modify, terminate or cancel, or request or grant any consents or waivers under, any Assigned Agreements. Any modification, termination or cancellation fees or charges, liabilities or other obligations imposed upon Affiliate in connection with any modification, termination or cancellation of, or consent or waiver under, any Assigned Agreements that are made or requested by Accretive shall be paid or performed by Accretive. Accretive shall pay the invoices submitted by third parties in connection with the Assigned Agreements to the extent the invoices relate to periods arising on or after the Affiliate Effective Date. Affiliate shall pay the invoices submitted by third parties in connection with the Assigned Agreements, to the extent relating to periods arising prior to the Affiliate Effective Date(s). In the event that any Assigned Agreement cannot be assigned on the applicable Affiliate Effective Date(s) due to time constraints, the respective Affiliate shall be responsible for the payment of the invoices submitted by third parties and Accretive shall reimburse such Affiliate for such amounts as relate to periods on or after the applicable Affiliate Effective Date(s).

Article 5. STAFFING

5.01

Contract Employees . As of each Affiliate Effective Date, Accretive shall lease from the respective Affiliate those Affiliate employees listed in Appendix H to the respective Affiliate Schedule (“Contract Employees”), on an exclusive basis. Contract Employees shall be considered for all purposes to be employees of the respective Affiliate and not of Accretive, and the respective Affiliate shall have sole responsibility for the following:

	5.01.01		Pay all wages, bonuses, if any , and other remuneration and all applicable federal, state, municipal and other governmental taxes with respect to the employment of the Contract Employees, including, without limitation, social security, federal and/or state unemployment compensation taxes.

	5.01.02		Maintain payroll records and reports.

	5.01.03		Have all responsibility for any retirement, health, life, disability or similar employee benefit for the Contract Employees, including vacation or sick days or holidays that may be offered by Affiliate pursuant to its standard policies, procedures, and plans.

	5.01.04		Accretive and Affiliate shall review and revise the roster of Contract Employees listed on Appendix H of each Affiliate Schedule on a bi weekly basis and shall adjust the lease payment to be paid to the respective Affiliate by Accretive pursuant to paragraph 5.07 below, as specified in the applicable Affiliate Schedule.

5.02

Accretive will have the following rights with respect to Contract Employees:

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	5.02.01		The right to control and direct the work activities of the Contract Employees relating to the Services and subject to its obligations under paragraph 5.05 below. In exercising such right, which may include a request to remove or discipline a Contract Employee, Accretive shall comply with the respective Affiliate’s policies and procedures regarding progressive discipline, as well as, all other applicable personnel policies, procedures, and/or collective bargaining agreements. Prior to removing or disciplining a Contract Employee, Accretive shall consult and work with Affiliate to ensure the removal of the Contract Employee from providing Services under this MSA and/or discipline of a Contract Employee is conducted in a manner consistent with Affiliate’s applicable policies, procedures, and/or collective bargaining agreements. In the event Affiliate objects to the Contract Employee being removed or disciplined, Affiliate may submit the matter to the Joint Review Board for further discussion and prompt resolution. Any request by Accretive to remove an individual from the roster shall not be deemed to constitute or require a termination of such individual’s employment by Affiliate, and in no event shall Accretive be deemed an employer of any such person.

	5.02.02		The right to reassign a Contract Employee to a comparable position in pay, benefits, and/or duties providing Services to the respective Affiliate consistent with Affiliate’s personnel policies and procedures and any applicable collective bargaining agreement. Reassignment to a position with non-comparable pay, benefits, and/or duties shall be subject to the process established in Section 5.02.01.

	5.02.03		The right to determine whether or not a Contract Employee who ceases employment with Affiliate, or who transfers under Affiliate’s customary policies and procedures to an area not subject to Accretive’s Services, should be replaced and whether the replacement should be by an Accretive employee or an Affiliate Contract Employee. In the event that Accretive determines that the position is to be filled by adding a new Contract Employee to the roster, and that individual will be a new hire for Affiliate, Affiliate shall have the right to approve the hiring of the Contract Employee and the Contract Employee’s terms and conditions of employment, including, but not limited to, pay and benefits. In the event an Affiliate objects to the manner in which Accretive exercises its rights under this Section 5.02.03, the Affiliate shall be permitted to submit the matter for consideration to the Joint Review Board.

5.03

Contract Employee Payments. Accretive shall pay Affiliate for all employment-related costs, benefits and expenses arising out of the employment by the respective Affiliate of the Contract Employees identified in Appendix H of the Affiliate Schedule as it may be amended from time to time pursuant to the Operating Protocols. Payment shall be made by wire transfer or other mutually acceptable means in twenty-six (26) payments per year and shall be received by

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			Affiliate the day prior to each payroll for the respective Affiliate. Accretive shall not be responsible for any employment related costs not included in the determination of the Base Case unless required, authorized or approved in advance by Accretive.

	5.04		In the event that any portion of the Base Fee is held by Accretive in any account which is subject to investment risk, Ascension Health shall have the right to demand reasonable assurances that Accretive is able to make all Lease payments in a timely fashion and Accretive shall provide such assurance within three (3) business days. Accretive shall notify Ascension Health, in writing, in advance of the transfer or deposit of any component of the Base Fee into an account subject to investment risk. Failure of Accretive to provide reasonable assurances as set forth in this Section shall entitle Ascension Health to require that Accretive escrow funds sufficient to satisfy Accretive’s Employee Reimbursement payment through the end of the Quarter within ten (10) days of this request for reasonable assurance.

	5.05		Contract Employees shall be subject to all personnel policies and regulations applicable to Affiliate’s employees generally, including, but not limited to, time off with or without pay, and leaves of absence under the Family and Medical Leave Act. While Contract Employees are providing Services hereunder, Accretive shall maintain a safe, healthy and non-discriminatory working environment in compliance with all applicable laws and regulations and shall indemnify Ascension Health and Affiliate for its failure to do so pursuant to Section 30.02. Likewise, each Affiliate shall maintain a safe, healthy and non-discriminatory working environment in compliance with all applicable laws and regulations and shall indemnify Accretive for its failure to do so pursuant to Section 30.01. Accretive shall honor and observe all obligations of a respective Affiliate provided for in any collective bargaining agreement which govern the employment of any Contract Employees as it relates to the employees covered by the particular collective bargaining agreement, and shall indemnify and hold a respective Affiliate harmless for its failure to do so pursuant to Section 30.02.

	5.06		Departmental Policies and Compensation Plan. On behalf of the respective Affiliate and subject to the approval of an Affiliate prior to implementation, Accretive shall be responsible for developing and implementing performance management policies and practices for the Affiliate’s Contract Employees which are designed to achieve the performance objectives necessary to fulfill the objectives of this MSA. Subject to the approval of the Affiliate, Accretive shall also be responsible for developing and implementing a compensation plan for Contract Employee’s which supports the performance management policies discussed above (the “Compensation Plan”). The Compensation Plan shall set forth, at a minimum, the manner in which annual pay increases shall be determined, the manner in which compensation for overtime service will be determined and any other matters which impact the compensation of a Contract Employee. Affiliate shall not unreasonably withhold or delay its approval of the performance management policies and compensation plans contemplated by this paragraph. The Affiliate shall have the right to review changes in individual

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			compensation of Contract Employee’s in advance to assure that the proposed changes are consistent with the Compensation Plan. Accretive agrees that its Compensation Plan will not violate any Affiliate personnel policy, regulation or collective bargaining agreement.

	5.07		Contract Employee Compensation Adjustments. If a Contract Employee’s compensation is adjusted under the terms of the applicable Compensation Plan, Accretive shall provide Affiliate with an amended Appendix H reflecting the adjustment at least ten (10) days prior to the effective date of the compensation adjustment and the reimbursement provided by Accretive pursuant to Section 5.03 above shall be adjusted accordingly.

	5.08		Severance Payments. In the event a Contract Employee is designated for removal from the roster by Accretive and Affiliate elects to terminate the Contract Employee within ninety (90) days of the date the employee was designated for removal from the roster, Accretive shall reimburse Affiliate for any separation payments made to the employee pursuant to the Affiliate’s applicable personnel policies, exclusive of accrued vacation, PTO or sick leave, up to a maximum of 90 days.

	5.09		Increases in Compensation. Accretive agrees that the average annual percentage increase in compensation of Contract Employees will be [**] the Average Wage Increase.

	5.10		Accretive Employees. All Accretive Employees shall be qualified and competent to render Services under this MSA, and shall provide Services in compliance with (i) all applicable state, federal and local laws and regulations, (ii) the requirements of all regulatory and/or accrediting agencies and third party payors applicable to the respective Affiliate, including Joint Commission on Accreditation of Healthcare Organizations (“JCAHO”), and (iii) the applicable policies, procedures and applicable collective bargaining agreements of the Affiliate. With respect to Accretive Employees, Accretive shall:

	5.10.01		Pay all wages, bonuses, if any, and other remuneration and all applicable Federal, state, municipal and other governmental taxes with respect to the employment of the Accretive Employees, including, without limitation, social security, federal and/or state unemployment compensation taxes.

	5.10.02		Maintain payroll records and reports.

	5.10.03		Have all responsibility for any retirement, health, life, disability or similar employee benefit for Accretive Employees, including vacation or sick days or holidays.

5.11

While at the Affiliate Service Locations, Accretive Employees shall (1) comply as requested with standard rules and regulations of Affiliate regarding personal and professional conduct (including the wearing of a particular uniform, identification badge, or personal protective equipment and adhering to health care facility regulations which in some instances may include drug screen, tuberculosis testing (or other communicable disease testing required by law) and general safety practices or procedures) generally applicable to such Affiliate Service Locations, and (2) otherwise conduct themselves in a businesslike manner. In the event that Affiliate determines in good faith that the continued assignment of one or more Accretive Staff is not in the best interests of Affiliate (and provided the basis for

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			such determination is not prohibited by law), Affiliate shall consult with Accretive to that effect. Upon such consultation, Accretive shall have a reasonable period of time in which to investigate the matters stated in such notice, discuss its findings with Affiliate and resolve the problems with such person. If Affiliate and Accretive can not agree on the disposition of the matter it shall be referred to the Joint Review Board for prompt resolution. In the event that the Joint Review Board determines that the Accretive employee should be removed, Accretive shall replace that person with another person of suitable ability and qualifications. However, under circumstances where an Accretive Employee’s continued presence at an Affiliate would be particularly disruptive to the Affiliate’s operations or would pose a risk to Affiliate, its employees, or patients, Affiliate shall have the right to demand and Accretive must immediately remove such individual(s) from Affiliate’s account pending such investigation and discussion. In any event, any request by Affiliate to remove an individual from Affiliate’s account shall not be deemed to constitute or require a termination of such individual’s employment by Accretive and in no event shall Affiliate be deemed an employer of any such person.

			In the event that Accretive believes that an Affiliate’s requests for reassignment of Accretive employees under this paragraph are unreasonable or excessive, it shall have the right to refer the issue directly to the Joint Review Board for discussion.

Article 6. APPOINTMENT AS ATTORNEY IN FACT

6.01

Affiliate shall sign a power of attorney, and shall cause all entities for which Accretive is performing Services through an Affiliate (“Eligible Entities”) for whom Accretive will perform Services to sign a power of attorney, in the form attached hereto as Appendix L to Exhibit 1, to authorize Accretive to process medical claims of Affiliate and Eligible Entities and to receive and deposit funds from third party payors, including self pay patients, into accounts controlled by or in the name of Affiliate or the Eligible Entities which power shall be subject to review by the Affiliate. Accretive agrees to execute any document or agreement reasonably requested by third parties or Affiliates to permit Accretive to perform the Services.

Article 7. AFFILIATE RESPONSIBILITIES

7.01

Affiliate shall be responsible for:

7.01.01

Except for payment to Affiliate by Accretive for certain occupancy expenses to be set forth in Appendix I (“Reimbursement for Occupancy Expenses”) of the respective Affiliate Schedule, Affiliate will make available at no cost to Accretive the Affiliate Service Locations set forth on Appendix B of the applicable Affiliate Schedule for the time periods set forth in such Appendix, which Appendix may be amended from time to time by the respective Affiliate. Affiliate shall also make available to Accretive any on-site and off-site storage currently used by Affiliate in connection with the

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			Services. Affiliate shall furnish standard office furnishings and services, including janitorial services of the same quality as it provides its own staff, at the Affiliate Service Locations, from time to time. (The specified space and the associated storage space are collectively the “Affiliate Facilities”).

	7.01.02		With respect to the Affiliate Facilities, Affiliate will manage and maintain as necessary the building and property including the structures, roof, exterior and interior walls, electrical systems, Internet access (to the extent available at the Affiliate Service location on the respective Affiliate Effective Date), telephone service, water, sewer, lights, heating, ventilation and air conditions (HVAC) systems, physical security systems, fire suppression systems, general custodial services and other infrastructure components relating to the Affiliate Service Locations.

	7.01.03		Accretive may not provide services to other customers from Affiliates Facilities without Affiliate’s consent. Accretive’s use of Affiliate Facilities shall not constitute a leasehold or other property interest in favor of Accretive. To the extent Accretive’s use of Affiliate Facilities materially increases Affiliate’s facility or other costs, Affiliate reserves the right to charge Accretive for such excess costs after reasonable consultation with Accretive. Affiliate shall have the option at any time during the Master Term of relocating the Accretive Staff, other employees, and subcontractors located in such office space provided by Affiliate to another comparable location or facility; provided that such relocation shall not require a move by Accretive Staff of more than twenty miles from the original Affiliate Facilities. Affiliate shall be responsible for any disruption or degradation in Services directly resulting from any relocation, and shall reimburse Accretive’s relocation costs and expenses.

	7.01.04		Affiliate warrants that throughout the Affiliate Term: (i) the Affiliate Facilities will comply with applicable health and safety laws and regulations; (ii) Affiliate will obtain and maintain any necessary permits and approvals for Accretive’s use as contemplated by this MSA; and (iii) the use as contemplated by this MSA will not be an unlawful purpose or act or violate any insurance policy or lease which is currently or which in the future may be in effect; and (iv) Affiliate will satisfy the requirements for Affiliate performance contemplated by the Operating Protocols.

	7.01.05		Notwithstanding the foregoing, neither party intends Accretive’s interest in the Affiliate Facilities to be deemed or construed to be a lease or other interest in real property, but rather a revocable license. Accretive’s right to quiet enjoyment shall be subject to such disruption as required by applicable laws, regulations and rules or generally accepted hospital operation protocols. In the event of such

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			disruption, Accretive shall be relieved of service levels and other obligations to the extent that the effect of the disruption cannot be mitigated through commercially reasonable methods at no additional cost to Accretive.

	7.01.06		Accretive Staff and Accretive Agents will not commit or permit waste or damage to the Affiliate Facilities, and, subject to Affiliate’s warranties, not use the Affiliate Facilities for any unlawful purpose or act. Accretive Staff and Accretive Agents will comply with Affiliate’s reasonable building policies and procedures as made available to Accretive regarding access to and use of the Affiliate Facilities, including procedures for the physical security of the Affiliate Facilities.

	7.01.07		Accretive will not make any improvements or changes involving structural, mechanical or electrical alterations to the Affiliate Facilities without Affiliate’s prior written approval. At Affiliate’s option, any such alterations shall be made by Affiliate or its agents and subcontractors.

	7.01.08		Affiliate will make available [**] to Accretive the assets which were used prior to each respective Affiliate Effective Date to perform the services previously performed by the Contract Employees. Subject to Ascension Health’s capital allocation process, Affiliate will be responsible for replacing capital items provided by Affiliate pursuant to the prior sentence utilized by Accretive in performing the Services, as well as, upgrades of technology applications. Notwithstanding the foregoing, Accretive will be responsible for acquiring any new assets to support its own operations, including for the development of any interfaces between Accretive Tools and Affiliate’s systems.

7.02

Savings Clause. Affiliate’s failure to perform any of its responsibilities set forth in the MSA shall be referred to the Joint Review Board for corrective action.

Article 8. THIRD PARTY CONTRACT ADMINISTRATION AND MANAGEMENT

8.01

Accretive Responsibilities. Accretive shall be responsible for acting on behalf of the respective Affiliate to manage, administer and maintain the Retained Resources Agreements, as itemized on Appendix F of the applicable Affiliate Schedules. Accretive shall not modify, change or terminate Affiliate’s responsibilities as to the Retained Resources without first obtaining the consent of the respective Affiliate (which shall not be unreasonably withheld). Accretive shall, at least once every ninety (90)-day period during the applicable Affiliate Term, review and revise the applicable Appendix F in order to determine whether any Retained Resources Agreement may be terminated, modified or assigned to Accretive; provided, however, no such termination, modification, or assignment shall occur without the prior written consent of the respective Affiliate. Subject to Affiliate’s right to consent, Affiliate shall cooperate with Accretive in performing

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such review and either terminating, modifying or assigning the Retained Resources Agreements. Subject to Ascension Health’s capital allocation process, [**] shall be responsible for the cost of maintaining, servicing and refreshing the equipment and software which is subject to a Retained Resources Agreement on a commercially reasonable basis. As part of the Services, Accretive shall provide Affiliate reasonable notice of any renewal, termination, or cancellation dates and fees in respect of the Retained Resources Agreements. Accretive shall submit to Affiliate any proposals to modify, terminate, or cancel any Retained Resources Agreements, to the extent permitted by such Retained Resources Agreement. Any fees or charges imposed upon Affiliate under a Retained Resources Agreement and in connection with any such modification, termination, or cancellation of such Retained Resources Agreement shall be paid by [**], who shall be financially responsible for all such fees and charges except for penalties and charges which are [**] responsibilities under Section 8.03 below.

8.02

Performance Under Retained Resources Agreements. Accretive and applicable Affiliate shall promptly inform the other party of any known material breach of, fraud or material misuse in connection with, any Retained Resource Agreements arising after the applicable Affiliate Effective Date and shall cooperate with the other party to prevent or stay any such breach, misuse, or fraud.

8.02.01

As an agent of Affiliate, Accretive shall manage the Retained Resources Agreements in accordance with their terms, provided that the need for additional personnel to manage any expansion of such Retained Resources Agreements or activity there under shall be subject to review by the Affiliate with written consent of the Designated Sponsor. Accretive shall not be liable for the failure of any party to a Retained Resource Agreement to meet the specific contractual obligations of a Retained Resources Agreement; provided, however, that Accretive shall notify Affiliate of known deficiencies or other known failures to perform by any Retained Resource Vendor, and shall assist Affiliate in their appropriate resolution. In addition to any other reason for excused performance, if (i) a Service Level or Performance Guaranty failure of Accretive is directly attributable to the failure of a Retained Resource Vendor to perform, (ii) Accretive promptly notifies Affiliate that such Retained Resource Vendor is failing to so perform and such failure will impair Accretive’s ability to meet its corresponding Service Level or Performance Guaranty obligation, and (iii) Accretive uses reasonably diligent efforts to meet such Service Levels or Performance Guaranty notwithstanding such failure by the applicable Retained Resource Vendor, then, in such event, Accretive shall be excused from its failure to meet the Service Level or Performance Guaranty. To the extent, if any, Accretive has any rights with respect to the effect of performance under a Retained Resources Agreement under this Article 8, Accretive shall be subrogated to Affiliate’s rights under such Agreement and Affiliate will provide all necessary cooperation in order to allow Accretive to exercise such rights. The parties shall discuss continuing

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performance and material non-compliance issues with respect to any Retained Resource Vendor as part of their normal meeting schedule.

8.03

Third Party Invoices. Accretive shall (1) receive all invoices for Retained Resources Agreements, (2) review and make reasonable commercial efforts to correct any errors in any such invoices in a timely manner, and (3) if received in sufficient time, submit such invoices to Affiliate for payment within a reasonable period of time prior to the due date or, if a discount for such payment is given, the date on which Affiliate may pay such invoice with a discount. Accretive may, in its discretion, tender an invoice for payment while it undertakes its review or works to correct any errors or discrepancies. Affiliate shall pay the invoices for Retained Resources Agreements received and tendered by Accretive. Affiliate shall only be responsible for payment of the invoices for Retained Resources Agreements and shall not be responsible to Accretive for any management, administration, or maintenance fees of Accretive in connection with the invoices for Retained Resources Agreements. Affiliate shall be responsible for any late fees in respect of the invoices for Retained Resources Agreements; provided, however, that Accretive shall submit the applicable invoices to Affiliate for payment, or notified Affiliate of a disputed amount, within fifteen (15) business days after receipt by Accretive. If Accretive fails to submit an invoice for Retained Resources to Affiliate for payment, or fails to notify Affiliate of a disputed amount, within fifteen (15) business days after receipt by Accretive due to its fault or the fault of a party under its control, Accretive shall be responsible for any late fees in respect of such invoice.

Article 9. CUSTOMER SATISFACTION AND PERFORMANCE REVIEW

	9.01		Patient Satisfaction Performance. If the Affiliate has historic performance tracking measurements for patient satisfaction which identifies the performance levels for the patient access and patient financial services functions, those performance measurements shall become the baseline performance measurements for patient satisfaction in these areas during the term of the Service Agreement and shall be tracked and reported with the same frequency as the historic period. If no such tracking measurements exist for the Affiliate, during the ninety (90)-day period after the Affiliate Effective Date and as part of the Services, Accretive and Affiliate shall establish a baseline performance measurements for these areas, a method for tracking patient satisfaction performance in these areas on an on-going basis and shall report on this performance to the Affiliate on a quarterly basis.

	9.02		Employee Satisfaction. If the Affiliate has historic measurements for employee satisfaction which identifies historic performance levels for the in-scope employees, those historic measurements shall become the baseline performance measurements for employee satisfaction during the term of the Service Agreement and shall be tracked and reported with the same frequency as the historic period. If no such tracking measurements exist for the Affiliate, during the ninety (90) day period after the Affiliate Effective Date, Accretive and the Affiliate shall conduct a survey and establish baseline performance measurements for employee

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satisfaction in these areas. Accretive and Affiliate will agree on a mechanism to conduct an annual survey with respect to employee satisfaction and will work collaboratively to review and respond to the results of that survey as appropriate.

	9.03		Accretive shall maintain or increase patient satisfaction as measured against the prior surveys conducted under this Article 9.

	9.04		The Joint Review Board shall periodically, but no less frequently than annually, monitor the activities and conduct of the parties with respect to the following:

	9.04.01		Quality of Services rendered by Accretive pursuant to the MSA;

	9.04.02		Any activity performed by Accretive under the MSA which might harm, reflect poorly on, or lower the reputation of Ascension Health or any of the Affiliates;

	9.04.03		Accretive’s adherence to corporate compliance and principles of integrity, and ethical practices as well as all applicable laws, rules, and regulations;

	9.04.04		The conduct of any activities that might jeopardize the tax-exempt status of Ascension Health, Affiliates, or their Related Entities.

9.05

Performance Levels. In the event that: (i) the patient satisfaction as measured in Section 9.01 falls below the baseline performance measurement as set in Section 9.01; (ii) the employee satisfaction as measured in Section 9.02 falls below the baseline performance measurement as established in Section 9.02; (iii) patient satisfaction is not maintained or increased as required by Section 9.03; or (iv) the Joint Review Board determines that activities and conduct of the parties as established in Section 9.04 are below required levels, then Accretive shall take the following actions.

	9.05.01		Conduct a root cause analysis to determine and document the cause of the failure.

	9.05.02		Provide the Joint Review Board with a report detailing the cause of, and procedure or steps for correcting such failure.

	9.05.03		Correct such failure utilizing the procedures and steps consented to by the Joint Review Board and within a timeframe mutually agreed to by the Joint Review Board.

	9.05.04		Provide the Joint Review Board with reasonable evidence that reasonable steps have been taken to avoid a recurrence of the issue giving rise to the inquiry.

	In the event Accretive does not correct the failures as required by Section 9.05.03 within the timeframe designated by the Joint Review Board, then Ascension Health may deem Accretive in material breach of this Agreement and may

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terminate the Affiliate Schedule for any Affiliate negatively impacted by such failure upon 180 days written notice.

Article 10. SERVICE LEVELS

	10.01		Ascension Health/Affiliate Service Levels. Ascension Health and Affiliates shall provide the Ascension Health/Affiliate Services at the Ascension Health/Affiliate service levels as set forth in the Operating Protocols. The parties acknowledge that Affiliates may not be performing in a manner consistent with the target service levels at the time of the Affiliate Effective Date. Accretive agrees to work with each Affiliate in the first ninety (90) days following the Affiliate Effective Date to develop a joint plan to satisfy or adjust the service levels to meet the needs of both Affiliate and Accretive.

	10.02		Adjustment of Service Levels. The Joint Review Board shall review during the last quarter of every Master Contract Year the adjustments to the service levels. Either Ascension Health, Affiliate, or Accretive may, at any time upon request to the other party, initiate negotiations to review and, upon agreement by the Joint Review Board, adjust any Service Level which such party in good faith believes is inappropriate at that time.

	10.03		Reports. As part of the Services, Accretive shall provide performance reports for each Quarter to Ascension Health and each Affiliate in a form agreed upon by Ascension Health and Accretive.

Article 11. SERVICE LOCATIONS

11.01

Service Locations. The Services shall be provided from the Service Locations. Accretive may modify Exhibit 1 to revise the Accretive Service Locations upon the written consent of Ascension Health, which shall not be unreasonably withheld or delayed. In addition, to the extent any Services for an Affiliate are to be provided by Accretive from one of the Accretive Service Locations set forth in Exhibit 1, such Accretive Service Locations shall be specified in Appendix G of the respective Affiliate Schedule. Accretive shall notify the Affiliate that Services are being delivered on its behalf from Service Location upon changes to Appendix G. Ascension Health may, in reviewing a request to amend Exhibit 1, take into consideration any issues or concerns it deems material to the consent including, but not limited to:

	11.01.01		Accretive’s ability to timely and satisfactorily provide the Services;

	11.01.02		Security protocols established to protect Ascension Health Data from unauthorized or unlawful access, use, or disclosure; and

	11.01.03		Privacy practices in place to protect Ascension Health Data from unauthorized or unlawful use or disclosure.

11.02

On request of Ascension Health, Accretive shall conduct a self-assessment, in the form provided by Ascension Health, of its provision of Services and its privacy

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and security practices. The self-assessment shall not be counted as an audit for purposes of Article 22. The self-assessment shall not be required more frequently than annually, provided, that if Ascension Health identifies material deficiencies in a self-assessment, it may request a follow- up self-assessment more frequently than annually to verify correction.

11.03

For the term of this MSA, Accretive shall continue to utilize the security protocols and privacy standards in place at each Service Location within 60 days of the adoption of the security protocol by the parties. Accretive shall, prior to implementation, supply Ascension Health with all material revisions to its security protocols and privacy practices for any or all Service Locations. If Ascension Health reasonably believes that such modifications will likely result in an increased risk of unauthorized or unlawful access, use, or disclosure of Ascension Health Data, Ascension Health may provide Accretive with its written objections to the revisions which objections will specify the details of the objection. Accretive shall, upon receipt of an objection from Ascension Health either: (i) modify the revisions to Ascension Health’s reasonable satisfaction; (ii) move the provision of Services to a Service Location where Ascension Health has not objected to the security protocols or security practices; or (iii) refer the matter to the Joint Review Board for guidance and resolution.

Article 12. PROJECT TEAM

	12.01		Accretive Staff Orientation. Accretive personnel dedicated to a site shall undergo orientation to acquaint them with the mission, history and culture of Ascension Health’s organization and the respective Affiliate to which they are assigned, which orientation shall either be performed by Affiliate personnel or subject to Ascension Health’s consent.

	12.02		Accretive Staff Orientation and Training. Accretive and each Affiliate shall, prior to the respective Affiliate Effective Date, mutually agree to the timing and manner of orientation and continuous training of Accretive Staff. Such orientation shall include: (i) providing the Accretive Staff with their obligations with respect to Affiliate’s policy and procedures; (ii) the corporate compliance programs of the respective Affiliate and Accretive; and (iii) training and education of Accretive Staff with respect to the foregoing.

	12.03		Subcontractors. Accretive shall not subcontract its material obligations under this MSA without Ascension Health’s prior written consent which may be granted or withheld at Ascension Health’s sole discretion. Ascension Health shall have the right to revoke its prior consent of a subcontractor if the subcontractor’s performance is materially deficient and is not cured after reasonable notice or material misrepresentations were made concerning the subcontractor at the time of Ascension Health’s prior consent. Accretive shall be responsible for obligations performed by its subcontractors and shall be Ascension Health’s sole point of contact. Accretive shall not disclose confidential information of Ascension Health or Affiliates to a subcontractor unless and until such subcontractor has signed an appropriate nondisclosure agreement. For purposes

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of this section, Ascension Health approval shall be deemed to be given for any subcontractor being utilized by an Affiliate as of the respective Affiliate Schedule’s Effective Date (but only with respect to the services that such subcontractor is then providing). For the purposes of this MSA, third party agreements including obligations relating to the license of software, use of software application service providers and third party service providers (e.g. collection agencies, disability vendors) where Accretive retains discretion and responsibility for outcomes are not subcontractors under this Section 12.03, provided, however, that vendors under such third party agreements shall constitute subcontractors for purposes of Section 30.02.03.

	12.04		Conduct of Affiliate Personnel. While at the Accretive Service Locations, Affiliate and its agents and subcontractors shall comply with Accretive’s reasonable security and safety rules and regulations generally applicable to such Accretive Service Location.

	12.05		Transfer of Billing Information. In providing Accretive with information regarding Affiliate’s payor contracts and fee schedule (the “Billing Information”) for purposes of Accretive providing the Services, Affiliate shall provide such Billing Information to Accretive Staff. Accretive shall seek to insulate such Accretive Staff receiving Billing Information to the greatest extent reasonably practicable from other Accretive customer’s rate-setting processes. Accretive Staff shall only disclose the Billing Information to appropriate Accretive Staff, on a need to know basis in order to perform the Services.

Article 13. GOVERNANCE AND RELATIONSHIP MANAGEMENT

13.01

The parties’ obligations and performance under this MSA shall be overseen by a joint review board (“Joint Review Board”) which will be responsible for oversight of the MSA, including reviewing strategic issues and resolving disputes between the parties. The Joint Review Board shall be composed of three (3) senior executives from each of Ascension Health and Accretive. The Joint Review Board will meet on a periodic basis as mutually agreed to by the parties.

Article 14. PROPRIETARY RIGHTS

14.01

Affiliate Software. To the extent permitted by the applicable contract in respect of the Affiliate Third Party Software, Affiliate, [**] hereby grants to Accretive and Accretive Agents for the limited purpose of providing the Services a nonexclusive, nontransferable, royalty-free right to (1) have access to, (2) copy for archival purposes or as may otherwise be required by this MSA or the applicable Affiliate Schedule, (3) modify as required by this MSA or the applicable Affiliate Schedule, and (4) sublicense subcontractors to do any of the foregoing for the same limited purpose: (a) any Affiliate proprietary software, including any related documentation in Affiliate’s possession on or after the applicable Affiliate Effective Date (the “Affiliate Proprietary Software”) and (b) any software licensed or leased by Affiliate from a third party that is used in connection with the Services on or after the applicable Affiliate Effective Date,

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including any related documentation in Affiliate’s possession (the “Affiliate Third Party Software”); provided, however, that Accretive may not decompile or reverse engineer the Affiliate Software. As of the applicable Affiliate Effective Date, (i) Affiliate shall, [**] provide Accretive with access to the Affiliate Proprietary Software in the form in use by Affiliate as of the applicable Affiliate Effective Date and (ii) Accretive, as part of the Services, shall compile and, as changes are made, update a list of Affiliate Proprietary Software in use at that time pursuant to the applicable Affiliate Schedule. Upon expiration of the applicable Affiliate Schedule or termination of this MSA or the applicable Affiliate Schedule for any reason, the rights granted to Accretive in this Section 14.01 shall immediately revert to Affiliate and Accretive shall, at no cost to Affiliate, (x) deliver to Affiliate a current copy of (aa) the list of Affiliate Software in use as of the date of such expiration of the applicable Affiliate Schedule or the termination of this MSA or the applicable Affiliate Schedule and (bb) all of the Affiliate Software (including any related source code in Accretive’s possession) in the form in use as of the effective date of such expiration of the applicable Affiliate Schedule or termination of this MSA or the applicable Affiliate Schedule and (y) destroy or erase all other copies of the Affiliate Software in its possession or the possession of Accretive and Accretive Agents unless otherwise instructed by Affiliate.

14.02

Accretive Proprietary Software. All software and related documentation (1) owned by Accretive as of the applicable Affiliate Effective Date which is used in connection with the Services, (2) of which Accretive acquires ownership after the applicable Affiliate Effective Date and which is used in connection with the Services, (3) procured by Accretive on an exclusive or other proprietary basis and (4) developed by or on behalf of Accretive after the applicable Affiliate Effective Date for use in connection with the Services that is not Affiliate Software ((1) through (4) collectively, the “Accretive Proprietary Software”) shall be and shall remain the exclusive property of Accretive and neither Ascension Health nor any of the Affiliates shall have any rights or interests in the Accretive Software except as described in this MSA. As part of the Services, Accretive shall (a) use the Accretive Proprietary Software as may be required to provide the Services and (b) make available such Accretive Proprietary Software to Ascension Health and Affiliates for use by Affiliates solely in connection with the Services.

14.03

Accretive Third Party Software. All software and related documentation licensed or leased from a third party by Accretive (1) as of the applicable Affiliate Effective Date which will be used in connection with the Services and (2) after the applicable Affiliate Effective Date which will be used in connection with the Services {(1) and (2) collectively, “Accretive Third Party Software”) shall be and shall remain the exclusive property of such third party licensors and neither Ascension Health nor any Affiliate shall have any rights or interests in the Accretive Third Party Software except as described in this Section 14.03. As part of the Services, Accretive shall use the Accretive Third Party Software, as may be required to provide the Services; provided Accretive shall have the right to unilaterally utilize such software as it chooses for the sole purpose of internal administration.

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	14.04		Accretive Ownership of its Intellectual Property. Accretive shall have and retain all right, title and interest, including ownership of copyrights, patents, trade secrets and other intellectual property rights in and to methods, processes, techniques, strategies, materials, images, prototypes, software, source and object code and related materials that are developed by Accretive, or its subcontractors, including any modifications to, or derivative works or enhancements of, materials owned or licensed by Accretive and any tools, utilities, prototypes, models, processes, methodologies and other such materials that are developed, enhanced or improved by Accretive or any of its subcontractors or employees, which relate to the performance of the Services, or any modification of the Services to be provided under this MSA. Ascension Health and Affiliates acknowledge that all of this work is Accretive Health’s intellectual property, none of this work is “work for hire” and that they have no rights to the intellectual property developed by Accretive and its agents, principals, employees, subcontractors and delivery partners, except as otherwise provided for herein.

	14.05		Each party will protect the other party’s intellectual property and confidential information with the same care and diligence as it would use to protect its own intellectual property and confidential information. Each party will take all necessary and appropriate steps to safeguard the other’s intellectual property and confidential information by employees, former employees, vendors, affiliates and others to whom they have directly, or indirectly, made confidential information available. Information that is available to the public through no breach of confidentiality obligations, that was independently developed, or that was previously possessed will not constitute confidential information.

Article 15. DATA AND REPORTS

	15.01		Ascension Health Data. All Ascension Health Data is and shall remain the property of Ascension Health or the respective Affiliate. The Ascension Health Data shall not, without the written consent of either Ascension Health or the Affiliate whose data it is, be (1) used by Accretive, Accretive Employees or Accretive Agents other than in connection with providing the Services, (2) disclosed, sold, assigned, leased, or otherwise provided to third parties by Accretive, Accretive Employees or Accretive Agents other than in connection with providing the Services, or (3) commercially exploited by or on behalf of Accretive or Accretive Agents. Accretive hereby waives any liens or encumbrances it may have or which may arise as to Ascension Health Data.

	15.02		Correction of Errors. As part of the Services, Accretive shall promptly correct at Ascension Health’s request any errors or inaccuracies in the Ascension Health Data and the Reports caused by Accretive or Accretive Agents. At Ascension Health’s request Accretive shall promptly correct any other material errors or inaccuracies in the Ascension Health Data and the Reports. Ascension Health or Affiliate is responsible for any errors or inaccuracies in and with respect to data obtained from Accretive because of any inaccurate or incomplete data provided by Ascension Health or the respective Affiliate.

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Article 16. CONSENTS

16.01

Accretive shall be responsible for, and shall pay any costs associated with, obtaining all consents, approvals, authorizations, notices, requests, and acknowledgements of third parties other than legal fees which might be incurred by Affiliate which have not been approved in advance, necessary to implement the terms of this agreement and the Affiliate Schedule as of the Affiliate Effective Date of each Affiliate Schedule (“Consents”); provided that Affiliate is responsible to pay any costs associated with: (i) bringing any item into compliance with its contractual terms at the time of initial transfer to Accretive, including paying for any undocumented usage; (ii) Consents for Accretive’s use of the Affiliate Software, Affiliate Machines, and the services under Affiliate’s third party service contracts (including Retained Resource Agreements) which are used to provide the Services to the extent the foregoing are not listed in an Affiliate Schedule on the Affiliate Effective Date. Each party shall cooperate with the other in obtaining the Consents. If a Consent is not obtained by the party responsible for it after using commercially reasonable efforts, then, unless and until such Consent is obtained, Accretive shall determine and promptly adopt, subject to Affiliate’s prior written approval, such alternative approaches or workarounds as are commercially reasonable under the circumstances in order to provide the Services to the extent that same can be provided without such Consents.

Article 17. CONTINUED PROVISION OF SERVICES

17.01

Force Majeure. Any failure or delay by Ascension Health, an Affiliate or Accretive in the performance of its obligations pursuant to this MSA shall not be deemed a default of this MSA or a ground for termination hereunder (except as provided in this Section 17.01) to the extent such failure or delay is caused by a Force Majeure Event. The occurrence of a Force Majeure Event in respect of another customer of Accretive does not constitute a Force Majeure Event under this MSA except to the extent such customer and Ascension Health and/or Affiliate(s) experience the same Force Majeure event at a site shared with such customer. The party delayed (meaning in the case of the affected Affiliate) by a Force Majeure Event shall immediately notify the other party by telephone (to be confirmed in a notice within five (5) days of the inception of such delay); in the case of notice by Accretive, notice shall be given to the Affiliate and the Joint Review Board of the occurrence of a Force Majeure Event and describe in reasonable detail the nature of the Force Majeure Event. If any Force Majeure Event results in a failure of Accretive to deliver the Services, or in Ascension Health or Affiliate to provide resources or services required under this MSA, which failure lasts for more than 48 hours from the receipt of notice of the first such Force Majeure Event, the non-failing party may, upon notice to the failing party, and approval of the Joint Review Board (provided the Joint Review Board can be convened within such 48 hour period), require the failing party to procure the Services from an alternate source until the failure is cured. In such event, Affiliate shall continue to pay Accretive for the Services at the pricing herein provided and the failing party shall be liable from the date such alternate source

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commences to provide services for payment of such alternate source, for a period not to exceed thirty (30) days.

17.02

Allocation of Resources. Whenever a Force Majeure Event causes Accretive to allocate limited resources between or among Accretive’s customers and Accretive’s Related Entities, Ascension Health and each of the Affiliates shall receive no less priority in respect of such allocation as any of Accretive’s other customers.

Article 18. PAYMENTS

	18.01		Fees. In consideration of Accretive providing the Services, Affiliate shall pay to Accretive the Base Fee, the Management and Technology Fee and the Performance Incentive Fees as set forth herein.

	18.02		Base Fee. The Base Fee will be determined in the manner set forth in the Operating Protocols adopted by the parties, which are incorporated herein by reference. The Base Fee will be paid [], or as mutually agreed to in writing, and adjusted on the first anniversary of the Affiliate Effective Date, and each year thereafter, based on increases in the Inflator. “Inflator” shall mean the sum of (a) the annual percentage increase in the United States Department of Labor Consumer Price Index, All Urban Consumers, U.S. City Average, all items, with an index base period of (1982-1984 = 100) for the preceding twelve (12) months multiplied by []%; and (b) the Average Wage Increase as determined annually by the respective Affiliate multiplied by [**]%.

	18.03		Management and Technology Fee. Each Affiliate shall pay Accretive a Management and Technology Fee. The Management and Technology Fee shall be []% ([] percent) of the In-Scope Revenue of the Affiliate. In-Scope Revenue of the Affiliate for the purposes of determining the Management and Technology fee shall be determined as follows:

	18.03.01		Affiliates commencing services after the Master Renewal date: In-Scope Revenue based on the twelve (12) month period preceding the commencement of services.

	18.03.02		Affiliates commencing services within the twelve (12) months prior to the Master Renewal Date: In-Scope Revenue based on the twelve (12) month period preceding the commencement of services.

	18.03.03		All other Affiliates: In-Scope Revenue based on the twelve (12) month period preceding the Master Renewal Date.

For purposes of this Section, “In-Scope Revenue” means total charges for Affiliate Services appropriately invoiced during a period of such Services, less: (i) posted and accrued adjustments; (ii) estimated adjustments due, but not yet posted, recorded in the respective entity’s general ledger; (iii) administrative adjustments and allowances; (iv) posted and accrued for charity write-offs; (v) adjustments for bad debts; and (vi) other adjustments to revenue.

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	18.04		Timing of Payments. For Affiliates where the Affiliate Start Date falls after November of 2006 and before the Master Renewal Date, the Management and Technology fee shall be paid for the [] Affiliate Contract Year and shall replace the gain-share fee for the [] of operations for those Affiliates. The Management and Technology Fee shall be paid quarterly, along with the Base Fee. For Affiliates where the Management and Technology Fee is replacing the gain-sharing fee, the Management and Technology fee for the period preceding the Master Renewal Date shall be paid within thirty (30) days of the Master Renewal Date.

	18.05		Performance Incentive Fee. During the first year of operations at any Affiliate commencing services after the Master Renewal Date, there will be no Performance Incentive Fee assessed to the Affiliate. For Affiliates whose Affiliate Start Date falls after November of 2006 and before the Master Renewal Date, their will be no Performance Incentive Fee for the first Affiliate Contract Year. In all subsequent years the Affiliate shall pay Accretive [**]% of the measured Revenue Improvement and Additional Revenue Improvement as a Performance Incentive Fee. The calculation of the Performance Incentive Fee shall include a credit for the Management and Technology Fee for the period. The Performance Incentive Fee shall be calculated in accordance with the Operating Protocols adopted by the parties. Revenue Improvement and Additional Revenue Improvement are defined in the Operating Protocols.

	18.06		Maximum Performance Incentive Fee, Management Technology Fee and Dormant Receivables Fee. Notwithstanding any provisions herein to the contrary, in no event shall the sum of the Performance Incentive Fee, Management Technology Fee and Dormant Receivables Fee for an Affiliate exceed an amount equal to [] percent ([]%) of the Base Fee for such Affiliate for any operating year.

	18.07		After the first year of operations, in the event that the measured average Revenue Yield Change (as defined in the Operating Protocols) at any Affiliate fails to exceed []%, for any Affiliate Contract Year, the Affiliate shall be entitled to an adjustment in the Management and Technology Fee such that the Management and Technology Fee for the period do not exceed []% of measured Revenue Improvement. For purposes of this Section 18.07, determination of “Revenue Improvements” is described in the Operating Protocols.

	18.08		Dormant Receivable Fees. Accretive shall also be paid a fee for its efforts in connection with the collection of Dormant Receivables. The fee for collection of Dormant Receivables shall be [**]% of the Net Proceeds from the Collection of Dormant Receivables. Net Proceeds from the Collection of Dormant Receivable shall be determined in accordance with the Operating Protocols adopted by the parties.

	18.09		Most Favored Customer. Accretive’s fees for Services provided to Ascension Health pursuant to this MSA shall be at least as low as Accretive’s fees for the Services it provides to any other similarly situated Client receiving comparable services at comparable volumes. In the event Ascension Health’s Fees require

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adjustment pursuant to this Section 18.08, Accretive shall advise Ascension Health in writing and adjust the Fees retroactive to the effective date of the more favorable agreement. Ascension Health may from time to time request Accretive to certify that the terms of this Section 18.08 have not been contradicted by any transaction entered into by Accretive since the date of the most recent written notice provided by Accretive pursuant to this Section 18.02. If Accretive is unable to provide such written notice because of a transaction entered into by Accretive contradicting this Section 18.08, Accretive shall offer to Ascension Health an adjustment to the financial and other terms of this MSA consistent with the terms of this Section 18.08 retroactive to the effective date of the more favorable agreement.

18.10

Determination of Fees. The parties acknowledge and intend that the payment methodology for Additional Fees has been developed in a manner to reflect billing efficiency, compliance, and collections management and not based upon case mix index or coding and documentation changes. Notwithstanding anything contained in this MSA to the contrary, it is the intent of the parties that the manner in which the Fees have been determined and will be calculated is not unreasonable and the amount of all compensation payable to Accretive shall not be unreasonable and shall be consistent with fair market value.

Article 19. PAYMENT SCHEDULE AND INVOICES

	19.01		Fees. Accretive shall provide each Affiliate with an invoice for the Base Fees and Management and Technology Fees applicable to such Affiliate [] before the [] of each Quarter for each Quarter in which the Services applicable to such Affiliate are to be provided; provided, however, that any invoices provided by Accretive before the [] of the Quarter shall be dated as of the [] of the Quarter. The Payment of all invoices for Base Fees and Management and Technology Fees shall be made by wire transfer, or other mutually acceptable means, on or before the [**] of the applicable Quarter.

	19.02		Performance Incentive Fees. Accretive shall provide Affiliate with an invoice for the Performance Incentive Fees applicable to such Affiliate on a quarterly basis upon completion of benefit measurement pursuant to the Operating Protocols. Instructions for submission of the invoice are set forth in the Operating Protocols.

	19.03		Detailed Invoices. Upon Ascension Health’s reasonable request, Accretive shall provide invoices with varying degree of detail as specified in the applicable Affiliate Schedule.

	19.04		Time of Payment. Unless otherwise agreed to in writing, payment of all invoices shall be due and payable fifteen (15) days after receipt of an invoice from Accretive.

	19.05		Fee Dispute. In the event of a good faith dispute between Ascension Health or an Affiliate and Accretive regarding any Fees due under this MSA, the dispute shall be referred to the Joint Review Board for prompt resolution. Ascension Health and the respective Affiliate shall not withhold any Base Fee payment for any

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reason. Accretive shall not withhold any reimbursement owed to Affiliate under Article 5.03 for any reason. Ascension Health and the respective Affiliate may withhold such portion of the Additional Fees as may be authorized by the Joint Review Board.

19.06

Performance Guaranty. To the extent that any Affiliate’s quarterly cash collections after the Affiliate Effective Date deteriorates materially relative to such Affiliate’s “historical cash collection performance” (as defined below), after adjustment for any negative change beyond Accretive’s control, such as a change in patient volumes measured by the total of inpatient discharges and outpatient encounters, the difference will be removed from the Base Fee paid by such Affiliate to Accretive in the manner provided for in the Operating Protocols.

Article 20. TAXES

	20.01		The fees paid to Accretive are inclusive of any applicable sales, use, personal property, or other taxes attributable to periods on or after the applicable Affiliate Effective Date based upon or measured by Accretive’s cost in acquiring or providing equipment, materials, supplies, or services furnished or used by Accretive in performing or furnishing the Services, including without limitation, all personal property and use taxes, if any, due on Accretive Machines.

	20.02		Affiliate will also be responsible for paying all personal property or use taxes due on or with respect to Affiliate Machines and Software.

	20.03		Ascension Health, each Affiliate and Accretive each shall bear sole responsibility for all taxes, assessments, and other real property-related levies on its owned or leased real property.

	20.04		To the extent the parties believe the circumstances warrant, Ascension Health and Accretive shall cooperate to segregate the Fees into the following separate payment streams: (a) those for taxable Services, (b) those for nontaxable Services, (c) those for which a sales, use, or other similar tax has already been paid, and (d) those for which Accretive functions merely as a paying agent for Affiliate in receiving goods, supplies, or services (including leasing and licensing arrangements) that otherwise are nontaxable or have previously not been subject to tax. In addition, Ascension Health, Affiliates and Accretive shall reasonably cooperate with each other to more accurately determine each party’s tax liability and to minimize such liability to the extent legally permissible.

Article 21. REDUCTION OF OPERATING COSTS

21.01

It is anticipated that, as a result of the operational improvements implemented by Accretive with the support of the Affiliates, certain efficiencies in staffing requirements for the operation of the Affiliate revenue cycle will be realized. These staffing efficiencies will be facilitated and enhanced to the extent that certain operational functions can be performed through the Shared Services Operating Model (as more fully described in the Operating Protocols). In the

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event that these staffing efficiencies are realized during the course of operations, the Affiliate shall receive a credit against the Base Fee expense as follows:

	a)		In Place Model: [] of actual reductions in [] achieved across all areas of operation as more fully described in the Operating Protocols.

	b)		Shared Services Operating Model: [] of actual reductions in [] achieved across all areas of operation as more fully described in the Operating Protocols.

	c)		Reductions in [**] achieved shall be determined in accordance with the Operating Protocols adopted by the parties.

	d)		In the event that an Affiliate elects to receive Services in the In Place Model, the delivery of Services shall be based at Affiliate Service Locations unless otherwise agreed to by the Affiliate.


	21.02		It is anticipated that the adoption of the Shared Services Operating Model will produce significant operating efficiencies with respect to the operation of the Affiliate’s revenue cycle. In the event that the revenue managed by Accretive on behalf of Affiliates using the Shared Services Operating Model described above exceeds $[], the percentage of Revenue Improvement (as defined in the Operating Protocols) paid to Accretive Health as Additional Fees for subsequent quarters by Affiliates participating in the shared services model shall be reduced to []%. In the event that the revenue managed by Accretive on behalf of Affiliates using the Shared Services Operating Model described above exceeds $[], the percentage of Revenue Improvement paid to Accretive Health as Additional Fees for subsequent quarters by Affiliates participating in the Shared Services Operating Model [].

	21.03		Accretive Health shall prepare a cost savings projection for each Affiliate adopting the Shared Services Operating Model in accordance with the procedures set forth in the Operating Protocols. Accretive [] each Affiliate adopting the Shared Services Operating Model that it will achieve []% of the cost savings projected for that Affiliate provided that the Affiliate provides its full support and cooperation with respect to the transition to, and operations under, the Shared Services Operating Model.

			The [] cost savings contemplated by this Section 21.03 are predicated on the parties’ mutual assumption that the shared services will be provided in a manner which may rely on both domestic and non-domestic resources to deliver the Services (“Blended Shore Resources” as described in the Operating Protocols). In the event that Ascension Health adopts a policy which precludes the use of Blended Shore Resources, Accretive Health shall honor these policies and the [] cost savings contemplated by this MSA shall be null and void. Further, in the event that Ascension Health adopts such a policy, Ascension Health shall be responsible for the cost incurred by Accretive to transition services being performed by Blended Shore Resources to shared service centers which are staffed exclusively by domestic resources.

Article 22. AUDIT RIGHTS

22.01

Upon reasonable notice from Ascension Health, Accretive and Accretive Agents, shall provide such auditors and inspectors as Ascension Health may designate in writing with access to the Service Locations, Accretive Employees, reports, security procedures/protocols and information used by Accretive to deliver the Services for the purpose of performing audits or inspections of the Services and the business of Ascension Health. With respect to any audit or inspection of the Services, Accretive shall have the right to approve the auditor or inspector (but shall not unreasonably withhold such approval) and to demand appropriate protections against disclosure of its intellectual property. Accretive shall provide, and cause Accretive Staff and Accretive Agents to provide, such auditors and inspectors any reasonable assistance that they may require. If any audit by an auditor designated by Ascension Health or a Governmental or Regulatory

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Authority results in Accretive being notified that it, Accretive Staff or Accretive Agents are not in compliance with any law, regulation, audit requirement, the MSA or generally accepted accounting principle relating to the Services, Accretive shall take actions to comply with such audit.

22.02

Fees. Upon reasonable notice from Ascension Health, Accretive shall provide Ascension Health and Ascension Health’s agents with access to such financial records and supporting documentation as may be reasonably requested by Ascension Health which are reasonably necessary to audit Fees charged Affiliates and Ascension Health may audit the Fees charged to Affiliates to determine that such Fees are accurate and in accordance with this MSA or continues to represent the fair market value for the Services. With respect to any such audit of the Fees charged by Accretive, Accretive shall have the right to approve the auditor (but shall not unreasonably withhold such approval) and to demand appropriate protections against disclosure of its intellectual property. If, as a result of such audit it is determined Accretive has overcharged Ascension Health and Affiliates, Ascension Health shall notify Accretive of the amount of such overcharge and Accretive shall promptly pay to the respective Affiliate the amount of the overcharge net of any undercharges. In the event any such audit reveals an overcharge net of undercharges to Ascension Health and Affiliates during any twelve (12)-month period preceding the audit in excess of 5% of the audited amount, Accretive shall reimburse Ascension Health for the reasonable cost of such audit and shall pay Interest calculated from the date of receipt by Accretive of the overcharged amount until the date of payment to Affiliate. In the event any such audit reveals that the Affiliate has been undercharged by Accretive Health, the amount of the undercharge shall be added to the next regular invoice to be provided to Affiliate and shall be paid in the ordinary course of business.

22.03

Record Retention. Until the later of (A) six (6) years after expiration or termination of the MSA, (B) all pending matters relating to the MSA (including, but not limited to, disputes) are closed, or (C) the time period stated in any applicable records retention policy of Ascension Health or Affiliate, or required by any law or regulations has expired, Accretive shall maintain and provide access upon request to Accretive’s policies and procedures applicable to Ascension Health and Affiliates, and the records, documents and other information provided, prepared or maintained by Accretive under this MSA.

Article 23. REGULATORY AND CORPORATE RESPONSIBILITY COMPLIANCE

23.01

Access by Regulators. Accretive acknowledges and agrees that, in addition to the audit rights set forth in Article 22, the records maintained and produced under this MSA (including all records required to be maintained under Article 22) shall at all times be available for examination and audit by governmental agencies, regulators or securities exchanges of which Ascension Health or the Affiliates are a member and which has jurisdiction over the business of Ascension Health or the Affiliates. Each party shall, to the extent permitted by law, notify the other promptly of any formal request by an authorized governmental agency, regulator or exchange to examine records regarding Ascension Health or Affiliates that are maintained by

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Accretive. Upon the written request of Ascension Health, Accretive shall provide any relevant assurances to such agencies, regulators or securities exchanges, and shall subject itself to any required examination or regulation by such agencies, regulators or securities exchanges; and shall make any required regulatory corrections. Accretive acknowledges and agrees it shall be subject to examination by the relevant federal regulatory authorities (i.e., DHHS) pursuant to the Health Insurance Portability and Accountability Act of 1996 and other relevant laws with respect to certain of the Services.

	23.02		Exclusion from Federal Health Programs. Accretive represents and warrants that neither it nor any of the Accretive Staff or Accretive have been or are about to be excluded from participation in any Federal Health Care Programs. Each Party agrees to notify the other party within three (3) business days of: (i) its receipt of a notice of intent to exclude or actual notice of exclusion from any Federal Health Care Program; or (ii) notification by any employee or agent of their receipt of a notice of intent to exclude or actual notice of exclusion from any Federal Health Care Program. The listing of Ascension Health, Affiliate, any Ascension Health or Affiliate related entity, Accretive, any Accretive related entity, or an Accretive Staff on the Office of Inspector General’s exclusion list (OIG Website) or the General Services Administration Lists of Parties Excluded from Federal Procurement and Non-Procurement Programs (GSA Website) for excluded individuals and entities shall constitute “exclusion” for purposes of this Section. In the event Accretive is excluded from any Federal Health Care Program, then Ascension Health may terminate this MSA pursuant to Section 27.08 without the necessity of an opinion of counsel. In the event Accretive Staff or Accretive related entity is excluded from any Federal Health Care Program, then Accretive shall promptly remove such Accretive Staff or Accretive related entity from providing Services to Ascension Health and the Affiliates. In the event Ascension Health, or an Affiliate, is excluded from any Federal Health Care Program, then Accretive may terminate the applicable Affiliate Schedule(s). In the event an Affiliate is excluded from any Federal Health Care Program, then Accretive may terminate the respective Affiliate Schedule. The parties agree to mutually cooperate to minimize the impact of events contemplated by this Section.

	23.03		Section 6032 of the Deficit Reduction Act of 2005. If Accretive furnishes, or otherwise authorizes the furnishing of, Medicaid health care items or services, performs billing or coding functions, or is involved in the monitoring of health care for Ascension Health, pursuant to Section 6032 of the Deficit Reduction Act of 2005 relating to “Employee Education About False Claims Recovery,” Accretive hereby agrees to abide by Ascension Health’s policies required by said law, insofar as they are relevant and applicable to Accretive’s work performed on behalf of Ascension Health, including participation in reviews or audits of claims or services, and agrees to make such policies available to Accretive’s personnel involved in the performance of such work.

	23.04		Compliance with Laws. The parties intend that this Agreement comply at all times with all existing and future applicable laws, including state and federal anti-kickback laws, the Medicare/Medicaid Anti-Fraud and Abuse Statutes, and the

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restrictions on Ascension Health by virtue of its tax-exempt status and the federal law relating to physician referrals. If at any time, as a result of the enactment of a new statute, the issuance of regulations, or otherwise, either party receives a written opinion of counsel that there is a substantial risk that, as a result of this Agreement, either party does not comply with applicable law or that a party would be legally precluded from billing a third party payor for services ordered by a physician, then the parties shall use good faith efforts to reform this Agreement in such a manner so that it complies with applicable law or does not preclude Ascension Health from billing a third party payor, as applicable. If, after the exercise of such good faith efforts for a period of at least thirty (30) days, the parties have not agreed on amendment(s) to this Agreement that resolve the legal issues referred to above, then the party(s) whose receipt of a legal opinion triggered renegotiation may terminate this Agreement upon at least sixty (60) days written notice to the other party.

	23.05		HIPAA Business Associate. Accretive shall execute contemporaneously with this MSA the Business Associate Agreement attached hereto as Exhibit 2. Furthermore, Accretive agrees to amend the Business Associate Agreement as reasonably requested by Ascension Health for purposes of continued compliance by Ascension Health and Affiliates with the Health Insurance Portability and Accountability Act of 1996 and the regulations promulgated thereunder.

	23.06		Access to Books and Records. If this MSA is deemed to be a contract within the purview of Section 1861(v)(1)(t) of the Social Security Act (Section 952 of the Omnibus Reconciliation Act of 1980) and the regulations promulgated at 42 C.F.R. Part 420 in implementation thereof, Accretive agrees to make available to the Comptroller General of the United States, the Department of Health and Human Services (“HHS”) and their duly authorized representatives for four (4) years after the latest furnishing of services pursuant to this Agreement, access to the books, documents and records and such other information as may be required by the Comptroller General or Secretary of HHS to verify the nature and extent of the costs of services provided by Accretive. If Accretive, upon the written approval of Ascension Health, carries out the duties of this MSA through a subcontract worth Ten Thousand Dollars ($10,000.00) or more over a twelve (12)-month period with a related organization, the subcontract will also contain an access clause to permit access by the Secretary, Comptroller General and their representatives to the related organization’s books and records.

	23.07		Ascension Health and each Affiliate represents and warrants that they shall comply with all applicable federal, state, and local laws and regulations applicable to them and shall obtain all applicable permits and licenses required in connection with its obligations under this MSA.

	23.08		Accretive represents and warrants that it shall comply with: (i) all applicable federal, state, and local laws and regulations applicable to Accretive; and (ii) all applicable regulatory or accrediting agencies with jurisdiction over Ascension Health or an Affiliate (including by not limited to, JCAHO) and shall obtain all

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applicable permits and licenses required of Accretive in connection with its obligations under this MSA.

	23.09		Ascension Health’s sole purpose of this arrangement is to establish a legally compliant, fair market value and commercially reasonable arrangements so that the Affiliates can better serve the community in compliance with all applicable laws, regulations and authority. It is the intent and desires of the parties that all Services, specifically including billing and collection services, are rendered in a legally compliant manner, consistent with all applicable billing and coding regulations and guidelines.

	23.10		As it proceeds and continues with the delivery of the Services, Accretive may review the billing, coding and collection practices of each Affiliate in an effort to further compliance with all applicable authority. Each Affiliate will reasonably cooperate with these respective reviews. In the event Accretive identifies issues that may or may not be consistent with relevant authority, Accretive will promptly review such issues within the parameters of the respective Affiliate’s Corporate Responsibility Program.

	23.11		Accretive represents and warrants that none of its stockholders are, directly or indirectly, a physician or immediate family member of a physician on the medical staff of any of the Affiliates. For purposes of this provision, the terms “physician” and “immediate family member” shall be defined pursuant to federal law and regulation at 42 U.S.C. §1395nn et seq. and 42 C.F.R. §411.350 et seq., respectively, or successor laws and regulations. Further, in the event that Accretive employs or otherwise contracts with such a physician or immediate family member, Accretive shall provide compensation to such individual that is fair market value for services and items actually provided and not determined in a manner that takes into account the volume or value of referrals or other business generated by the physician for the Affiliates.

Article 24. CONFIDENTIALITY

24.01

General Obligations. All Confidential Information relating to a party shall be held in confidence by the other party to the same extent and in at least the same manner as such party protects its own similar confidential information. Neither party shall disclose, publish, release, transfer, or otherwise make available Confidential Information of the other party in any form to, or for the use or benefit of, any person or entity without the other party’s consent. Each party shall, however, be permitted to disclose relevant aspects of the other party’s Confidential Information to its officers, agents, subcontractors, and employees and to the officers, agents, subcontractors, and employees of its Related Entities or subsidiaries to the extent that such disclosure is reasonably necessary for the performance of its duties and obligations under this MSA; provided, however, that such party shall take reasonable measures to ensure that Confidential Information of the other party is not disclosed or duplicated in contravention of the provisions of this MSA by such officers, agents, subcontractors, and employees. The obligations in this Section 24.01 shall not restrict any disclosure

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by either party pursuant to any applicable law, or by order of any court or government agency (provided that the disclosing party shall give prompt notice to the non-disclosing party of such order) and, except to the extent that local law provides otherwise, shall not apply with respect to information which (1) is developed by the other party without violating the disclosing party’s proprietary rights, (2) is or becomes publicly known (other than through unauthorized disclosure), (3) is disclosed by the owner of such information to a third party free of any obligation of confidentiality, (4) is already known by such party without an obligation of confidentiality other than pursuant to this MSA or any confidentiality agreements entered into before the Effective Date between Ascension Health and Accretive, or (5) is rightfully received by a party free of any obligation of confidentiality. To the extent this MSA or any Affiliate Schedule contains more specific terms on the subject of security, then such specific terms shall apply in lieu of the general obligations set forth in this Section 24.01.

24.02

Attorney-Client Privilege. Accretive acknowledges that Affiliate believes that in connection with the delivery of the Services, information may be prepared under the direction of Ascension Health or an Affiliate’s legal counsel in anticipation of litigation, or otherwise that Ascension Health or Affiliate seeks to keep privileged under the applicable attorney/client or attorney work product privileges conferred by applicable law (“Privileged Work Product”). Accretive acknowledges that under such circumstances, Accretive is performing the services as to Privileged Work Product as an agent of Affiliate, and that all matter related thereto is protected from disclosure by Rule 26 of the Federal Rules of Civil Procedure. Affiliate shall notify Accretive when it is to be provided access to Privileged Work Product or when its work is determined to be Privileged Work Product. After Accretive is notified or otherwise becomes aware that such documents, data, database, or communications are Privileged Work Product, only Accretive personnel for whom such access is necessary for the purpose of providing services to Affiliate as provided in this MSA may have access to Privileged Work Product. Should Accretive ever be notified of any judicial or other proceeding seeking to obtain access to Privileged Work Product, Accretive shall unless prohibited by law (a) immediately notify Ascension Health or the applicable Affiliate and (b) take such reasonable actions at Ascension Health’s or the applicable Affiliate’s expense as may be specified by Ascension Health or the applicable Affiliate to resist providing such access. Ascension Health or Affiliate shall have the right and duty to represent Accretive in such resistance or to select and compensate counsel to so represent Accretive or to reimburse Accretive for actual and reasonable attorneys’ fees, reasonable expenses and any damages arising from Accretive’s compliance with this Section incurred in resisting such access. Ascension Health shall indemnify and hold harmless Accretive and Accretive’s Related Entities and their respective officers, directors, employees and representatives against any and all claims damages, and expenses , including reasonable attorney’s fees, related to third party claims arising from Accretive’s compliance with this section. The indemnification procedures in this MSA shall apply to this indemnification. If Accretive is ultimately required, pursuant to an order of a court of competent jurisdiction, to produce documents, disclose data, or

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otherwise act in contravention of the confidentiality obligations imposed in this MSA or otherwise with respect to maintaining the confidentiality, proprietary nature, and secrecy of Privileged Work Product, Accretive shall not be liable for breach of such obligation. In such event, Accretive agrees to disclose only that information minimally required to be disclosed by such legal action. For purposes of this Section, Privileged Work Product shall mean certain documents, data, and databases created or provided to Accretive and Accretive Agents for Ascension Health or the Affiliate and all associated communications thereto.

24.03

Unauthorized Acts. Each party shall:

	24.03.01		Notify the other party promptly of any material unauthorized possession, use, or knowledge, or attempt thereof, of the other party’s Confidential Information by any person or entity which may become known to such party.

	24.03.02		Promptly furnish to the other party full details of the unauthorized possession, use, or knowledge, or attempt thereof, and use reasonable efforts to assist the other party in investigating or preventing the recurrence of any unauthorized possession, use, or knowledge, or attempt thereof, of Confidential Information.

	24.03.03		Use reasonable efforts to cooperate with the other party in any litigation and investigation against third parties deemed necessary by the other party to protect its proprietary rights.

	24.03.04		Except as provided in Section 24.03.06, promptly use reasonable efforts to prevent a recurrence of any such unauthorized possession, use, or knowledge of Confidential Information.

	24.03.05		Except for modifications to the Services more fully described in Section 24.03.06, bear the cost it incurs as a result of compliance with this Section 24.03.

	24.03.06		To the extent any change to prevent a recurrence of any such unauthorized possession, use or knowledge of Confidential Information requires a modification of the Services, such modification shall be approved by the Joint Review Board.

Article 25. REPRESENTATIONS AND WARRANTIES

Each of the following representations and warranties contained in Section 25.01 and 25.02 shall be deemed made by Accretive and the applicable Affiliate as of the Affiliate execution date of the applicable Affiliate Schedule. Each of the following representations and warranties contained in Section 25.03 shall be deemed made by Ascension Health as of the MSA Date.

25.01

Affiliate represents and warrants that:

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	25.01.01		Affiliate is a corporation duly incorporated, validly existing, and in good standing under the laws of its state of incorporation.

	25.01.02		Affiliate has all requisite corporate power and authority to execute, deliver, and perform its obligations under the applicable Affiliate Schedule.

	25.01.03		Affiliate is duly licensed, authorized, or qualified to do business and is in good standing in every jurisdiction in which a license, authorization, or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it except where the failure to be so licensed, authorized, or qualified would not have a material adverse effect on Affiliate’s ability to fulfill its obligations under the applicable Affiliate Schedule.

	25.01.04		Affiliate has not disclosed impermissibly any Confidential Information of Accretive.

	25.01.05		The execution, delivery, and performance of the Affiliate Schedule has been duly authorized by Affiliate and will not conflict with, result in a breach of, or constitute a default under any other agreement to which Affiliate is a party or by which Affiliate is bound subject to the acquisition of necessary consents and/or approvals required of Accretive as contemplated by this MSA. The Affiliate Proprietary Software, applicable to Affiliate, does not and will not infringe upon the proprietary rights of any third party (except to the extent such infringements result from: (a) modifications by Accretive or Accretive Agents, (b) breach of this MSA by Accretive, (c) Accretive’s failure to use any new or corrected versions of any such Affiliate Proprietary Software provided by Affiliate, or (d) Accretive’s failure to adhere to license, lease, or other agreement or specifications or instructions of which it has knowledge).

	25.01.06		There is no outstanding litigation, arbitrated matter or other dispute to which Affiliate is a party which, if decided unfavorably to Affiliate, would reasonably be expected to have a material adverse effect on Accretive’s ability to fulfill its obligations under this MSA.

25.02

Accretive represents and warrants that:

	25.02.01		It is a corporation duly incorporated, validly existing, and in good standing under the laws of Delaware.

	25.02.02		It has all requisite corporate power and authority to execute, deliver, and perform its obligations under this MSA.

	25.02.03		Accretive is duly licensed, authorized, or qualified to do business and is in good standing in Michigan and every jurisdiction in which a license, authorization, or qualification is required for the ownership or

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			leasing of its assets or the transaction of business of the character transacted by it except where the failure to be so licensed, authorized, or qualified would not have a material adverse effect on Accretive’s ability to fulfill its obligations under this MSA.

	25.02.04		The execution, delivery, and performance of this MSA has been duly authorized by Accretive and will not conflict with, result in a breach of, or constitute a default under any other agreement to which Accretive is a party or by which Accretive is bound subject to the acquisition of necessary consents and/or approvals required of Ascension Health or an Affiliate as contemplated by this MSA.

	25.02.05		Accretive has not disclosed impermissibly any Confidential Information of Ascension Health or any Affiliate.

	25.02.06		The Accretive Proprietary Software does not and will not, and the Developed Software and the Services will not, infringe upon the proprietary rights of any third party (except to the extent such infringements result from: (a) modifications by Affiliate or Ascension Health Agents other than those authorized or required by Affiliate with knowledge of the infringement, (b) breach of this MSA by Ascension Health or Affiliate, (c) Affiliate’s failure to use any new or corrected versions of any such Accretive Proprietary Software, provided Affiliate is notified that use of such new or corrected version is necessary to avoid infringement, or (d) Affiliate’s failure to adhere to any license, lease, or other agreement or specifications or instructions of which it has knowledge).

	25.02.07		There is no outstanding litigation, arbitrated matter or other dispute to which Accretive is a party which, if decided unfavorably to Accretive, would reasonably be expected to have a material adverse effect on Accretive’s ability to fulfill its obligations under this MSA.

	25.02.08		Accretive is not insolvent, is able to pay its bills as they become due and is financially able to meet its obligations under this MSA.

	25.02.09		The Accretive Tools when integrated and interfaced with a respective Affiliates systems will continue to allow information necessary for operations to be communicated with Affiliates other systems.

25.03

Ascension Health represents and warrants that:

	25.03.01		Ascension Health is a corporation duly incorporated, validly existing, and in good standing under the laws of its state of Missouri.

	25.03.02		Ascension Health has all requisite corporate power and authority to execute, deliver, and perform its obligations under this MSA.

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	25.03.03		Ascension Health has not disclosed impermissibly any Confidential Information of Accretive.

	25.03.04		Ascension Health is duly licensed, authorized, or qualified to do business and is in good standing in every jurisdiction in which a license, authorization, or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it except where the failure to be so licensed, authorized, or qualified would not have a material adverse effect on Ascension Health’s ability to fulfill its obligations under this MSA.

	25.03.05		The execution, delivery, and performance of this MSA has been duly authorized by Ascension Health and will not conflict with, result in a breach of, or constitute a default under any other agreement to which Ascension Health is a party or by which Ascension Health is bound subject to the acquisition of necessary consents and/or approvals required of Accretive as contemplated by this MSA.

25.04

DISCLAIMER. EXCEPT AS SPECIFIED IN THIS MASTER SERVICES AGREEMENT OR AN AFFILIATE SCHEDULE, NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES IN RESPECT OF THE SERVICES, THE SOFTWARE, THE AFFILIATE MACHINES OR THE SYSTEMS AND EACH EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE IN RESPECT OF THE SERVICES, THE SOFTWARE, THE CUSTOMER MACHINES AND THE SYSTEMS.

Article 26. DISPUTE RESOLUTION

	26.01		Joint Review Board. Either party may, upon notice from any member of the Joint Review Board request a review before the Joint Review Board. If a party elects to use the procedure set forth in this Section 26.01, the other party shall participate. The review will occur no more than ten (10) business days after a party serves notice to use the procedure set forth in this Section 26.01 and such meeting may occur telephonically. Each party may include such professionals as it may deem appropriate and useful in making its presentation to the Joint Review Board. If the matter cannot be resolved at such meeting, the parties shall submit the dispute to arbitration pursuant to Section 26.03.

	26.02		Admissibility. Proposals and information exchanged during the informal proceedings described in Sections 26.01 between the parties shall be privileged, confidential, and without prejudice to a party’s legal position in any formal proceedings. All such proposals and information, as well as any conduct during such proceedings, shall be inadmissible in any subsequent proceedings for any purpose (but this Section 26.02 shall not be construed to render confidential, inadmissible, or non-discoverable any otherwise admissible documents or other

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evidence merely because they were referred to, transmitted, or otherwise used in any such informal proceedings).

	26.03		Arbitration. Any dispute which is not resolved by the Joint Review Board shall, except as otherwise provided in this MSA, be finally settled by arbitration, conducted on a confidential basis, under the US Arbitration Act, if applicable, and the then-current Commercial Dispute Resolution Procedures (“Rules”) of the American Arbitration Association (“Association”) strictly in accordance with the terms of this MSA and the laws of the State of Missouri, excluding its principles of conflicts of laws. To the extent permitted by the Association rules, all parties direct that any arbitration be held on an expedited basis.

			All arbitration hearings shall be held in St. Louis, Missouri. The arbitration decision shall be majority vote of a panel consisting of three arbitrators. Each party shall select one arbitrator within thirty (30) days after the delivery of the demand for arbitration is made, and the third arbitrator shall be selected by the two arbitrators so chosen within thirty (30) days after the delivery of the demand for arbitration is made. If one or more arbitrator(s) is not selected within the permitted time periods, the missing arbitrator(s) shall be selected in accordance with Rule 13 of the Rules. All arbitrators shall be licensed practicing attorneys, shall have no conflicts, and shall be knowledgeable in the subject matter of the dispute. Each arbitrator shall have experience and education which qualify him or her to competently address the specific issues to be designated for arbitration. Each party shall bear its own costs of the arbitration and one-half of the arbitrators’ costs. The arbitrators shall apply Missouri substantive law and the Federal Rules of Evidence to the proceeding. The arbitrators shall have the power to grant all legal and equitable remedies and award compensatory damages provided by Missouri law, subject to the limitations set forth in this MSA; provided, however, the arbitrators shall not have the power to amend this MSA, award punitive or exemplary damages, or award damages in excess of the limits contained in the MSA. The arbitrators shall prepare in writing and provide to the parties an award, including factual findings and the reasons on which the decision is based. The arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected for any such error.

			Any award shall be paid within thirty (30) days of the issuance of the arbitrators’ decision. If any award is not paid within thirty (30) days, any party may seek entry of a judgment in state or federal courts located in the State of Missouri in the amount of the award.

			Neither party shall be excluded from seeking provisional remedies in the courts of competent jurisdiction, including but not limited to, temporary restraining orders and preliminary injunctions, but such remedies shall not be sought as a means to avoid or stay arbitration. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY. THE REQUIREMENT OF ARBITRATION SET FORTH IN THIS ARTICLE SHALL NOT APPLY IN THE EVENT THAT THERE IS THIRD PARTY JOINDER BY EITHER PARTY OR A THIRD PARTY INSTITUTES AN ACTION AGAINST ANY PARTY TO THIS

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AGREEMENT, AND SUCH THIRD PARTY IS NOT AMENABLE TO JOINDER IN THE ARBITRATION PROCEEDINGS CONTEMPLATED BY THIS ARTICLE.

Article 27. TERMINATION

	27.01		Termination for Cause. In the event that either Party has materially breached its obligations under this MSA, and that breach has not been satisfactorily addressed through the cure process established below, the non-breaching Party shall have the right to terminate this MSA for Cause sixty (60) days following the issuance of a written notice of termination. No written notice of Termination for Cause will be valid unless the Party issuing the notice has complied with the cure procedure set forth below. No breach can provide the basis for a Termination for Cause unless written notice of the breach is provided under 27.02.01 below within twelve (12) months of the date on which the party asserting the breach knew, or should have known in the ordinary course of the relationship, that the alleged breach had occurred.

	27.02		Procedure Regarding Cure. In the event that a material breach occurs under this MSA the Parties agree that the breaching party shall have the opportunity to cure the material breach prior to a Termination for Cause. Therefore, after issuing a written notice of termination, each party agrees to proceed in the following manner, working, in good faith, to address the circumstances which led to the breach or other conduct in question:

	27.02.01		The party seeking to address an area of concern shall give written notice to the party whose conduct has breached or frustrated the Agreement.

	27.02.02		The breaching party shall be given thirty (30) days within which to satisfactorily address the concern and begin implementation of the agreed upon course of action. If necessary under the circumstances and consented to by the non-breaching party (which consent shall not be unreasonably withheld), the complete implementation of the agreed upon course of action may take more than thirty (30) days but may not exceed one hundred twenty (120) days.

	27.02.03		If the breaching party fails to comply with the agreed upon course of action on the appropriate timetable, the other party may request a meeting of the Joint Review Board to discuss the failure to comply and termination. That meeting will be held promptly upon request. If it is determined by the Joint Review Board that the agreed upon course of action has not been undertaken then the non-breaching party shall be authorized to issue a notice of termination for cause.

	27.02.04		Upon the issuance of a notice of termination for cause the Joint Review Board shall meet to discuss the steps required to facilitate an orderly transition in connection with the termination and shall agree upon a transition plan which shall address timing, employee

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			communication, reconciliation of fees, allocation of transition costs, licenses for continued use of Accretive’s Proprietary Software, and related issues.

	27.02.05		Any disputes which arise during these procedures, and can not be resolved by good faith dialogue among the parties, shall be resolved by Arbitration (under the expedited arbitration rules of the American Arbitration Association) as provided for above, or by such other method mutually agreed upon by the parties.

	27.03		Termination for Convenience. Upon mutual agreement of Ascension Health and Accretive, the parties may terminate an Affiliate Schedule for convenience upon one hundred eighty (180) days written notice after the second anniversary of the Affiliate Effective Date for the applicable Affiliate.

	27.04		Termination Upon Renewal. Either party may terminate this MSA by providing the other party written notice at least one hundred eighty (180) days prior to the end of the then current Master Term if such party wishes not to renew this MSA. Either Accretive or Ascension Health may terminate an Affiliate Schedule by providing the other party written notice at least two hundred ten (210) days prior to the end of the then effective Affiliate Term if such party wishes not to renew the Affiliate Schedule.

	27.05		Termination Due to Event of Force Majeure. In the event that there is a failure to provide a material portion of the Services due to a Force Majeure Event from any source for a period of thirty (30) days out of any forty-five (45) day period, Ascension Health may terminate the affected portion of the applicable Affiliate Schedule, to the extent severable, upon thirty (30) days written notice.

	27.06		Termination for Change in Control. In the event of a sale, or potential sale, of all or substantially all of the assets of Accretive or sufficient stock of Accretive to effect a Change in Control of Accretive, Ascension Health may terminate this MSA on at least ninety (90) days’ notice to Accretive which notice must be provided within ninety (90) days of Ascension Health being notified of the Change in Control. For purposes of this section, a “Change in Control” shall mean the acquisition by an entity of fifty percent (50%) or more of Accretive’s capital stock ordinarily having voting rights if the acquiring entity actively exercises management control other than a transaction involving an offering of Accretive’s capital stock in the public markets. An offering of Accretive’s capital stock in the public markets shall not create a right of termination under this provision.

	27.07		Termination Due to Loss of Exempt Status. In the event Ascension Health receives an opinion of qualified legal counsel, after consultation with Accretive’s qualified legal counsel, in which it concludes that the MSA presents a material risk to the tax-exempt status of Ascension Health and/or any of the Affiliates, and that risk can not be reasonably mitigated by the parties following good faith consultations and consideration of reasonable amendments and modifications to

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			the MSA, then Ascension Health shall be entitled to terminate the MSA without penalty upon sixty (60) days written notice.

	27.08		Termination Due to Regulatory Risk. In the event Ascension Health receives an opinion of qualified legal counsel, after consultation with Accretive’s qualified legal counsel, in which it concludes that the MSA presents a material risk of causing Ascension Health and/or any of the Affiliates, to violate any applicable laws or regulations, and that risk can not be reasonably mitigated by the parties following good faith consultations and consideration of reasonable amendments and modifications to the MSA, then Ascension Health shall be entitled to terminate the MSA without penalty upon sixty (60) days written notice.

	27.09		Termination Because Excluded Provider. In the event Accretive becomes an Excluded Provider pursuant to Section 23.02 or fails to promptly take the actions specified in Section 23.02 with regards to Accretive Staff or Accretive related entities that become Excluded Providers, Ascension Health may terminate this MSA immediately and the cure provisions contained in Section 27.02 shall not be applicable to such breach.

Article 28. TERMINATION ASSISTANCE

	28.01		Termination Assistance. Accretive shall provide all reasonable Termination Assistance requested by Ascension Health, beginning upon notice of termination of the MSA for any reason and continuing through the date three (3) months following the Final Service Date. Accretive shall be entitled to reasonable fees for Termination Assistance Services provided prior to the Final Service Date to the extent the delivery of the Termination Assistance Services can not be accomplished by the existing Accretive Staff on hand at the time of the termination notice. Accretive shall be entitled to reasonable compensation for any Termination Assistance Services provided after the Final Service Date.

	28.02		Continuation of Services. At Ascension Health’s request, Accretive shall also continue to provide some or all of the Services for up to one (1) year following the expiration or termination of the MSA at the rate of [**]% of the then-applicable Base Fees applicable to the Services provided.

Article 29. EXIT PLAN

29.01

Upon receipt of an expiration or termination notice of this MSA or an Affiliate Schedule or termination of this MSA or any Affiliate Schedule for any reason:

	29.01.01		Accretive shall provide the Termination Assistance Services in accordance with Article 28;

	29.01.02		If the MSA or an Affiliate Schedule is terminated by Ascension Health for cause, pursuant to Section 27.01, or pursuant to Section 27.03, then:

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	29.01.02.01		Accretive shall assign and transfer to Ascension Health or one or more Affiliates, at [**], all Accretive Machines and other physical assets owned by Accretive and used at the terminated Affiliate(s) in performing the Services.

	29.01.02.02		Accretive shall grant to Affiliate a license or sublicense to use and maintain for its and the terminated Affiliates internal business purposes, the Accretive Software and Accretive Tools for a license fee payable by Affiliate equal to [**].

	29.01.02.03		Affiliate shall relinquish any right to receive any Performance Guaranty payment to which it might be entitled at the time of the Termination.

29.01.03

If the MSA or an Affiliate Schedule is terminated for any reason other than as set forth in Section 29.02.02:

	29.01.03.01		Accretive shall assign and transfer to Ascension Health or one or more of the Affiliates all Accretive Machines and other physical assets owned by Accretive and used at the terminated Affiliate(s) in performing the Services and Ascension Health shall pay Accretive the [] of such Accretive Machines and physical assets so transferred on the date of transfer. [] shall be mutually determined by Ascension Health and Accretive and if they cannot agree within forty (45) days, then by an independent appraiser to be mutually selected by Ascension Health and Accretive.

	29.01.03.02		Accretive shall grant to each Affiliate for whom Services are being terminated a license or sublicense to use and maintain for its and the terminated Affiliates internal business purposes, the [] payable by each Affiliate as set forth in Exhibit 3 subject to a good faith review and adjustment by mutual agreement of Accretive and Ascension Health [] from the MSA Effective Date.

	29.01.04		The parties shall cooperate in the development and execution of an orderly Exit Transition Plan which protects the right of each party to performance through the Final Service Date, timely payment for Services and the protection of its physical and intellectual property rights, subject to the provisions of this MSA.

	29.01.05		Upon Ascension Health’s request, Accretive shall transfer or assign to Ascension Health or its designee any agreements applicable to Services being provided to Ascension Health or Affiliates, on terms and conditions acceptable to both parties (Accretive and Ascension Health) and subject to the payment by Ascension Health of any

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			transfer fee or nonrecurring charge imposed by the applicable vendors.

	29.01.06		Notwithstanding the prohibition of paragraph 33.03 below, Ascension Health or the Affiliates may offer employment to Accretive Staff who perform Services exclusively for Affiliates at the time of the issuance of the notice of termination, other than the Key Accretive Staff. Accretive shall provide reasonable assistance to facilitate the communication of these offers of employment to its employees (e.g., providing names, resumes and other information reasonably requested by Ascension Health to the extent permissible by law and any contract). Accretive shall waive, any non-compete or other restrictive rights it may have with respect to those employees.

	29.02		Bidding Assistance. Ascension Health may obtain offers for performance of services similar to the Services following termination/expiration of the MSA. As requested by Ascension Health, Accretive shall provide to Ascension Health such information and other cooperation regarding Ascension Health’s operations as would be reasonably necessary for a third party to prepare an informed, non-qualified offer for such Services, and for a third party not to be disadvantaged compared to Accretive if said third party supplier were to be invited by Ascension Health to submit a proposal. The types of information and level of cooperation to be provided by Accretive pursuant to this Item shall be no less than those initially provided by Ascension Health to Accretive prior to commencement of the MSA.

	29.03		Equitable Remedies. Accretive, Ascension Health and Affiliates acknowledge that, in the event they breach (or attempt or threaten to breach) their obligations to one another regarding the preparation and execution of an Exit Roll-Out Plan and to provide termination/expiration assistance, they may be irreparably harmed. Under these circumstances either party may proceed directly to court. If a court of competent jurisdiction should find that a party has breached (or attempted or threatened to breach) any obligations related to the preparation and execution of an Exit Roll-Out Plan and termination/expiration assistance, each party agrees that, without any additional findings of irreparable injury to injunctive relief, it shall not oppose the entry of an appropriate order compelling performance by it and restraining it from any further breaches (or attempted or threatened breaches). Each party shall have the right to request that any injunctive relief be conditioned on contractual performance by the other party.

Article 30. INDEMNITIES

30.01

Indemnity by Affiliate. Affiliate shall indemnify Accretive and Accretive’s Related Entities and their respective officers, directors, employees, agents, successors, and assigns from, and defend the foregoing against, any Claim, liability or expenses (including attorneys’ fees and expenses) asserted by a third party and arising from the acts or omissions of Affiliate as follows:

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	30.01.01		That the Affiliate Software, or any other resources or items provided to Accretive by the Affiliate, its employees, or Ascension Health Agents infringe upon the proprietary rights of any third party (except to the extent such infringements as may result from: (a) modifications by Accretive or Accretive Agents, (b) breach of this MSA by Accretive, (c) Accretive’s failure to use any new or corrected versions of any allegedly infringing item provided by Affiliate, or (d) Accretive’s failure to adhere to any applicable license, lease, or other agreement, or specifications or instructions of which it has knowledge).

	30.01.02		Relating to any duties or obligations of the Affiliate, its employees, or agents accruing before the respective Affiliate Effective Date, or imposed on Affiliate, its employees, or agents under this MSA and/or an Affiliate Schedule at any time after the respective Affiliate Effective Date to a third party that is not a Related Entity of Affiliate.

	30.01.03		Occurring at an Affiliate Service Location if not caused by the acts or omissions of Accretive.

	30.01.04		Relating to Affiliate’s failure to obtain those Consents for which it is responsible.

	30.01.05		Caused by the material inaccuracy or untruthfulness of any representation or warranty made by Affiliate under Section 25.01 of this MSA.

	30.01.06		Relating to (a) a violation of Federal, state, or other laws or regulations for the protection of persons or members of a protected class or category of persons by Affiliate, its employees, or agents and (b) discrimination or harassment by Affiliate, its employees, or agents, and (c) work-related injury except as may be covered by Affiliate’s workers’ compensation or death caused by Affiliate, its employees, or agents; and (d) any Claim of wrongful termination or other employment related claim arising as a result of Affiliate’s conduct; and (e) any claim of unfair labor practice, arbitrations, breaches of collective bargaining agreements arising as a result of Affiliate’s conduct.

	30.01.07		Relating to violations by Affiliate of its obligations, representations and warranties under this MSA which are not caused or directed by Accretive, or which arise out of Accretive’s delivery of Services pursuant to the billing, coding and collection policies, practices and procedures of Affiliate as of the Affiliate Effective Date (except to the extent of Accretive’s negligence in providing such Services), including costs, claims, liabilities, expenses, penalties and other sanctions (including those arising as a result of a False Claims Act and/or qui tarn action) arising from Accretive or Accretive Agent’s

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failure to comply with any law, regulation, authority, or contractual obligations relating to the coding and billing of health care services (including but not limited to any Federal Health Care Program services).

	30.01.08		Relating to any amounts, including taxes, interest, and penalties, assessed against Accretive which are the obligations of Affiliate pursuant to Article 20.

	30.01.09		Relating to any Claim by, on behalf of, or related to the Contract Employees arising out of, related to, or in anyway connected with their employment prior to the Affiliate Effective Date.

	30.01.10		Relating to any Claim arising as a result of any action or failure to act by Affiliate pursuant to Section 5.05.

	30.01.11		Affiliate shall indemnify Accretive from any reasonable costs and expenses (excluding reasonable attorney’s fees) incurred in connection with the enforcement of this Section 30.01 against Affiliate.

	30.01.12		Affiliates obligations under this Section 30.01 shall be capped at $25 million dollars.

30.02

Indemnity by Accretive. Accretive shall indemnify Ascension Health, Affiliates and their Related Entities and their respective officers, directors, employees, agents, successors, and assigns from, and defend the foregoing against, any Claim, liability or expenses (including attorneys’ fees and expenses) asserted by a third party that is not a Related Entity of Accretive:

	30.02.01		That the Services, the Accretive Software, any modifications to Affiliate Software performed by Accretive, its employees, Accretive Staff, or Accretive Agents or any other resources or items provided to an Affiliate by Accretive, its employees, or Accretive Agents infringe upon the proprietary rights of any third party (except to the extent such infringements as may result from: (a) modifications by Affiliate or Ascension Health Agents other than those authorized or required by Accretive, (b) breach of this MSA by Ascension Health or the Affiliate, (c) an Affiliate’s failure to use any new or corrected versions of any allegedly infringing item provided by Accretive, provided the Affiliate is notified that use of such new or corrected version is necessary to avoid infringement, or (d) an Affiliate’s failure to adhere to any license, lease, or other agreement or specifications or instructions of which it has knowledge).

	30.02.02		In respect of Services provided out of shared facilities by Accretive, Accretive Staff, or agents to a third party not caused by Ascension Health or an Affiliate.

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	30.02.03		Relating to any duties or obligations of Accretive, its employees, Accretive Staff, or agents accruing after the respective Affiliate Effective Date in respect of any subcontractor of Accretive.

	30.02.04		Caused by the material inaccuracy or untruthfulness of any representation or warranty made by Accretive, its employees, or Accretive Agents under Section 25.02 of this MSA.

	30.02.05		Relating to Accretive’s failure to obtain the Consents for which it is responsible.

	30.02.06		Relating to (a) a violation of Federal, state, or other laws or regulations for the protection of persons or members of a protected class or category of persons by Accretive, its employees, Accretive Staff, or agents, (b) discrimination or harassment by Accretive, its employees, Accretive Staff, or agents, and (c) work-related injury except as may be covered by Accretive’s workers’ compensation or death caused by Accretive, its employees, Accretive Staff, or Accretive Agents; (d) any Claim of wrongful termination arising as a result of Accretive’s conduct; and (e) any claim of unfair labor practice, arbitrations, breaches of collective bargaining agreements arising as a result of Accretive’s conduct.

	30.02.07		Relating to any amounts including taxes, interest, and penalties assessed against Ascension Health or an Affiliate which are obligations of Accretive pursuant to Article 20.

	30.02.08		Relating to violations by Accretive of its obligations which are not caused or directed by Affiliate, including costs, claims, liabilities, expenses, penalties and other sanctions (including those arising as a result of a False Claims Act and/or qui tarn action) arising from failure of Accretive, Accretive Staff or Accretive Agents to comply with any law, regulation, authority, or contractual obligations relating to the coding and billing of health care services (including but not limited to any Federal Health Care Program services).

	30.02.09		Accretive shall indemnify Ascension Health or an Affiliate from any reasonable costs and expenses (excluding attorney’s fees) incurred in connection with the enforcement of this Section 30.02.

	30.02.10		Accretive’s obligations under this Section 30.02 shall be capped at $25 million dollars.

30.03

Indemnity by Ascension Health. Ascension Health shall indemnify Accretive and Accretive’s Related Entities and their respective officers, directors, employees, agents, successors, and assigns from, and defend the foregoing against, any Claim, liability or expenses (including attorneys’ fees and expenses) asserted by a third party and arising from the acts or omissions of Ascension Health as follows:

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	30.03.01		Relating to any duties or obligations of Ascension Health, its employees, or agents accruing either before the MSA Effective Date imposed on Ascension Health, its employees or agents under this MSA, or at any time after the MSA Effective Date to a third party that is not a Related Entity of Ascension Health.

	30.03.02		Caused by the material inaccuracy or untruthfulness of any representation or warranty made by Ascension Health under Section 25.03 of this MSA.

	30.03.03		Relating to (a) a violation of Federal, state, or other laws or regulations for the protection of persons or members of a protected class or category of persons by Ascension Health, its employees, or agents and or (b) discrimination or harassment by Ascension Health, its employees, or agents.

	30.03.04		Relating to violations by Ascension Health of its obligations under this Agreement which are not caused or directed by Accretive, including costs, claims, liabilities, expenses, penalties and other sanctions (including those arising as a result of a False Claims Act and/or qui tarn action) arising from failure of Ascension Health to comply with any law, regulation, authority, or contractual obligations relating to the coding and billing of health care services (including but not limited to any Federal Health Care Program services).

	30.03.05		Ascension Health shall indemnify Accretive from any reasonable costs and expenses (excluding attorney’s fees) incurred in connection with the enforcement of this Section 30.03 against Ascension Health.

	30.03.06		Ascension Health’s obligations under this Section 30.03 shall be capped at $25 million dollars.

30.04

Indemnification Procedures. If any Claim is commenced against an indemnified party (hereinafter “Indemnified Party”), notice thereof shall be given to the indemnifying party (hereinafter Indemnifying Party”) as promptly as practicable. After such notice, if the Indemnifying Party shall acknowledge in writing to such Indemnified Party that this MSA applies with respect to such Claim, then the Indemnifying Party shall be entitled, if it so elects, in a notice delivered to the Indemnified Party not less than thirty (30) days prior to the date on which a response to such Claim is due, to immediately take control of the defense and investigation of such Claim and to employ and engage attorneys subject to the approval of Indemnified Party, which shall not be unreasonably withheld, to handle and defend the same, at the Indemnifying Party’s sole cost and expense. The indemnifying party agrees to consult with the Indemnified Party regarding the defense of the claim and the Indemnified Party shall cooperate in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial, and defense of such Claim and any appeal arising there from; provided, however, that the Indemnified Party may, at its own cost and expense,

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			participate, through its attorneys or otherwise, in such investigation, trial, and defense of such Claim and any appeal arising therefrom. No settlement of a Claim that involves a remedy other than the payment of money by the Indemnifying Party shall be entered into without the consent of the Indemnified Party which shall not be unreasonably withheld. After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that Claim. If the Indemnifying Party does not assume full control over the defense of a Claim subject to such defense as provided in this Section 30.04, the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party shall have the right to defend the Claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party.

	30.05		Any Indemnified Party shall have the right to demand that any Indemnifying Party provide reasonable assurance that the Indemnifying Party is able to meet its financial obligations pursuant to these Indemnities including the ability to fund promptly at least $1,000,000 in indemnified claims.

Article 31. DAMAGES

31.01

Direct Damages. Ascension Health, Affiliates and Accretive shall be liable to the other party for any direct damages arising out of or relating to its performance under this MSA or any Affiliate Schedule. The following shall be considered direct damages and no party shall assert that they are Consequential Damages (as defined in Section 31.02):

	31.01.01		Commercially reasonable costs of recreating or reloading a party’s information which is lost or damaged as a result of a party’s breach of its obligations under this MSA;

	31.01.02		Commercially reasonable costs of implementing a work around in respect of a failure to provide all or a portion of the Services or any part thereof;

	31.01.03		Commercially reasonable costs of replacing lost or damaged equipment, software and materials;

	31.01.04		Payments or penalties imposed by a regulatory agency for a party’s failure to comply with deadlines which is not the result of a Force Majeure Event;

	31.01.05		Claims, liabilities, expenses, penalties and other sanctions (including those arising as a result of a False Claims Act and/or qui tarn action) or commercially reasonable costs as a result of a party’s failure to comply with any law, regulation, authority, or contractual obligations relating to the coding and/or billing of health care services including

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but not limited to any Federal Health Care Program services which is not the result of a Force Majeure Event.

	31.02		Consequential Damages. Neither Ascension Health, Affiliate nor Accretive shall be liable for, nor will the measure of damages include, any Consequential Damages arising out of or relating to its performance under this MSA or any Affiliate Schedule, except as provided in Section 4.03 relating to the public relations cost resulting from disruption of Affiliate’s operations. For purposes of this Agreement, Consequential Damages shall mean any indirect, incidental, special or consequential damages or amounts , including, as to Accretive, loss of income, or, as to the parties, for loss of profits, or savings arising out of or relating to Ascension Health’s, Affiliate’s or Accretive’s performance under this MSA, but excluding all Fees.

	31.03		Exclusions. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS ARTICLE 31, IN NO EVENT WILL ANY PARTY BE LIABLE FOR PUNITIVE OR EXEMPLARY DAMAGES UNLESS ASSESSED PURSUANT TO SECTION 31.01.05.

Article 32. INSURANCE

32.01

Insurance. During the Master Term, Accretive shall maintain at its own expense, insurance of the type and in the amounts specified below;

	32.01.01		statutory workers’ compensation in accordance with all Federal, state, and local requirements, and employer liability in an amount not less than $1,000,000 per occurrence:

	32.01.02		commercial general liability (including contractual liability insurance) in an amount not less than $[**] per occurrence;

	32.01.03		comprehensive automobile liability covering all vehicles that Accretive owns, hires, or leases in an amount not less than $1,000,000 per accident (combined single limit for bodily injury and property damages);

	32.01.04		umbrella excess liability applying above the employer’s liability, commercial general liability and comprehensive automobile liability described above in an amount not less than $[**] per occurrence/accident.

32.02

During the Master Term, Ascension Health and or Affiliates shall maintain at their own expense, insurance or self-insurance of the type and in the amounts specified below:

32.02.01

statutory workers’ compensation in accordance with all Federal, state, and local requirements, and employers liability in an amount not less than $1,000,000 per occurrence;

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	32.02.02		commercial general liability (including contractual liability insurance) in an amount not less than $[**] per occurrence;

	32.02.03		comprehensive automobile liability covering all vehicles that Ascension Health or Affiliate owns, hires, or leases in an amount not less than $1,000,000 per accident (combined single limit for bodily injury and property damages);

	32.02.04		umbrella excess liability applying above the employer’s liability, commercial general liability and comprehensive automobile liability described above in an amount not less than $[**] per occurrence/accident.

	32.03		Insurance Documentation. Each party shall furnish to the other party certificates of insurance or other appropriate documentation (including evidence of renewal of insurance) evidencing all coverage referenced above in Section 32.01 and 32.02 and naming the other party as an additional insured to the extent available on a commercially reasonable basis. Such certificates or other documentation will include a provision whereby thirty (30) days’ notice must be received by the additionally insured party prior to coverage cancellation of the coverage by either the insuring party or the applicable insurer. Such cancellation shall not relieve the insuring party of its continuing obligation to maintain insurance coverage in accordance with this Article 32.

	32.04		Accretive shall require each of its subcontractors to maintain at their own expense insurance of the types and in amounts commensurate with the scope of services to be performed, as determined by Accretive.

	32.05		Each party shall be responsible for insuring the personal property which is in its care, custody or control and shall effect waivers of subrogation against the other party, its Related Entities, agents, and subcontractors and their employees. Each party shall assume all risk of loss or damage to the property which is in its care, custody, or control even if caused by the act or omission, including a negligent act or omission, of the other party, its Related Parties, agents and subcontractors and their employees.

	32.06		Any insurance provided on a claims-made basis shall apply a retroactive date that precedes the Master Effective Date or the provision of Services. An extended reporting period must be purchased if the retroactive date is advanced or if the coverage is terminated and not replaced by another claims-made policy with the same retroactive date.

Article 33. MISCELLANEOUS PROVISIONS

33.01

Ethical and Religious Directives. Accretive acknowledges that Ascension Health and each Affiliate conduct their operations in a manner consistent with the Ethical and Religious Directives for Catholic Health Care Services as promulgated by the United States Conference of Catholic Bishops, Washington D.C., of the Roman Catholic Church or its successor. While performing Services pursuant to the

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			MSA, Accretive shall provide Services in accordance with the Ethical and Religious Directives. Disputes regarding violation of this Section 33.01 shall not be subject to the arbitration provisions of Section 26.03, but rather shall be decided by a Catholic ethicist to be mutually selected by the Ascension Health and Accretive.

	33.02		Corporate Responsibility. Accretive, Ascension Health and each of the Affiliates have in place Corporate Responsibility Programs (“Programs”) which have as their goal to ensure that they comply with federal, state and local laws and regulations. The Programs focus on risk management, the promotion of good corporate citizenship, including a commitment to uphold a high standard of ethical and legal business practices, and the prevention of misconduct. The parties acknowledge one another’s commitment to corporate responsibility and this MSA shall be interpreted and fulfilled consistent with the policies enumerated in their respective Programs. The parties agree to mutually cooperate with one another to assure that the objective of their respective Programs are met. The parties each agree to immediately notify one another’s corporate responsibility officer of (i) any and all possible instances of non-compliance on the part of the other party or any of its employees or agents of which the parties are aware, or (ii) any subpoena or other request for information or documents relative to the Services rendered hereunder. The parties agree to conduct their business transactions with one another in accordance with principles of good corporate citizenship and a high standard of ethical and legal business practices.

	33.03		Solicitation of Employees. During the Master Term, and for a [] period following the Final Service Date, Accretive, Ascension Health and Affiliates shall be prohibited from soliciting, recruiting or employing the employees of the other without the consent of the employee’s then current employer during the employee’s term of employment and for a period of [] following the employee’s final service date and subject to the provisions of Paragraph 29.01.06.

	33.04		Assignment. Neither party to this MSA may assign the MSA without the consent of the other party to the MSA. An Affiliate may not assign its respective Affiliate Schedule without the written consent of Accretive and Ascension Health. Upon notice to Accretive, Ascension Health may assign this MSA without consent to any affiliate or subsidiary in an assignment in which the assignor assigns substantially all of its assets and operating control (including a change in sponsorship) or upon a sale of all or substantially all of the assets of the assignor. Upon notice to Ascension Health, Accretive may assign this MSA without consent to any affiliate or subsidiary in an assignment in which the assignor assigns substantially all of its assets and operating control or upon a sale of all or substantially all of the assets of the assignor. Except with regard to the preceding sentence, no assignment shall relieve the assignor or any other party of its obligations under this MSA including each Affiliate Schedule shall continue to be binding on the parties and their respective successors and permitted assigns. Any assignment in violation of this Section 33.04 shall be void.

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33.05

Notices. Except as otherwise specified in this MSA or an Affiliate Schedule, all notices, requests, consents, approvals, and other communications required or permitted under this MSA shall be in writing and shall be sent by United States mail in a form which requires a, return receipt or nationally recognized courier service such as Federal Express with the capacity to verify receipt of delivery on the date such notice is received to the address specified below:

33.05.01

In the case of Ascension Health:


		Anthony Speranzo Senior Vice President and Chief Financial Officer Ascension Health 4600 Edmundson Road St. Louis, Missouri 63134

with a copy to:		Joseph R. Impicciche Senior Vice President and General Counsel 4600 Edmundson Road St. Louis, Missouri 63134

33.05.02

In the case of Accretive:


		Mary Tolan Founder and Chief Executive Officer 401 N. Michigan Avenue Suite 2700 Chicago, IL 60611

with a copy to:		Greg Kazarian Senior Vice President and General Counsel 401 N. Michigan Avenue Suite 2700 Chicago, IL 60611

			Either party may, by notice to the addresses above, change its address, or the parties to be notified under this provision. Notices shall be effective upon receipt in the case of notices given by courier, and five (5) days after deposit in the United States mail, properly addressed and postpaid in the case of mail.

	33.06		Counterparts. This MSA and each Affiliate Schedule may be executed in any number of counterparts, all of which taken together shall constitute one single agreement between the parties.

	33.07		Relationship. The parties intend to create an independent contractor relationship and nothing contained in this MSA or any Affiliate Schedule shall be construed to make either Accretive, Ascension Health or any Affiliate partners, joint venturers, principals, agents, or employees of the other. No officer, director, employee, agent, affiliate, or contractor retained by Accretive to perform work on Affiliate’s behalf hereunder shall be deemed to be an employee, agent, or contractor of

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			Affiliate. Accretive shall not have any right, power, or authority, express or implied, to bind Ascension Health or an Affiliate. Neither Ascension Health nor an Affiliate shall have any right, power, or authority, express or implied, to bind Accretive.

	33.08		Consents, Approvals, Notices and Requests. Unless otherwise specified in this MSA or the applicable Affiliate Schedule, all consents, approvals, notices, and requests, acceptances or similar actions to be given by either party under this MSA shall not be unreasonably withheld or delayed and each party shall make only reasonable requests under this MSA.

	33.09		Severability. If any provision of this MSA (other than a term or provision relating to any payment obligation) is held by a court of competent jurisdiction to be contrary to law, then the remaining provisions of this MSA or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each such provision of this MSA shall be valid and enforceable to the extent granted by law. Notwithstanding this provision, if the severance and removal of the provision(s) deemed to be contrary to law frustrates the purpose of this MSA, or either party’s ability to perform under this MSA, than that party shall have the right to terminate this MSA for Good Reason.

	33.10		Waiver. No delay or omission by any party to exercise any right or power it has under this MSA or any Affiliate Schedule shall impair or be construed as a waiver of such right or power. A waiver by any party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be in writing and signed by the party waiving its rights.

	33.11		Publicity. No party shall use another party’s name or refer to the other party directly or indirectly in any media release, public announcement, or public disclosure relating to this MSA or any Affiliate Schedule or their subject matter, including in any promotional or marketing materials, customer lists or business presentations without consent from the other party for each such use or release. No party may use any trademark or service mark of the other party without that party’s consent which shall be given in its sole discretion. Nothing in this Agreement shall be construed to prevent the parties from entering into any separate agreement with respect to the use of the Ascension Health name, trademark or service mark.

	33.12		Entire Agreement. This MSA including each of the Affiliate Schedules, which are hereby incorporated by reference into this MSA, is the entire agreement between the parties with respect to its subject matter, and there are no other representations, understandings, or agreements between the parties relative to such subject matter.

	33.13		Amendments. No amendment to, or change, waiver, or discharge of, any provision of this MSA including any Affiliate Schedule shall be valid unless in

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			writing and signed by an authorized representative of the party against which such amendment, change, waiver, or discharge is sought to be enforced.

	33.14		Governing Law. This MSA including each of the Affiliate Schedules shall be interpreted in accordance with and governed by the internal laws of State of Missouri excluding its conflict of laws rules.

	33.15		Jurisdiction. Each party irrevocably accepts and submits to the jurisdiction of the courts in Missouri, Illinois and any state in which an Affiliate Service Location is located, in personam, generally and unconditionally with respect to any action, suit, or proceeding brought by it or against it by the other party. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY. THE SUBSTANCE OF THIS PROVISION SHALL BE INCLUDED IN EACH AFFILIATE SCHEDULE AND SHALL BIND EACH AFFILIATE.

	33.16		Survival. The terms of Articles 14, 22, 23, 24, 25, 28, 29, 30, 31 and Sections 15.01, 32.06, 33.03, 33.05 33.09, 33.10, 33.14, 33.15, 33.17, and this Section 33.16, and any other provision which by its context or nature should survive shall survive the expiration or termination of this MSA and any Affiliate Schedule in whole or in part for any reason.

	33.17		Third Party Beneficiaries. Each party intends that this MSA and each Affiliate Schedule shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than Ascension Health, the respective Affiliate or Accretive.

	33.18		Acknowledgment. Ascension Health, Affiliates and Accretive each acknowledge that the limitations and exclusions contained in this MSA have been the subject of active and complete negotiation between the parties and represent the parties’ agreement based upon the level of risk to Ascension Health, Affiliates and Accretive associated with their respective obligations under this MSA and the payments to be made to Accretive and credits to be issued to Affiliate pursuant to this MSA. The parties agree that the terms and conditions of this MSA and the Affiliate Schedules shall not be construed in favor of or against any party by reason of the extent to which any party or its professional advisors participated in the preparation of this MSA and the Affiliate Schedules.

	33.19		Injunctive Relief. The parties acknowledge and agree that a breach of *Article 14 and Article 24* may give rise to irreparable injury that is not adequately compensable in damages. Accordingly, either party may seek injunctive relief against the breach or threatened breach of *Article 14 and Article 24* in addition to any such legal and equitable remedies available.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

- 57 -

IN WITNESS WHEREOF, each of Ascension Health and Accretive have each caused this MSA to be signed and delivered by its duly authorized representative.


ASCENSION HEALTH		HEALTHCARE SERVICES, INC. d/b/a
		ACCRETIVE HEALTH

By:	/s/ Anthony J. Speranzo	By:	/s/ Mary Tolan

TABLE OF EXHIBITS


1.		Accretive Service Locations
2.		Form of Affiliate Schedule
3.		Operating Protocols
4.		Termination License Fees
5.		Business Associate Agreement

Exhibit 1
Accretive Service Locations

Accretive Health – Corporate
401 N. Michigan Avenue
27 ^th Floor Chicago, IL 60611

Accretive Health
Financial Clearance Center and
Medical Financial Solutions
229 North Rose
Kalamazoo, MI 49007

Accretive Health Medicaid Eligibility Hub
660 Woodward Avenue, Suite 1442
Detroit, Michigan 48226

Accretive Health
BP Modeling
2811 Wintergreen Drive
Cape Girardeau, MO 63701

Accretive Health
Underpayment
725 N. Highway A1A
Jupiter, FL 33477

Accretive Health India Operations
Location 1 –
Underpayments, Best Possible,
FCC Data Entry, Small Balance Team
301-306, Centrum Plaza,
Sector – 53,
Gurgaon, India - 122002

Location 2 –
Transcription, PFS,
FCC Payor Follow-up
C-110, Sector – 63
Noida, India - 201307


Exhibit 1 – Ascension MSA		1/1/09

Exhibit 2
Form of Affiliate Schedule

AFFILIATE SCHEDULE

FOR

[INSERT AFFILIATE NAME]

This Affiliate Schedule dated as of [Date] , by and among Health Care Services, Inc., a Delaware corporation (“Accretive”), Ascension Health, a Missouri nonprofit corporation (“Ascension Health”), and [____________] , a [____________] corporation (“Affiliate”) supplements the Master Services Agreement by and between Accretive and Ascension Health.

W I T N E S S E T H:

WHEREAS, Ascension Health and Accretive have entered into a Master Services Agreement that permits Affiliates to procure revenue cycle services from Accretive pursuant to Affiliate Schedules;

WHEREAS, Affiliate wishes to procure revenue cycle services from Accretive and Accretive wishes to provide revenue cycle services to Affiliate on the terms and conditions set forth in the Master Services Agreement and this Affiliate Schedule;

NOW, THEREFORE, for valuable consideration, the receipt of which is acknowledged, Accretive, Ascension Health, and Affiliate agree as follows:

Article 1. Definitions and Construction

	1.01		Definition. Unless otherwise defined herein, defined terms shall have the meaning ascribed to them in the Master Services Agreement.

	1.02		Construction and Interpretation. This Affiliate Schedule shall be construed and interpreted as set forth in the Master Services Agreement.

	1.03		Reference to Master Services Agreement. The “Master Services Agreement” means that certain contract between Ascension Health and Accretive, dated November ___, 2007, as has been or may be amended, modified, supplemented, revised, or restated by Ascension Health and Accretive in the future. This Affiliate Schedule hereby incorporates the Master Services Agreement as it currently exists and as may exist in the future.

	1.04		Changes. The Master Services Agreement and each of its provisions may be amended, modified, supplemented, revised, or restated, as agreed by and between Ascension Health and Accretive from time to time. Affiliate irrevocably agrees that all of the foregoing and any waiver by Ascension Health shall be binding upon Affiliate without any further agreement, consent or notice. Affiliate hereby

irrevocably consents to Ascension Health acting on its behalf in such regard during the Affiliate Term. This Affiliate Schedule may be amended as agreed by and among Affiliate, Ascension Health, and Accretive from time to time.

Article 2. Services and Effective Date

2.01

Services. Pursuant to the Master Services Agreement, Accretive shall provide the Services to Affiliate for the Sites set forth in Appendix C. Accretive shall be the exclusive provider of Services as defined in the Master Services Agreement. Accretive agrees that it will not commence services outside the Standard Scope of Services without written confirmation from the Affiliate Designated Sponsor, that Accretive is authorized to proceed with the services. Notwithstanding this exclusivity, Affiliate shall have the option of utilizing a provider other than Accretive to provide it with services limited to the areas of CDM Review and Strategic Pricing provided that:

	(a)		Accretive is provided a fair opportunity to provide the services on terms comparable to those being offered by the alternative service provider;

	(b)		The alternative service provider must be a focused service provider in the particular area of services and can not be a firm which competes directly with Accretive in the delivery of revenue cycle services.

	(c)		The work of the alternative service provider is coordinated with the Accretive team to avoid overlap and assure coordination of services.

	2.02		Affiliate Effective Date. The term of this Affiliate Schedule shall commence on [____________] (such date the “Affiliate Effective Date”) and continue until the expiration of the Affiliate Term.

	2.03		Affiliate Environment Specifications. The particular specifications relating to Affiliate’s environment and relevant to the provision of the Services are set forth as follows:

	2.03.01		Those employees of Affiliate that are Contract Employees are set forth in Appendix H. Those employees that will be leased from Affiliate by Accretive and the reimbursement for each such employee to be paid by Accretive to Affiliate (“Employee Lease Payments”) are set forth in Appendix H. This roster shall be reviewed and adjusted on a monthly basis. Accretive shall pay to Affiliate the Employee Lease Payments on or before the first day of each month.

	2.03.02		Affiliate’s Affiliate Machines are set forth in Appendix A.

	2.03.03		Affiliate’s Assigned Agreements are set forth in Appendix E.

	2.03.04		Affiliate’s Retained Resource Agreements are set forth in Appendix F.

	2.03.05		The Accretive Service Locations from which Accretive will provide Services to Affiliate are set forth on Appendix G. The monthly occupancy expenses for which Accretive is to reimburse Affiliate are set forth in Appendix I (“Occupancy Reimbursement Payment”). Accretive shall pay to Affiliate the Occupancy Reimbursement Payment on or before the first day of each month. The Occupancy Reimbursement Payment shall be adjusted by a percentage equal to INFLATOR on each anniversary of the Affiliate Effective Date.

	2.03.06		The Affiliate Service Locations from which Accretive will provide Services to Affiliate are set forth on Appendix B.

	2.03.07		The Affiliate Roll-Out plan is set forth on Appendix K.

Article 3. Fees

3.01

Fees. The Base Fee and Management and Technology Fee payable by Affiliate as established by the Base Case as set forth in Appendix D and pursuant to the Operating Protocols are $[_________] and $_________, respectively.

Article 4. Dispute Resolution

4.01

Consent to Process. All parties hereby consent to the Dispute Resolution Procedures set forth in the Master Services Agreement. Furthermore, Affiliate acknowledges and consents that it will institute all claims as between Affiliate and Accretive, through and in the name of Ascension Health, subject to the qualifications and rights set forth in the Master Services Agreement.

Article 5. Additional Provisions

5.01

Right to Consultation. In the event that Accretive elects to consider delivering services to a client in close proximity to Affiliate which is identified by Affiliate as a competitor on Appendix J, Accretive agrees to consult with Affiliate before undertaking such a relationship.



ACCRETIVE		ASCENSION HEALTH



Signature		Signature



Printed Name and Title		Printed Name and Title



Date		Date


AFFILIATE


Signature


Printed Name and Title


Date

Table of Appendices


A			Affiliate Machines
B			Affiliate Service Locations
C			Sites
D			Base Case
E			Assigned Agreements
F			Retained Resource Agreements
G			Accretive Service Locations
H			Contract Employees
1			Reimbursement for Occupancy Expenses
J			Affiliate Competitors
K			Roll-Out Plan
L			Form Designation as Attorney in Fact

Appendix L

Form of Designation as Attorney in Fact

STATE OF )

) SS:

COUNTY OF )

KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby make, constitute and appoint Healthcare Services, Inc. (d/b/a Accretive Health) (hereinafter “Accretive”) of Cook County, Illinois, as attorney-in-fact for the benefit of the undersigned, and in its name, place and stead for the following purposes:

To act as processing agent for the undersigned in submitting the undersigned’s medical assistance claims for the purpose of reimbursement under the state’s medical assistance program.

To act as the undersigned’s authorized agent for purposes of signing on behalf of the undersigned any required certification statement in connection with the submission of medical claims.

To act as processing agent for the undersigned in submitting the undersigned’s medical claims to third party payors, including but not limited to Medicare, Medicaid, and any and all third party payors for covered health care services, items, and supplies provided by the undersigned, for the purpose of reimbursement.

To deposit funds received from third party payors, including those classified as self pay into accounts controlled by, or in the name of the undersigned.

It is acknowledged that this Power of Attorney does not authorize Accretive to receive and negotiate checks or other remuneration in its own name that are otherwise due or payable to the undersigned. It is further expressly acknowledged and recognized that the granting of this Power of Attorney in no way limits or discharges the ultimate responsibility and liability of the undersigned for the truthfulness and accuracy of any and all information provided to Accretive for submission ‘on on behalf of the undersigned. This Power of Attorney is not intended to, shall not be construed to, and expressly does not authorize the Accretive to sign, certify, file, or otherwise submit, on behalf of the undersigned, any claim, statement, request for reimbursement, or other document, or information that Accretive knows or would know is not, in all respects, true and accurate. In the event that the Accretive submits any claims, certification, statement, request for document on behalf of the undersigned that it knows to be false or inaccurate, it is understood and agreed that such action by Accretive is completely unauthorized by the undersigned.

This Power of Attorney shall automatically terminate upon the termination of the Affiliate Schedule entered into between Accretive and the undersigned on , 200___. Upon termination of the Affiliate Schedule Accretive shall promptly notify all parties which it has provided with this Power of Attorney that the Power of Attorney has been terminated.



		By:

		Its:

Exhibit 3
Operating Protocols

EXHIBIT 3: OPERATING PROTOCOLS

In support of the

Amended and Restated Master Services Agreement

by and between

Healthcare Services, Inc. d/b/a Accretive Health

and

Ascension Health

as of December 13, 2007

Revised: March 20, 2009

Confidential
Revised: 3/20/09

Operating Protocol Overview

The Operating Protocols were developed jointly by Accretive Health and Ascension Health to support key operational aspects of the contractual relationship governed by the Master Services Agreement.

Table of Contents


PROTOCOL	PAGE#	MSA REFERENCE
Standard Scope of Services	3	Par. 3.02

Affiliate Roll Out Plan	4	Par. 4.01

Protocol for Adjustment of Employee Roster and Compensation	5	Par 5.03

Affiliate Target Service Levels	6	Par 7.01.04, 10.01

Base Fee Methodology	7	Par 18.02

Determination of Revenue Improvement	12	Par 18.05, 19.02

Measurement for Performance Improvement Not Captured by Revenue Improvement	21	Par. 18.05, 19.02

Measurement Procedures	23	Articles 18 & 19

Performance Guaranty	25	Par. 19.06

Dormant Receivable Collections	27	Par. 18.8

Shared Service Blended Shore Operating Model	29	Par. 21.01

Mechanism for Determining and Sharing Cost Savings	31	Par. 21.01 (c)

Cost Savings Projections and []**	38	Par 21.03

IT Access	41	n/a

Given the complex and fluid nature of certain aspects of the operating model (e.g. measurement of benefit) the Operating Protocols may revised as often as necessary by mutual agreement of the parties. Similarly, exceptions or adjustments to the Operating Protocols may be made at the Affiliate level as appropriate and mutually agreed to by the parties. Issues that can not be resolved by mutual agreement will be elevated to the Joint Review Board for resolution as outlined in paragraph 26.01 of the Master Services Agreement.

Confidential
Revised: 3/20/09

Standard of Scope of Services

The Services shall include the following functional areas:

	•		scheduling

	•		on-site processes of pre-registration

	•		eligibility verification

	•		registration

	•		authorization

	•		admitting

	•		coding

	•		transcription

	•		record retention

	•		chart analysis and assembly

	•		billing

	•		secondary billing

	•		underpayment review

	•		denial management

	•		third party collections and self pay follow-up

	•		charge description master maintenance

	•		collection of dormant receivables

	•		lost charges/charge capture

	•		Finance and managed care analytical support as appropriate to support general operations

From January 2008 forward, the following additional functions shall be considered Services and be provided as necessary and agreed upon in writing by the respective Affiliates:

	•		Clinical documentation improvement

	•		Managed care contract negotiation

	•		CDM review

	•		Strategic pricing

Confidential
Revised: 3/20/09

Affiliate Roll-Out Plan

A roll-out plan will be developed for each Affiliate prior to the Affiliate Effective Date. Affiliate will review Roll-Out Plan and approve in writing prior to commencement of services. Such Roll-out Plan will, at a minimum, include the following key components:

A.		Time Frame: The Roll-out Plan will specify the date for the commencement of Services at the Affiliate and will address activities to be undertaken by each party during the first three months of the Services.

B.		Schedule of Leadership and Associate Communication Initiatives

C.		Schedule of Management and Staff Training and Development

D.		Prioritization and implementation plan for key process/technology initiatives which includes key dates

E.		Identification of Resources required and available to execute the Roll-out Plan and commencement of Services.

F.		Schedule for delivery of Affiliate financial data required to support the Best Possible measurement process.

G.		Agreement on any Affiliate-specific Service Level Targets as may be appropriate

H.		Identification of Applicable Policies affecting Financial Assistance and Billing Practices relating to the Uninsured.

I.		Protocol for System Access Requests

J.		Identification of Data Requests Necessary to Support Operations.

Confidential
Revised: 3/20/09

Protocol for Adjustment of Employee Roster and Compensation

1.		As part of the start-up process for each Affiliate a roster of Contract Employees and their associated compensation shall be established (the “Contract Employee Roster”) and shall become part of the Affiliate Agreement as Appendix H.

2.		The Contract Employee Roster shall be reviewed semi-monthly (i.e. two times each month) by the Accretive Site lead and the designee of Affiliate to assure the accuracy of the Contract Employee invoice and payment.

3.		Changes to the Contract Employee Roster and the rates of compensation shall be communicated on a timely basis as part of the review process discussed above.

4.		No later than thirty (30) days from the end of each quarter both parties will review and acknowledge in writing any changes to the Employee Roster and/or associated rates of compensation. Associated true ups will be carried forward to the next monthly billing cycle.

Confidential
Revised: 3/20/09

Affiliate Target Service Levels

Accretive and Affiliate will establish specific Service Level Targets as may be appropriate to ensure efficient revenue cycle operations. Affiliate Target Service Levels will be mutually agreed by both parties, and documented in a manner and form consistent with the table below.


Function/Activity	Measured By	Target Service Level
*Scheduling*
OP Scheduling	7 CDEs
OR Scheduling	7 CDEs
PBX	Availability of Phone

*Case Management/Utilization Management*
Re-certification	Denials for request
Pre-discharge denials/appeals	Denial overturn

*Revenue Generation*
Automated Charges	Missing charges
Manual Charges	Missing charges
Charge Error Corrections	Missing charges
Audit Corrections	Missing charges
Batch Report Rejects	Missing charges
Late Charge Generation	Volume of late charges
Charge Balancing	Out of Balance
Ancillary Charge Report	Missing Charges
Internal System Issues/Interfaces (“systems out of sync”)	Out of Balance

*Cash Processing/Logging*
Bank Depostis - Patient Access Cash (Front End)	Deposit
Bank Depostis - PFS Cash (Back End)	Deposit
Deposit Reconciliation	Reconciliation
Monthly bank Account Reconciliation	Reconciliation

*Revenue Cycle Controls/Maintenance*
Patient Day Reconciliation	Census reconciliation

*Other-Facility*
Month End Close	EOM Reports
General Ledger Entries	EOM Reports
Employee Lease Payment Determination	Transfer Amount Sign-off

*Information Services and Technology*
Core Revenue Cycle Systems (i.e. PAS, billing system)	Minimum hours access per day

Confidential
Revised: 3/20/09

Base Fee Methodology

1.		Base Fee . It is anticipated that each Affiliate will pay Accretive a base fee amount [**]. The parties will work collaboratively in an attempt to obtain accurate costs involved at each Affiliate with regard to these Services

2.		The costs involved in the base fee are to include both Direct Cost (as more fully described in Section 3 below) and Indirect Costs (as more fully described in Section 4 below), except where their inclusion is not commercially practical.

3.		For purposes of this Section 2, direct cost means [**]. The Direct Costs include, but are not limited to, the following direct expense categories:

[**]

4.		The Indirect Costs are costs incurred in support of revenue cycle functions []. These costs include, but are not limited to, the following categories: []. These costs will be allocated to the revenue cycle functions based on the amount of those costs consumed by the revenue cycle function. [] will be allocated on either the proportion of salary expense or FTEs engaged in the revenue cycle function compared to the total salary expense or FTEs associated with the expense item, as appropriate. [] will be allocated based on the proportion of computers and telephones utilized in the revenue cycle function compared to the total computers and telephones associated with the expense item.

5.		The Base Fee for each quarter shall be adjusted to include any [] as mutually agreed to in writing with the Affiliate during the prior quarter [].

Accrual for PTO Costs:

1.		“Paid Time Off” (PTO) shall mean the time that a Contract Employee is paid by an Affiliate due to an excused absence.

2.		Each Affiliate has its own definition of what sort of absence qualifies for PTO. As such, this matter will be addressed and defined during the establishment of each Affiliate’s Base Fee.

3.		For all Affiliates with contract start dates subsequent to January 1, 2008 :

	a)		PTO costs will be included in the Affiliate’s Base Fee using an “as incurred” methodology. This methodology will recognize the PTO cost as earned by the employee using the Affiliate’s calculation method (policy) beginning at the inception of the contract. Consequently, all PTO related cost incurred or accrued by the Affiliate prior to the inception of the contract should not be included in the baseline calculation and should not be reimbursed by Accretive.

	b)		Accretive will reimburse Affiliates for PTO costs as they are incurred by the Affiliate’s employees. An allowance for PTO that is earned in the current period is added to each bi-weekly payroll like other overhead allocations. Payments to employees for PTO taken are deducted from the bi-weekly payrolls. Accretive does not reimburse the Affiliates for these amounts.

Affiliates with contract start dates prior to January 1, 2008 used different methods to account for PTO. If the Affiliate is not using the “as incurred” methodology as set forth in 3 above, Accretive and the Affiliate will review the methodology used in determining the Base Fee and subsequent PTO payments and determine if retroactive recalculation of PTO costs using the “as incurred” method is practical.

Confidential
Revised: 3/20/09

If the Affiliate agrees that retroactive recalculation is practical, Accretive will work with Affiliate to recalculate the PTO cost under the “as incurred” method from the inception of the contract and make any adjustments to the baseline calculation and payroll reimbursement as needed. Subsequently, the “as incurred” method should be applied and any remaining PTO balances or accrued PTO liabilities remaining with the client will be the responsibility of the client.

5.		Under the “as incurred” method there may be an instance where an employee will have earned PTO but due to the Affiliate’s policy or employee’s actions the employee will have forfeited the right to receive payment or utilize the PTO. This instance most likely will occur when an employee continues to earn PTO after reaching the maximum allowable PTO balance and the Affiliate does not have a payout policy. This scenario is expected to be infrequent; but when it occurs, an adjustment to the payroll reimbursement from Accretive to the Affiliate will be necessary to avoid Accretive reimbursing the Affiliate for an expense that the Affiliate did not incur.

6.		PTO cost related to allocations such as human resources and information technology that contain FTEs as a component in the calculation will be based on the full time equivalent (FTE) classification of each employee per the Affiliate’s payroll records. The FTE classification approach will eliminate fluctuations in the allocation portion of the payroll reimbursement resulting from employees utilizing PTO.

7.		A change in FTE status due to employee reclassifications will impact the allocation reimbursement. When an employee’s status is modified during the contract period Accretive Health finance will make an adjustment to the allocation reimbursement to reflect the change. To illustrate, the reimbursement for PTO cost for an employee that has been identified to be a full time equivalent (1 FTE) will be 100% of the eligible PTO benefit. In comparison, the reimbursement for PTO cost for an employee that has changed from a full time 1 FTE to a part time one-half (.5 FTE) will be 50% of the eligible PTO benefit.

Example 1 – Direct or Allocated Full Time Employee PTO Calculated “As Incurred”

The calculation of PTO cost per pay period for a full-time direct or allocated employee based upon a standard week of 40 hours consisting of five 8-hour workdays and a semi-monthly pay period is:

[(Number of PTO days the employee is eligible per year at the full time rate) X (Standard hours per day)] / (Number of pay periods per year).

In this example the employee is entitled to 20 PTO days per year. This would equate to the following hours per pay period earned.

[(20 days per year X 8 hours per day)] / (24 pay periods per year) = 6.67 hours per pay period.

Under the “as incurred” method of calculating direct employee PTO cost Accretive would reimburse the Affiliate for the actual hours worked by the employee for the pay period plus an additional 6.67 hours. Assuming an 80 hour

Confidential
Revised: 3/20/09

pay period Accretive would reimburse the Affiliate 86.67 hours (80 hours worked + 6.67 hours of accrued PTO). Conversely, if the employee utilizes 40 hours of PTO during a pay period consisting of 80 hours Accretive will reimburse the Affiliate for 46.67 hours (40 hours worked + 6.67 hours of accrued PTO). The Affiliate will not be reimbursed for the 40 hours of vacation utilized as Accretive has already reimbursed the Affiliate as the vacation was earned.

Example 2 – Direct or Allocated Part Time Employee PTO Calculated “As Incurred”

The calculation of PTO cost per pay period for a one half (.5 FTE) direct or allocated employee based upon a standard week of 40 hours consisting of five 8-hour workdays and a semi-monthly pay period is:

[(Number of PTO days the employees level is eligible at the full time rate) X (FTE %) X (Standard hours per day)] / (Number of pay period per year)

In this example a full time employee is entitled to 20 PTO days per year. However, since this employee is categorized as a one-half FTE (.5 FTE) the full time amount of PTO earned must be adjusted to properly reflect the percentage of the full-time work schedule.

[(20 days per year X 8 hours per day) X (.5 FTE %)] / (24 pay periods per year) = 3.33 hours per pay period.

Determination of Net Revenue Yield Improvement

The Performance Incentive Fees will relate to Accretive’s ability to provide the revenue cycle operations services more efficiently and in compliance with applicable rules and regulations. Compliant efficiencies will be calculated on a monthly basis comparing the monthly results against the annual monthly average for the Baseline Period.

Guiding Principles

Accretive and the Affiliate acknowledge and intend that the methodology for the measurement of Net Revenue Yield Improvement has been developed in a manner to reflect [**].

Both parties should be protected from either windfalls or penalties resulting from the impact of market events. Such events could include, but are not limited to:

	•		[**] being operated by the Affiliate.

	•		[**] resulting in non-compliance with contract terms.

	•		Delayed implementation of [**] between insurance company and Affiliate.

	•		[**]

	•		Services to patients where Affiliate is not certified by a payor to bill for such services and thus not entitled to reimbursement.

	•		[**] (e.g., changes in netting policies on individual open patient accounts receivable balances).

	•		Changes in [**].

Given the material differences in revenue yields experienced for [**], the Net Revenue Yield Improvement will be adjusted [**] for changes [**] as a percentage of the total payer mix. These adjustments will be made by applying the [**] applied against the [**] for each of these categories to produce an adjustment to baseline. [**] are those patients that present at time of service [**] and include those patients converted to [**].

All calculations are to be based on the Affiliate’s generated financial data with a final review and approval by the Affiliate’s designee.

Key Concepts

Best Possible Compliant Net Revenue The maximum amount collectible from patient encounters, in compliance with contracts between the Affiliate and third party payors and consistent with the Affiliate’s self-pay discounts charitable mission and policies. [**]. This may include cash collected through collection agencies, legal collections, early out vendors and other contracted services before deductions of fees. In the event that [**] (e.g., lump-sum underpayment settlements). For payors that have periodic interim payments, vouchered remittances will be considered cash.

Adjusted Cash Collections Cash Collections plus an adjustment for [**]

Net Revenue Yield The measure of collection efficiency. [**]

Improvement in Net Revenue Yield The change in the Net Revenue Yield of the Measurement Period as compared to the Net Revenue Yield of the Baseline Period, [**].

Total Improvement Improvement in Net Revenue Yield plus [**].

Baseline Period The 12 months immediately preceding the start of Services (Affiliate Effective Date).

Measurement Month(s) The months commencing as of the Contract Start Date (Affiliate Effective Date).

Ultimate Yield Actual cash collected on a group of accounts divided by the specific Best Possible (expected) cash collections for the same group of accounts.

Process of Determination of Net Revenue Yield Improvement

Beginning on the first anniversary of the Affiliate Effective Date (i.e. start of the second contract year), the [**] will be computed and paid quarterly [**], after measuring the [**]. Since account financial class determination and therefore Best Possible can change many quarters after the initial calculation (e.g., disability cases) the [**]. All calculations are to be based on the Affiliate’s generated financial data with a quarterly review by each Affiliate CFO or his/her designee.

The Best Possible Compliant Revenue and Adjusted Cash Collections amounts utilized in arriving at the [**] (i.e., compliant efficiencies) will be adjusted, by mutual written consent of Accretive and Affiliate, to account for the impact of [**]. The parties will also review to confirm that there has been no compensation for case mix changes. The parties may engage an outside auditor to review and confirm such analysis.

Net Revenue Yield and resulting Net Revenue Yield Improvement will be determined by comparing the [**] Revenue Yield to the [**] Revenue Yield.

Net Revenue Yield is [**]. It is defined as:

[**]

Improvement in Net Revenue Yield is defined as:

[**]

Step 1: Calculating Best Possible Compliant Revenue

The Best Possible Compliant Revenue for the [**] will be calculated by modeling the payment terms of each [**] for the respective period through the contract model, [**]. The model will be built as follows;

	•		The modeling of [] will be reviewed and approved by the [] will be incorporated into the contract models.

	•		The model will assume [**].

	•		Best Possible Compliant Revenue for []. This process will be similar to calculating expected payment for a managed care payer after application of the negotiated discount. For those self-pay patients that [] the specific insurance compliant collectible revenue is utilized.

Step 2: Calculating Adjusted Cash Collections

Step 2 involves calculating the [**] using the following methodology. [**] and, in the case of interim payments, [**]. Adjusted Cash Collections is the total Cash Collections received [**] as set forth in this Step 2. The adjustment to [**] for changes in [**] for a measurement month or a baseline month would be calculated in the following manner:

•

[**] (changes in days in receivables over 365 days old will be eliminated from this calculation). For purposes of these Operating Protocols, [**] is the current months ending [**] less the prior months [**].

	•		Gross AR days are calculated as the [**].

	•		Average Daily Gross Revenue for the current and prior month is the sum of [] divided by the [].

	•		Calculate the Adjusted Days which is equal to [**].

	•		Calculate the AR Day Cash Value by [**]

	•		Calculate the AR Adjustment by [**].

	•		Calculate Adjusted Cash Collections for a month by [**].

Step 3: Calculating Net Revenue Yield

Step 3 involves calculating the Net Revenue Yield for the [**]. Net Revenue Yield for the Measurement month is calculated by [**]. Revenue Yield for the Baseline Period [**] and then dividing by [**] for the same 12 month Baseline Period.

Step 4: Normalizing Baseline Net Revenue Yield for Changes in Self-Pay Mix

Given the material differences in Revenue Yields experienced for [**] on one hand, and [**] and [**] on the other hand, the Baseline Period Revenue Yield will be normalized annually for changes in the [**].

These adjustments will be made by applying the new mix percentage for each of the [**] applied against the specific Baseline Period Revenue Yield for each of the payer types to [**].

In addition, an [**]. As noted in the Guiding Principles, Pure Self Pay accounts include those that are [**]. These converted accounts will have an adjustment so as to fully capture the total self-pay pool of patients. The self pay conversion adjustment is [**]. The Average Monthly Baseline Period converted account Best Possible is the total [**].

The baseline revenue yields for each of the three payer types will be determined using [**]. Ultimate Yield is the [**]. For Patient Residual versus Third Party Payer Best Possible, [**]. This could range from patient account data system &/or 835/remittance advice data to sampling of accounts.

Step 5 Calculating Net Revenue Yield Improvements

Step 5 involves calculating the Revenue Improvements for a month using the following methodology.

	•		[**]

	•		[**]

Illustration

As an illustration of the above steps, the following describes the detailed calculations:

Facts:

Best Possible Compliant Revenue

Baseline Period: $205,330,437

Measurement Month: $18,195,069

Baseline Adjusted Cash Collections: $172,272,237

Measurement Month Cash Collections: $16,445,021

Gross AR Days

Current Measurement Month: 62.51

Previous Measurement Month: 63.78

AR Day Cash Value: $509,518

[**]

A total of four pages were omitted pursuant to a request for confidential treatment.

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Revised: 3/20/09

Measurement for Performance Improvement
Not Captured by Revenue Improvement

The parties acknowledge that certain areas of improvement are anticipated that are not captured by the Revenue Improvement Measurement Methodology and therefore need to be measured on an initiative by initiative basis.

These initiatives and the measurement approach to be applied to each are set forth below. Accretive will be responsible for communicating the commencement of these initiatives with the Affiliate CFO prior to the commencement of the Initiatives and reviewing the agreed upon measurement methodology for each initiative at that time.

Determination regarding initiatives that increase Revenue Improvement shall be computed and paid quarterly in arrears unless the improvement is not reasonably measurable on a quarterly basis and an alternative arrangement is mutually agreed to by the parties.

Pricing changes. Accretive will provide recommendations for the implementation of targeted pricing changes on an annual basis based on both market sensitivity and revenue impact.

Measurement approach. The Best Possible revenue impact of those changes will be tracked on a monthly basis. The Additional Revenue Improvement for this initiative will be the [**]. Accretive Performance Incentive Fee for benefits for [**].

CDM Changes. Accretive will recommend and implement changes in the charge description master charges which produce an increase in Best Possible Compliant Revenue (for example changes in the CDM which for services currently rendered with no existing charge).

Measurement approach. The specific charges added or changed will be tracked and adjusted [**]. Accretive Performance Incentive Fee for benefits relating to [**] from date of implementation.

Lost charges. Accretive will implement processes which detect and capture lost charges so that they can be appropriately billed.

Measurement approach. Lost charges will be accumulated on a monthly or quarterly basis [**].

For benefit measurement purposes, Initiatives that Increase Best Possible are not compared to a performance level in the baseline period. Instead, the approach is to track and accumulate the actual amounts achieved subsequent to the period prior to implementation of the initiative.

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The total Additional Revenue Improvement numbers for all initiatives in this section shall be accumulated for purposes of calculating the Performance Incentive Fee for each month.

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Measurement Procedures

1.		The Best Possible implementation timeline outlined below is dependent upon timely delivery of requisite Best Possible data from the Affiliate. A mutually agreed to schedule for delivery of Affiliate financial data required to support the Best Possible measurement process and timeline will be developed prior to commencement of services as a component of the Affiliate Roll-out Plan. Failure of Affiliate to deliver the requisite financial data as mutually agreed may result in a corresponding delay to the Best Possible implementation timeline.

2.		Best Possible *Base Line Yield* for the [] preceding the Affiliate Agreement effective date will be calculated and signed-off by both parties no later than [] after the end of the first contract year (CY1). This timetable is dependent upon Affiliate providing the requisite data to support Best Possible measurement within the first [**] of CY1.

Accretive Health will implement the Best Possible measurement process and provide a draft scorecard and supporting database no later than [**] after receiving the requisite Affiliate financial data.

3.		There will be [] formal measurement or sign off of Best Possible [].

4.		Best Possible *Contract Year Two (CY2) Yield* will be calculated and signed-off by both parties no later than [**] after the end of the second contract year (CY2).

A draft scorecard and database for CY2 will be presented to the Affiliate for review and comment no later than [**] after the end of CY2.

5.		The above timetable will be adhered to for each [**] . Affiliate will continue to provide requisite financial data in a timely fashion to support on-going measurement of Cash to Best Possible Yield improvements.

6.		Accretive will fully implement the *Cash* []. Both parties will sign off on Cash to Best Possible no later than [] after the end of the Second Contract Year (CY2).

7.		Once [**] is fully implemented for an Affiliate (or an Affiliate’s facility) a number of practices will be followed.

	a.		Each month a [**] will be provided to Affiliate no later than 45 days after the end of the month; the goal is to provide materials by the 30th of each month (for the results through the month previous).

	b.		Accretive will invoice the Affiliate quarterly [] for the [] reflected in the [**].

	c.		Quarterly invoices will be delivered to Affiliate no later than the [**] of the quarter.

	i.		The initial Best Possible invoice generated will be for [**].

	ii.		All subsequent invoices will reflect [] through the end of the [].

	d.		An Affiliate must submit a [] to Accretive within [] business days of the receipt of a Quarterly Invoice if there are []. A [] will be included with each quarterly Invoice. The Affiliate [] for the items identified on the [] of the issues identified by the Notice. If the parties are unable to [**], the matter will be referred to the Joint Review Board for resolution.

	e.		Scorecard data will be deemed [**] .

This allows for ongoing changes/updates to the [**], based upon the continued evolution of accounts (e.g., changed payer class, Medicaid pending and self-pay conversions to insurance, patient residual shifts) [**].

After the [**], both static ones [**] and the dynamic ones, (e.g., [**]) will be “frozen” at the values in the scorecard for that period. All subsequent measurement books and scorecards will incorporate the frozen values.

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A schedule for delivery of Affiliate financial data required to support the Best Possible measurement process will be developed and mutually agreed to as a component of the Affiliate Roll-out Plan.

In the event that the necessary Best Possible data has not been received from the affiliate by end of the [**] of operations, the management and technology fee (M&T Fee) becomes [**] for the period from the first anniversary of the affiliate agreement to [**] including daily data feeds to keep the best Possible database current..

Once Best Possible is implemented and net revenue yield improvement determined the Performance Improvement Fees will be trued up to the first anniversary of the contract as outlined in Paragraph 18.05 of the Master Services Agreement. In the event that Accretive Health does not complete the Best Possible implementation [**] Accretive Health will be further delayed in invoicing and recognizing revenue for measured benefits above a [**].

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Revised: 3/20/09

Performance Guaranty

To the extent that any Affiliate’s quarterly cash collections after the Affiliate Effective Date deteriorates materially relative to such Affiliate’s Historical Cash Collection Performance” (as defined below), after adjustment for any negative change beyond Accretive’s control, such as a change in patient volumes measured by the total of inpatient discharges and outpatient encounters, the difference will be removed from the Base Fee paid by such Affiliate to Accretive, as defined herein.

1.		From the start of operations at the Affiliate Effective Date, the Affiliate’s cash collection will be measured quarterly, and compared to the Affiliate’s Historical Cash Collection Performance. The “Historical Cash Collection Performance” shall be the lowest [] aggregate cash collection over the [] immediately preceding the Affiliate Effective Date. If the Affiliate’s actual cash collection for any of the first [**] following the Affiliate Effective Date, net of any surplus accumulated in the prior quarter(s) relative to the Historical Cash Collection Performance, is less than the Affiliate’s Historical Cash Collection Performance, then the difference (“the Funding Shortfall”) will be removed from the next Base Fee payment to be paid by the Affiliate to Accretive following the determination that a Funding Shortfall occurred in the prior quarter of operations.

2.		After the first [], Accretive will be entitled to a refund of the Funding Shortfall to the extent that the next month, or subsequent month of Affiliate’s cash collection performance exceeds the Affiliate’s Historical Cash Collection Performance divided by [] (“Monthly Historical Cash Collection”). The amount of the refund, to be credited against fees to be paid by Accretive to the Affiliate immediately after the improved performance, will be equal to the amount by which the Affiliate’s cash collection for the subsequent month exceeds the Affiliate’s Historical Cash Collection Performance, up to the amount of any outstanding Funding Shortfall. If the above amount does not equal the outstanding Funding Shortfall, then the above process can be repeated during the following months, up to the amount of the outstanding Funding Shortfall. If Accretive is entitled to a refund of a Funding Shortfall, then for the remainder of such quarter the Performance Guaranty shall be evaluated and paid on a monthly basis utilizing the Monthly Historical Cash Collection.

3.		After the first year of operations following the Affiliate Effective Date, to the extent that any Affiliate’s Cumulative Quarterly Cash Collections (as defined below) is less than such Affiliate’s Historical Cash Collections Performance, the difference will be removed from the Base Fee as per the process described above. Thereafter, Accretive shall be entitled to a credit against fees paid by Accretive to the Affiliate, on an Affiliate by Affiliate basis, as per the process described in the above section. Unless otherwise set forth in the Master Services Agreement, Ascension shall have no obligation to repay to Accretive any Funding Shortfall, provided that if Ascension terminates the MSA without cause or Accretive terminates the MSA for cause or for Good Reason, then Ascension must pay to Accretive an additional termination fee equal to the Funding Shortfall. For purposes of this Section 4, “Cumulative Quarterly Cash Collections” shall mean, for all quarterly time periods after the first full [**] calendar months from the respective

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Affiliate Effective Date, the [**] of the quarterly cash collections during the period covering the time frame from the respective Affiliate Effective Date to the quarter in which such collections are being measured.

Differences to be removed from the Base Fee to correct “Funding Shortfalls” under this paragraph shall be capped at $[**] dollars) in aggregate, and at $[**] dollars) per individual Affiliate. “Funding Shortfalls” which occur as a result of events outside Accretive’s control (i.e. state Medicaid slows or suspends payments or Affiliate vendor conduct which causes delays in Medicare billing) shall be excused from this guaranty.

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Dormant Receivable Collections

1.		Dormant Receivables are defined in paragraph 1.01.29 of the MSA.

2.		Accretive shall also be paid a fee for its efforts in connection with the collection of Dormant Receivables. The Affiliate’s Share of Dormant Receivables shall be [**]% of the Net Proceeds from the Collection of Dormant Receivables. Net Proceeds from the Collection of Dormant Receivables shall be defined as the gross payments received as payment on any Dormant Receivable during the term of this Agreement, and for the twelve month period following the termination of this Agreement, less the Direct Costs of collection incurred by Accretive with respect to the Collection of Dormant Receivables. Direct Costs of collection shall include third party expenses and dedicated labor, dedicated technology and dedicated facility expenses. Direct Costs will be allocated to each Affiliate based on a combination of out-bound calls, collector conversations with patients, and legal costs incurred on behalf of that Affiliate during the applicable period.

3.		Accretive shall have the right to establish such accounts as may be necessary and appropriate to facilitate its efforts in connection with the collection of Dormant Receivables. Accretive shall have the right to accept payments on Dormant Receivables and to deposit those payments into the accounts created for that exclusive purpose. Payments deposited into those accounts shall not be commingled with funds from any other source other than the collection of Dormant Receivables.

4.		If Accretive Health receives funds from the collection of Dormant Receivables, then Accretive Health shall set-off the Direct Costs incurred against those proceeds prior to distribution of Affiliate’s share of the net proceeds. If Affiliate receives the proceeds from the Dormant Receivable program then Accretive Health shall be reimbursed for the Direct Costs incurred in connection with this program by the Affiliate and [**].

5.		On or before the 25 ^th of each month, Accretive Health shall provide Affiliate with a monthly statement reflecting the Direct Costs and Accretive Health’s [**] of net proceeds resulting from activity in the prior calendar month. This invoice will be accompanied by appropriate statements that reflects, at the account level, the beginning balance, collections or other activity during the month, and the ending balance.

6.		A pro forma estimate of Direct Costs will be provided to Affiliate by Accretive and will be updated on a timely basis. Each Affiliate shall have the reasonable right to request an update of the pro forma estimate and to audit the Direct Cost allocations.

7.		Payments received on Dormant Receivables shall be excluded from the calculation of the improvement in net revenue yield realized as a result of Accretive’s efforts and shall not be subject to any Additional Fees relating to the improvement in net revenue yield by Accretive, therefore preventing any duplicative recognition of revenue for purposes of determining fees.

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Shared Service Blended Shore Operating Model

Current Scope of Shared Service Blended Shore Operating Model

1. Financial Clearance Center of Excellence [**]

•

Processes

			- Insurance verification

			- Patient education on coverages and patient obligation

			- Pre-Certification and Authorization

			- Collection of Residuals

•

Impact

[**]

2. Transcription Center of Excellence

•

Process

			- Voice recognition software produces drafts

			- Transcriptionists correct drafts for completed product

			- Corrections fed back into software so physician specific voice logic is continually refined

•

Impact

[**]

3. Patient Financial Services Center of Excellence

•

Process

			- All Payor Billing and Follow up

			- Payment Posting

			- Credit balance processing

			- Small balance processing

			- Denial management

•

Impact

[**]

A total of one page was omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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Mechanism for Determining and Sharing Cost Savings

The following defined terms when capitalized (or when the context clearly indicates the parties intended the defined term) shall have the meanings specified below. These definitions are incremental to those outlined in the MSA and are pertinent to mechanism for determining and sharing cost savings.

Accretive Health Infused Costs shall mean the sum of costs incurred by Accretive and allocated to an Affiliate associated with the following:

	a.		Licensing and/or development costs to provide Affiliate with access to the suite of Accretive Tools and Accretive Software used in managing the revenue cycle

	b.		salary and related costs such as bonus, travel, benefits, payroll taxes, training, certifications, lap top or desktop computers, phones, PTO accruals, and severance accruals necessary to deploy and support the Accretive Tools and Accretive Software.

	c.		salary and related costs such as bonus, travel, benefits, payroll taxes, training, certifications, lap top or desktop computers, phones, PTO accruals, and severance accruals for infused site leadership personnel. Site leadership personnel are Accretive Health employees deployed to provide daily leadership and direction. These individuals include site leads, operations leads, site VP’s, operations analysts, site finance analysts, measurement analysts, and initiative leads.

Hospital Operations Staffing Costs shall mean the sum of costs incurred by Accretive and allocated to an Affiliate associated with the following:

	a.		Contract Employee as defined in section 5.01 of the MSA. Such costs include payroll, benefits, and head count related overheads / allocations (e.g., desktop computer support, phone, payroll taxes, PTO accruals, severance accruals) as included in the calculation of the Base Fee

	b.		Individuals supplied by staffing organizations or other independent contractors that are executing revenue cycle processes on behalf of an Affiliate (e.g., transcription services, coding services, PFS temporary workers).

	c.		Accretive Health employees working in a functional area directly on behalf of an Affiliate. The costs associated with these individuals includes all direct costs (e.g., payroll, travel, benefits, payroll taxes, laptops/desktop computers, training, certifications).

	d.		All Costs allocated to an Affiliate from one or more of Accretive’s Shared Services Blended Shore Centers of Excellence including Financial Clearance, Transcription, and Patient Financial Services.

Hospital Operations Third Party Costs shall mean all direct costs incurred to engage 3 ^rd parties to support revenue cycle operations on behalf of an Affiliate. Hospital Operations Third Party Costs include, but are not limited to, eligibility vendors, collection agency fees, medical record storage/management, and software license fees Hospital Operation Third Party Costs include costs paid directly by Accretive Health and costs paid by the Affiliate for which it is later reimbursed by Accretive Health.

4.		*Accretive Allocated Costs* shall mean costs allocated to an Affiliate from subsidiaries or divisions of Accretive that are performing services on behalf of an Affiliate. Examples include services performed by Accretive’s CCS initiative. Accretive Allocated Costs exclude costs associated with Accretive’s Shared Services Blended Shore Centers of Excellence.

5.		*Hospital Operations Costs* shall mean the sum of the following:

	a.		Hospital Operations Staffing Costs.

	b.		Hospital Operations Third Party Costs.

	c.		Accretive Allocated Costs

6.		[**]

7.		[**]

8.		*Shared Services Blended Shore Adoption Agreement —* Agreement between Affiliate and Accretive that outlines the mutually agreed upon terms and conditions specific to the Affiliate under the Shared Services Blended Shore Operating Model including but not limited to variables and timing of transition, and cost savings [**].

Determining and Sharing Cost Savings

Affiliate will have an opportunity to participate in any realized reductions in Hospital Operations Staffing Costs. In the event that reductions in Hospital Operations Staffing Costs occur, the Affiliate shall receive a credit against a subsequent period Base Fee expense. [**]

Measuring Cost Savings

1.		Unless stated otherwise in the Affiliate Agreement and/or Shared Service Blended Shore Operating Agreement, Cost Savings will be based upon a comparison of the current quarter’s Hospital Operations Staffing Costs to the Inflation Adjusted Hospital Operations Staffing Costs associated with the Affiliate’s base fee. Cost Savings will be calculated and shared from the Affiliate effective date (i.e., affiliate contract start date).

2.		For those Affiliates with an effective date prior to September 30, 2006:

		[**]

3.		If Accretive and Affiliate agree that all or a portion [**] associated with Hospital Operations Staffing Costs applies to a period in which Hospital Operations Staffing Costs

savings was previously calculated, then the Hospital Operations Staffing Costs savings and the Affiliate’s portion of the savings will be [**].

Determining the applicable operating model and sharing percentage

1.		[**]

2.		Participation in the Shared Services Blended Shore Operating Model will begin when

	a.		A Shared Services Blended Shore Adoption Agreement has been signed by the Affiliate’s CFO and Accretive’s CFO

	b.		The Affiliate has completed the agreed upon transition period and is fully participating in the FCC, Transcription, and Patient Financial Services Centers of Operational Excellence.

	c.		The Affiliate’s CFO and Accretive’s CFO have each signed an acknowledgement that the Affiliate has satisfied the participation requirements outlined in the Shared Services Blended Shore Adoption Agreement.

Allocation of Costs and Saving from Shared Services Blended Shore Centers of Excellence

1.		Monthly, each Affiliate participating in a Shared Services Blended Shore Center of Excellence will receive an allocation of the Shared Services Blended Shore Center of Excellence total costs based upon its []. Each Shared Service Center of Excellence will complete its own [].

2.		The mechanism for calculating these allocations follows:

	a.		The Shared Service Center of Excellence total cost for the month associated with performing services for Ascension Affiliates are compared to [**]

	b.		An Affiliate’s “inflation adjusted base period” costs are the product of:

			[**]

	c.		Allocate the total savings or additional costs for the month (calculated in step 1) to each Affiliate based on the Affiliate’s relative percentage [**].

	•		Ascension Health will provide Accretive Health with [**].

	•		The current quarter’s allocation will be based upon the [**].

Compute the amount of the cost to be allocated to each Affiliate for the month by subtracting the Affiliate’s [**].

If there are any [**] at an Affiliate participating in a Shared Services Blended Shore Center of Excellence that would effect the [**], then the above calculations will be [**].

4.		When an Affiliate is transitioning to a specific Shared Services Blended Shore Center of Excellence, [] adjusted to reflect the planned implementation period. Generally, a [] implementation period is required. In such cases, the above items are pro-rated []% for [] of transition, []% for [] of transition, and []% for [] of transition. When there are unusual circumstances involved a longer or shorter period is necessary; in such cases the Affiliate and the Shared Services Blended Shore Center of Excellence will jointly agree on the pro rata adjustment factors to be used during the transition period. The agreement will be reflected in the Affiliate’s Shared Service Blended Shore Adoption Agreement.

5.		An example of how the transition period approach is applied in the case of a general situation is shown below.

[**]

Reporting Cost Savings Results to Affiliates

Accretive will provide Affiliate with a quarterly report reflecting the following:

	a)		The calculation of the Hospital Operations Staffing Costs and the amount of savings achieved

	b)		The Affiliates share of the savings which will be the amount of the Credit applied to a subsequent Base Fee

	c)		Any changes in the composition of the Hospital Operations Staffing Costs which occurred during the quarter

	d)		The percentage Hospital Operations Cost Take Out

The form used for reporting items a and b above will be as follows

BASE FEE CREDIT RECONCILIATION


QUARTERLY STAFFING COST BASELINE TARGET (adjusted for inflation)	$
CONTRACT EMPLOYEE STAFFING COSTS (per invoices from Affiliate)	$
HOSPITAL OPS STAFFING COSTS (per Roster of Contract Employees)	$
SHARED SERVICES BLENDED SHORE ALLOCATION (if applicable) ¹
a. Staffing Costs prior to Shared Services impl.	$
b. Allocated Staffing Costs Savings	$
c. NET STAFFING COST SAVINGS (a-b)	$
Percentage to Affiliate	x	%
BASE FEE CREDIT	$


¹		A breakdown of costs will be provided for each SSBS functional area: Financial Clearance, Transcription and Patient Financial Services.

Accretive shall provide the Affiliate with the Base Fee Credit Reconciliation and the other matters noted in item 1 above no later than the [**]. Affiliate shall provide Accretive with any questions regarding the reconciliation within [**]. The parties will work collaboratively to resolve any discrepancies in the Hospital Operations Staffing Cost savings and the Affiliate’s Base Fee Credit on a timely basis. The [**].

Cost Savings Projection and [**]

1.		Accretive will provide each Affiliate with a projection and a [] of anticipated cost savings assuming that they are fully participating in the Shared Services Blended Shore Operating Model. []. The specifics of each Affiliates projected cost savings [**] will be documented in the Affiliate’s Shared Services Blended Shore Adoption Agreement.

2.		[**], each Affiliate will be required to consistently provide Accretive’s shared services centers, whether located in the U.S. or offshore, with complete access to all Patient Financial Systems computer applications and records for a minimum of 18 hours each business day.

3.		The projected [] savings assume that the []. If changes in this arrangement occur, appropriate adjustments will be made in the projected and guaranteed cost savings.

4.		The [] incremental cost savings will be evaluated on a year over year basis. For example, [].

5.		The annual cost savings [ is provided to the Affiliate in [].

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The standard Form of the Affiliate Shared Services Blended Shore Adoption

Agreement is provided on the next page for reference.

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Affiliate Shared Services Blended Shore Adoption Agreement

(Affiliate)

This election shall serve as confirmation that ___________________________ (“Affiliate”) has elected to have the revenue cycle services provided to it by Accretive Health, pursuant to that certain Affiliate Agreement entered by and between the parties, delivered pursuant to the Shared Services Blended Shore Operating Model as contemplated by the Amended and Restated Master Services Agreement entered into by and between Ascension Health and Accretive Health on December 13, 2007.

The planned start and finish dates for transitioning each of the functions set forth below from the Affiliate to the Shared Services Blended Shore Center of Operational Excellence is set forth below:


	Start	Finish
Financial Clearance

Transcription

Patient Financial Services

The Affiliate agrees to fully cooperate with the transition to the Shared Services Operating Model and to provide such support and assistance as may be necessary to operate the Shared Services Operating Model in an efficient manner.

The Affiliate’s Base Period Costs for each of the functions being transferred to the respective Shared Services Blended Shore Center of Excellence is as follows:


Financial Clearance		$
Transcription		$
Patient Financial Services		$

In accordance with the Master Services Agreement and the related Operating Protocols, commencing with the starting month the Affiliate will receive an allocation of the Shared Services Blended Shore Center of Excellence total costs based upon its pro rata share of the total cost savings achieved by the Center. The allocation of each Shared Services Blended Shore Center of Excellence total cost for the month to the Affiliate will be based on the Affiliate’s relative percentage of equivalent discharges to the total of all Affiliates’ equivalent discharges. Each Shared Service Center of Excellence will complete its own calculation and cost allocations.

During the planned transition period, the Affiliate’s base period costs for the activity, the equivalent discharges, and the Affiliates share of savings associated with a Shared Services Blended Shore Center of Excellence will be adjusted using the following percentages.

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	Financial		Patient
	Clearance		Financial
	Center	Transcription	Services
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

The Affiliates share of the savings in its Hospital Operations Staffing Costs will be increased from [**]% to [**]% upon (a) the completion of the transition periods for each Shared Service and it is fully participating in the FCC, Transcription, and Patient Financial Services Centers of Operational Excellence, and (b) the Affiliate’s CFO and Accretive’s CFO having each signed an acknowledgement that the Affiliate has satisfied the participation requirements outlined in the Shared Services Blended Shore Adoption Agreement.

[**]


Healthcare Services, Inc D/B/A Accretive Health				[AFFILIATE}


By:

John Staton						Chief Financial Officer
Chief Financial Officer

Dated:						Dated:

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Revised: 3/20/09

IT Access

Accretive Health will be provided system access to each Affiliate’s system to facilitate and enable the performance of the Services contemplated by the Master Services Agreement (e.g. front end insurance verification, residual collection, transcription and account follow up). System access for any individual will be limited to the functionality required for that individual to perform their work related duties. In most cases individual access will be limited to read only. Individuals performing specific functions associated with PFS and account follow up will require access to the patient accounting system to enable the appropriate workflow.

The Affiliate systems to which Accretive Health may require access are listed below:


Systems	Overall Reason for Access	Update/Read-only

Patient accounting system	Access patient residual balances, demographics etc charges,	Read-only for Front End functions and underpayments.

Billing Editor	Access claim information to understand detailed charges and what has been submitted to payers	Update for PFS Read-only

Admission, Discharge, Transfer System	To create a registration verifiable with patients through financial clearance function	Update

Medical Records Imaging systems	View online tool support underpayment appeals and denial management	Read-only

Payer Websites	Understand patient eligibility, benefit structures etc for the purposes of validating underpayments and calculating residuals	Read-only

Scheduling systems	Complete registrations with demographic, service and insurance information	Read-only

Methods of network and application access

Access to the Affiliate applications will be provided through Affiliate/AHIS controlled VPN connections. A VPN connection or Virtual Private Network Connection is an encrypted path between an Accretive user’s PCs and the Affiliate systems. Accretive users will obtain this connection through Affiliate/ AHIS authorization. They will have no ability to change the configuration of the VPN connection. Once a user is connected, he/she must then authenticate to the application using an Ascension-provided unique ID and password.

Data protection

After authentication with a unique ID and password, a user has access to the applications as provided by Affiliate/AHIS. In most cases read-only access to the Affiliate systems will meet the needs of the Accretive users. In cases where the applicable system can not be limited to

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“read-only” access, Accretive users will be granted the same access as other Affiliate users who require read-only access.

Affiliates/AHIS will retain control over the configuration of the access. Typically, this access does not require the ability to print, save to disk, copy, or cut-and-paste information from the relevant systems.

Unique ID generation

Accretive will assign a unique ID consistent with the social security number format for all Accretive users who do not have United States social security numbers. The two groups who encounter this are Accretive Health employees outside of the United States and employees in the United States on work visas. In order to provide a unique ID for these users, Accretive will generate a number in the format of the United States social security number, but in a number range which has never been issued by the United States. The US has never issued a social security number starting with numbers higher than 773, and no group of the numbers with all 0’s is acceptable. Accretive will generate unique numbers starting with 815-47- for these users and will follow that with four digits, starting at 0001.

Accretive will store the unique identifier in its HR systems associated with the user and will provide those identifiers to the Affiliate/AHIS as required. Access requests for these users will be accompanied by the unique identifier. Unique identifiers will not be reused.

Screening / Onboarding of Non-US citizen/Offshore Resources

Accretive will conduct background checks designed to assure that all users have been appropriately screened to assure that no user has any identifiable history of inappropriate conduct.

Accretive will retain records of these background checks which will be available for inspection by AHIS or any Affiliate.

All users will receive Accretive’s Compliance and HIPAA training. Accretive will retain documentation of the completion of this training for all resources. Additionally, all off-shore resources shall sign individual Business Associate Agreements, in the form attached, to assure that their individual obligations regarding protection of patient health information are acknowledged and understood.

Compliance and HIPAA training will be renewed annually. Documentation regarding refresher training will be retained for all resources.

Supervision of Offshore Resources

Supervision of Offshore resources is the responsibility of David Strickler, Accretive Health’s Vice President of Centralized Operating Model and Asheesh Khare, Accretive Health’s Director of Off-Shore Operations. Mr. Khare provides daily on-site supervision to Accretive’s offshore team. Additionally, these resources inter-face at least twice a week with their US based operating teams, (e.g. the PFS team has regular calls with the US based leader of that team).

Exhibit 4
Termination License Fee

1.		In the event that Affiliate elects to license the Accretive Health technology post- termination the licensing fee shall be $[**] per acute care hospital per year.

2.		This licensing fee shall in no event be greater than the fair market price for comparable technology in the marketplace. For purposes of this section, comparable technology shall mean technology that performs similar processes or functions creating similar output or results.

3.		The parties agree that in the event that Accretive has not implemented its full technology suite at a particular acute care hospital the post-termination licensing fee shall be adjusted for that acute care hospital to reflect the fair market price for those components which have been deployed.

4.		A license granted to an acute care hospital shall include those ancillary and affiliated facilities which were managed in conjunction with the acute care hospital during the period of Service.

Confidential
Revised: 3/20/09

Exhibit 5
Business Associate Agreement

Business Associate Agreement

THIS BUSINESS ASSOCIATE AGREEMENT (the “Agreement”) is entered into this day of , 2004, by and between HEALTHCARE SERVICES, INC. d/b/a ACCRETIVE HEALTH (“Accretive”) and ASCENSION HEALTH, including each of its Health Ministries (cumulatively and individually, “Ascension Health”).

WHEREAS, Ascension Health is a health system that owns numerous health care facilities across the United States (“Health Ministries”);

WHEREAS, Ascension Health is a business associate of the Health Ministries, and has entered into a previous business associate agreement with them;

WHEREAS, Ascension Health, on behalf of the Health Ministries, and Accretive have entered into a Master Services Agreement (“Master Agreement”), whereby the Health Ministries receive services from Accretive;

WHEREAS, Accretive, while in the course of providing services to Ascension Health under the Master Agreement, may be required to use or disclose Protected Health Information (as defined below) of Health Ministries; and

WHEREAS, Accretive and Ascension Health are entering into this Agreement to assure that such Protected Health Information will be used, disclosed and maintained in conformance with the HIPAA requirements.

NOW THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:

W I T N E S S E T H

Definitions . For purposes of this Agreement, the following terms shall have the designated meanings,

	(a)		“Administrative Safeguards” shall mean administrative actions, policies and procedures to manage the selection, development, implementation and maintenance of security measures to protect Electronic Protected Health Information and to manage the conduct of the Accretive’s workforce in relation to the protection of that information.

	(b)		“Ascension Health” shall mean: (i) Ascension Health; and (ii) Ascension’s Health Ministries.

	(c)		“Designated Record Set” shall mean a group of records maintained by or for Ascension Health that is (i) the medical records and billing records about

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individuals maintained by or for Ascension Health, (ii) the enrollment, payment, claims adjudication, and case or medical management record systems maintained by or for a health plan; or (iii) used, in whole or in part, by or for Ascension Health to make decisions about individuals. As used herein, the term “Record” means any item, collection, or grouping of information that includes Protected Health Information and is maintained, collected, used, or disseminated by or for Ascension Health.

	(d)		“Electronic Protected Health Information” shall mean Protected Health Information that is transmitted or maintained in electronic media.

	(e)		“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996.

	(f)		“Individually Identifiable Health Information” shall mean information that is a subset of health information, including demographic information collected from an individual, and

	(a)		is created or received by a health care provider, health plan, employer, or health care clearinghouse; and

	(b)		relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (a) identifies the individual, or (b) with respect to which there is a reasonable basis to believe the information can be used to identify the individual.

	(g)		“Physical Safeguards” shall mean physician measures, policies and procedures to protect Accretive’s electronic information systems and related buildings and equipment from natural and environmental hazards and unauthorized intrusion.

	(h)		“Privacy Standards” shall mean the Standards for Privacy of Individually Identifiable Health Information, 45 C.F.R. Parts 160 and 164.

	(i)		“ Protected Health Information” shall mean Individually Identifiable Health Information that is (i) transmitted by electronic media; (ii) maintained in any medium constituting electronic media; or (iii) transmitted or maintained in any other form or medium. “Protected Health Information” shall not include education records covered by the Family Educational Right and Privacy Act, as amended, 20 U.S.C. § 1232g, or records described in 20 U.S.C. § 1232g(a)(4)(B)(iv).

	(j)		“ Secretary” shall mean the Secretary of the United States Department of Health and Human Services.

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	(k)		“ Security Incident” shall mean the attempted or successful unauthorized access, use, disclosure, modification or destruction of information or interference with system operations in an information system.

	(l)		“ Security Standards” shall mean the Standards for the Protection of Electronic Protected Health Information, 45 C.F.R. Parts 160, 162 and 164.

	(m)		“ Technical Safeguards” shall mean the technology and the policy and procedures for its use that protect Electronic Protected Health Information and control access to it.

2.		Uses and Disclosures of Protected Health Information . Accretive shall not, and shall ensure that its directors, officers, employees contractors and agents do not, use or disclose Protected Health Information received from Ascension Health in any manner that is not permitted or required by the Master Agreement, this Agreement or required by law.

3.		Safeguards Against Misuse of Information . Accretive agrees that it will implement all appropriate safeguards to prevent the use or disclosure of Protected Health Information other than pursuant to the terms and conditions of this Agreement.

4.		Reporting of Disclosures of Protected Health Information . Accretive shall, within forty-eight hours of becoming aware of a use or disclosure of Protected Health Information in violation of this Agreement by Accretive, its officers, directors, employees, contractors, or agents, or by a third party to whom Accretive disclosed Protected Health Information, report any such use or disclosure to Ascension Health.

5.		Mitigation of Harmful Effects . Accretive agrees to mitigate, to the extent practicable, any harmful effect that is known to Accretive of a use or disclosure of Protected Health Information by Accretive in violation of the requirements of this Agreement.

6.		Agreements by Third Parties . Accretive shall enter into an agreement with any agent or subcontractor that will have access to Protected Health Information that is received from, or is created or received by Accretive on behalf of, Ascension Health pursuant to which such agent or subcontractor agrees to be bound by the same restrictions, terms, and conditions that apply to Accretive pursuant to this Agreement with respect to such Protected Health Information.

7.		Documentation of Disclosures . Accretive agrees to document such disclosures of Protected Health Information and information related to such disclosures as would be required for Ascension Health to respond to a request by an individual for an accounting of disclosures of Protected Health Information in accordance with 45 C.F.R. § 164.528. At a minimum, Accretive shall provide Ascension Health with the following information: (i) the date of the disclosure; (ii) the name of the entity or person who received the Protected Health Information, and if known, the address of such entity or person; (iii) a brief description of the Protected Health Information disclosed; and (iv) a brief statement of the purpose of such disclosure which includes an explanation of the basis for such

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disclosure. Additionally, Accretive, shall notify Ascension Health in writing of each disclosure made by Accretive (and/or by any subcontractors or agents of Accretive) that is subject to the accounting requirements in the Privacy Rule. Such notification shall be made to Ascension Health pursuant to the notification requirements set forth in this Agreement within thirty (30) days following each applicable disclosure.

8.		Accounting of Disclosures . Within ten (10) days of notice by Ascension Health to Accretive that it has received a request for an accounting of disclosures of Protected Health Information regarding an individual during the six (6) years prior to the date on which the accounting was requested, Accretive shall make available to Ascension Health information collected in accordance with Section 7 of this Agreement, to permit Ascension Health to respond to a request by an individual for an accounting of disclosures of Protected Health Information as required by 45 C.F.R. § 164.528. In the event the request for an accounting is delivered directly to Accretive, Accretive shall within two (2) days forward such request to Ascension Health. It shall be Ascension Health’s responsibility to prepare and deliver any such accounting requested. Accretive hereby agrees to implement an appropriate record keeping process to enable it to comply with the requirements of this Section.

9.		Access to Information . Within five (5) days of a request by Ascension Health for access to Protected Health Information about an individual contained in a Designated Record Set, Accretive shall make available to Ascension Health such Protected Health Information for so long as such information is maintained by Accretive in the Designated Record Set as required by 45 C.F.R. § 164.524. In the event any individual requests access to Protected Health Information directly from Accretive, Accretive shall within two (2) days forward such request to Ascension Health. Any denials of access to the Protected Health Information requested shall be the responsibility of Ascension Health.

10.		Availability of Protected Health Information for Amendment Within ten (10) days of receipt of a request from Ascension Health for the amendment of an individual’s Protected Health Information or a record regarding an individual contained in a Designated Record Set (for so long as the Protected Health Information is maintained in the Designated Record Set), Accretive shall provide such information to Ascension Health for amendment and incorporate any such amendments in the Protected Health Information as required by 45 C.F.R. §164.526.

11.		Availability of Books and Records. Accretive hereby agrees to make its internal practices, books, and records relating to the use and disclosure of Protected Health Information received from, or created or received by Accretive on behalf of, Ascension Health available to the Secretary for purposes of determining Ascension Health’s compliance with the Privacy Standards.

12.		Electronic Protected Health Information . To the extent that Accretive creates, receives, maintains or transmits Electronic Protected Health Information on behalf of Ascension Health on or after April 21, 2005, Accretive agrees to:

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	(a)		Implement Administrative, Physical and Technical Safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of the Electronic Protected Health Information;

	(b)		Ensure that any agent, including a subcontractor, to whom it provides Electronic Protected Health Information agrees to implement reasonable and appropriate safeguards to protect it; and

	(c)		Report to Ascension Health any Security Incident of which Accretive becomes aware.

13.		Effect of Termination of Master Agreement . Upon the termination of the Master Agreement for any reason, Accretive shall return to Ascension Health, or, at Ascension Health’s direction, destroy, all Protected Health Information received from Ascension Health that Accretive maintains in any form, recorded on any medium, or stored in any storage system, unless said information has been de-identified and is no longer Protected Health Information. This provision shall apply to Protected Health Information that is in the possession of subcontractors or agents of Accretive. Accretive shall retain no copies of the Protected Health Information. Accretive shall remain bound by the provisions of this Agreement, even after termination of the Master Agreement, until such time as all Protected Health Information has been returned, de-identified or otherwise destroyed as provided in this Section.

14.		Third Party Rights . The terms of this Agreement are not intended, nor should they be construed, to grant any rights to any parties other than Accretive and Ascension Health and Health Ministries.

15.		Injunctive Relief . Accretive acknowledges and stipulates that its unauthorized use or disclosure of Protected Health Information while performing services pursuant to the Master Agreement or this Agreement may cause irreparable harm to Ascension Health, and in such event, Ascension Health shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages and injunctive relief, together with the right to recover from Accretive costs, including reasonable attorneys’ fees, for any such breach of the terms and conditions of the Master Agreement or Agreement.

16.		Owner of Protected Health Information . Under no circumstances shall Accretive be deemed in any respect to be the owner of any Protected Health Information used or disclosed by or to Accretive pursuant to the terms of the Master Agreement.

17.		Changes in the Law . The parties agree to amend either the Master Agreement or this Agreement, as appropriate, to conform with any new or revised legislation, rules and regulations to which Ascension Health is subject now or in the future including, without limitation, the Privacy Standards, Security Standards or Transactions Standards (collectively “Laws”). If within ninety (90) days of either party first providing written notice to the other of the need to amend the Master Agreement or Agreement to comply with Laws, the parties, acting in good faith, are i) unable to mutually agree upon and

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make amendments or alterations to the Master Agreement or Agreement to meet the requirements in question, or ii) alternatively, the parties determine in good faith that amendments or alterations to the requirements are not feasible, then either party may terminate the Master Agreement upon thirty (30) days prior written notice.

18.

Breach of Contract . In addition to any other rights Ascension Health may have in the Master Agreement, this Agreement or by operation of law or in equity, a breach of this Agreement shall constitute a material breach of the Master Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.


HEALTHCARE SERVICES, INC. d/b/a		ASCENSION HEALTH
ACCRETIVE HEALTH

/s/ Mary Tolan		/s/ Anthony J. Speranzo

Signed		Signed

Mary Tolan		Anthony J. Speranzo

Printed		Printed

12/13/07		12/13/07

Date		Date

Exhibit 10.21

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

Credit Agreement

Dated as of
September 30, 2009,

between

Accretive Health, Inc.

and

Bank of Montreal

Table of Contents


Section		Description		Page


Section 1. The Credits.			1

Section 1.1. Revolving Credit			1
Section 1.2. Revolving Credit Loans			1
Section 1.3. Letters of Credit			2
Section 1.4. Manner and Disbursement of Loans			3

Section 2. Interest and Change In Circumstances.			3

Section 2.1. Interest Rate Options			3
Section 2.2. Minimum Amounts			4
Section 2.3. Computation of Interest			4
Section 2.4. Manner of Rate Selection			4
Section 2.5. Change of Law			4
Section 2.6. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, Adjusted LIBOR			5
Section 2.7. Taxes and Increased Costs			5
Section 2.8. Change in Capital Adequacy Requirements			6
Section 2.9. Funding Indemnity			7
Section 2.10. Lending Branch			7
Section 2.11. Discretion of Bank as to Manner of Funding			7
Section 2.12. Extension of Termination Date			7

Section 3. Fees, Prepayments, Terminations, and Applications.			8

Section 3.1. Fees			8
Section 3.2. Voluntary Prepayments			8
Section 3.3. Mandatory Prepayments			9
Section 3.4. Terminations			9
Section 3.5. Place and Application of Payments			9
Section 3.6. Notations			9

Section 4. Collateral and Guaranties.			10

Section 4.1. Collateral			10
Section 4.2. Liens on Real Property			10
Section 4.3. Guaranties			11
Section 4.4. Further Assurances			11

Section 5. Definitions; Interpretation			11

Section 5.1. Definitions			11
Section 5.2. Interpretation			23

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Section 6. Representations and Warranties.			24

Section 6.1. Organization and Qualification			24
Section 6.2. Subsidiaries			24
Section 6.3. Authority and Validity of Obligations			24
Section 6.4. Use of Proceeds; Margin Stock			25
Section 6.5. Financial Reports			25
Section 6.6. No Material Adverse Change			25
Section 6.7. Full Disclosure			25
Section 6.8. Trademarks, Franchises and Licenses			26
Section 6.9. Governmental Authority and Licensing			26
Section 6.10. Good Title			26
Section 6.11. Litigation and Other Controversies			26
Section 6.12. Taxes			26
Section 6.13. Approvals			26
Section 6.14. Affiliate Transactions			27
Section 6.15. Investment Company			27
Section 6.16. ERISA			27
Section 6.17. Compliance with Laws			27
Section 6.18. Other Agreements			27
Section 6.19. Solvency			27
Section 6.20. Broker Fees			28
Section 6.21. No Default			28

Section 7. Conditions Precedent.			28

Section 7.1. All Advances			28
Section 7.2. Initial Advance			28
Section 7.3. Post-Closing			30

Section 8. Covenants.			30

Section 8.1. Maintenance of Business			30
Section 8.2. Maintenance of Properties			31
Section 8.3. Taxes and Assessments			31
Section 8.4. Insurance			31
Section 8.5. Financial Reports			31
Section 8.6. Inspection			33
Section 8.7. Borrowings and Guaranties			33
Section 8.8. Liens			34
Section 8.9. Investments, Acquisitions, Loans and Advances			35
Section 8.10. Mergers, Consolidations and Sales			36
Section 8.11. Maintenance of Subsidiaries			37
Section 8.12. Dividends and Certain Other Restricted Payments			37
Section 8.13. ERISA			38
Section 8.14. Compliance with Laws			38
Section 8.15. Burdensome Contracts With Affiliates			38
Section 8.16. No Changes in Fiscal Year			39

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Section 8.17. Formation of Subsidiaries			39
Section 8.18. Change in the Nature of Business			39
Section 8.19. Use of Proceeds			39
Section 8.20. No Restrictions			39
Section 8.21. Deposit Accounts			39
Section 8.22. Clean Up			39
Section 8.23. Financial Covenants			39

Section 9. Events of Default and Remedies.			40

Section 9.1. Events of Default			40
Section 9.2. Non-Bankruptcy Defaults			42
Section 9.3. Bankruptcy Defaults			43
Section 9.4. Collateral for Undrawn Letters of Credit			43

Section 10. Miscellaneous.			43

Section 10.1. Non-Business Days			43
Section 10.2. No Waiver, Cumulative Remedies			43
Section 10.3. Amendments, Etc			43
Section 10.4. Costs and Expenses; Indemnification			44
Section 10.5. Documentary Taxes			45
Section 10.6. Survival of Representations			45
Section 10.7. Survival of Indemnities			45
Section 10.8. Notices			45
Section 10.9. Construction			46
Section 10.10. Headings			46
Section 10.11. Severability of Provisions			46
Section 10.12. Counterparts			46
Section 10.13. Binding Nature, Governing Law, Etc			46
Section 10.14. Submission to Jurisdiction; Waiver of Jury Trial			47
Section 10.15. USA Patriot Act			47
Section 10.16. Participations and Assignments			47
Section 10.17. Confidentiality			48

Signature			1

Exhibit A — Revolving Note
Exhibit B — Borrowing Base Certificate
Exhibit C — Compliance Certificate
Schedule 5.1 — EBITDA
Schedule 6.2 — Subsidiaries

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Credit Agreement

This Credit Agreement is entered into as of September 30, 2009, by and between Accretive Health, Inc., a Delaware corporation (the “Borrower” ), and Bank of Montreal, a Canadian chartered bank, acting through its Chicago branch (the “Bank” ). All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in Section 5.1 hereof.

Preliminary Statement

The Borrower has requested, and the Bank has agreed to extend, certain credit facilities on the terms and conditions of this Agreement.

Now, Therefore, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1. The Credits.

Section 1.1. Revolving Credit. Subject to the terms and conditions hereof, the Bank agrees to extend a revolving credit (the “Revolving Credit” ) to the Borrower which may be availed of by the Borrower from time to time during the period from and including the date hereof to but not including the Termination Date, at which time the commitment of the Bank to extend credit under the Revolving Credit shall expire. The Revolving Credit may be utilized by the Borrower in the form of Loans and Letters of Credit, all as more fully hereinafter set forth, provided that the aggregate principal amount of Loans and Letters of Credit outstanding at any one time shall not exceed the lesser of (i) $15,000,000 (the “Commitment”, as such amount may be reduced pursuant to the terms hereof) and (ii) the Borrowing Base as then determined and computed. During the period from and including the date hereof to but not including the Termination Date, the Borrower may use the Commitment by borrowing, repaying, and reborrowing Loans in whole or in part and/or by having the Bank issue Letters of Credit, having such Letters of Credit expire or otherwise terminate without having been drawn upon or, if drawn upon, reimbursing the Bank for each such drawing, and having the Bank issue new Letters of Credit, all in accordance with the terms and conditions of this Agreement.

Section 1.2. Revolving Credit Loans . Subject to the terms and conditions hereof, the Revolving Credit may be availed of by the Borrower in the form of loans (individually a “Loan” and collectively the “Loans” ). Each Loan shall be in a minimum amount of $100,000; provided, however, that any LIBOR Portion of the Loans shall be in such greater amount as is required by Section 2 hereof. The Loans shall be made against and evidenced by a single promissory note of the Borrower in the form (with appropriate insertions) attached hereto as Exhibit A (the “Note” ). The Note shall be dated the date of issuance thereof and be expressed to bear interest as set forth in Section 2 hereof. The Note, and all Loans evidenced thereby, shall mature and become due and payable in full on the Termination Date. Without regard to the principal amount of the Note stated on its face, the actual principal amount at any time outstanding and owing by the Borrower

on account of the Note shall be the sum of all Loans made hereunder less all payments of principal actually received by the Bank.

Section 1.3. Letters of Credit .

(a) General Terms. Subject to the terms and conditions hereof, the Revolving Credit may be availed of by the Borrower in the form of standby and commercial letters of credit issued by the Bank for the account of the Borrower (individually a “Letter of Credit” and collectively the “Letters of Credit” ), provided that the aggregate amount of Letters of Credit issued and outstanding hereunder shall not at any one time exceed $500,000. For purposes of this Agreement, a Letter of Credit shall be deemed outstanding as of any time in an amount equal to the maximum amount which could be drawn thereunder under any circumstances and over any period of time plus any unreimbursed drawings then outstanding with respect thereto. If and to the extent any Letter of Credit expires or otherwise terminates without having been drawn upon, the availability under the Commitment shall to such extent be reinstated.

(b) Term. Each Letter of Credit issued hereunder shall expire not later than the earlier of (i) 12 months from the date of issuance (or be cancelable not later than 12 months from the date of issuance and each renewal) or (ii) the Termination Date.

(c) General Characteristics. Each Letter of Credit issued hereunder shall be payable in U.S. Dollars, conform to the general requirements of the Bank for the issuance of a standby or commercial letter of credit, as the case may be, as to form and substance, and be a letter of credit which the Bank may lawfully issue.

(d) Applications. At the time the Borrower requests a Letter of Credit to be issued (or prior to the first issuance of a Letter of Credit in the case of a continuing application), the Borrower shall execute and deliver to the Bank an application for such Letter of Credit in the form then customarily prescribed by the Bank (individually an “Application” and collectively the “Applications” ). Subject to the other provisions of this subsection, the obligation of the Borrower to reimburse the Bank for drawings under a Letter of Credit (each a “Reimbursement Obligation” ) shall be governed by the Application for such Letter of Credit. Anything contained in the Applications to the contrary notwithstanding, (i) in the event the Bank is not reimbursed by the Borrower for the amount the Bank pays on any drawing made under a Letter of Credit issued hereunder by 11:00 a.m. (Chicago time) on the date when such drawing is paid, the obligation of the Borrower to reimburse the Bank for the amount of such drawing shall bear interest (which the Borrower hereby promises to pay on demand) from and after the date the drawing is paid by the Bank until repayment in full thereof at the fluctuating rate per annum determined by adding 2.0% to the sum of Base Rate as from time to time in effect plus the Applicable Margin (computed on the basis of a year of 360 days for the actual number of days elapsed), (ii) the Borrower shall pay fees in connection with each Letter of Credit as set forth in Section 3 hereof, (iii) except as otherwise provided in Section 3.3 hereof, prior to the occurrence of a Default or an Event of Default, the Bank will not call for the funding of a Letter of Credit by the Borrower prior to being presented with a drawing thereunder.

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Section 1.4. Manner and Disbursement of Loans . The Borrower shall give written or telephonic notice to the Bank (which notice shall be irrevocable once given and, if given by telephone, shall be promptly confirmed in writing) by no later than 11:00 a.m. (Chicago time) on the date the Borrower requests the Bank to make a Loan hereunder. Each such notice shall specify the date of the Loan requested (which must be a Business Day) and the amount of such Loan. Each Loan shall initially constitute part of the Base Rate Portion except to the extent the Borrower has otherwise timely elected that such Loan, or any part thereof, constitute part of a LIBOR Portion as provided in Section 2 hereof. The Borrower agrees that the Bank may rely upon any written or telephonic notice given by any person the Bank in good faith believes is an Authorized Representative without the necessity of independent investigation and, in the event any telephonic notice conflicts with the written confirmation, such telephonic notice shall govern if the Bank has acted in reliance thereon. Subject to the provisions of Section 7 hereof, the proceeds of each Loan shall be made available to the Borrower at the principal office of the Bank in Chicago, Illinois, in immediately available funds, in the case of the initial Loans made hereunder, in accordance with the terms of the written disbursement instructions of the Borrower and, in the case of each subsequent Loan, by deposit to the Borrower’s primary operating account maintained with the Bank or as otherwise agreed upon by the Borrower and the Bank.

Section 2. Interest and Change In Circumstances.

Section 2.1. Interest Rate Options. (a) Generally. The outstanding principal balance of the Loans (all of the indebtedness evidenced by the Note bearing interest at the same rate for the same period of time being hereinafter referred to as a “Portion” ) shall bear interest with reference to the Base Rate (the “Base Rate Portion” ) or, at the option of the Borrower and subject to the terms and conditions hereof, with reference to an Adjusted LIBOR ( “LIBOR Portions” ). All of the indebtedness evidenced by the Note which bears interest with reference to a particular Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR Portion and all of the indebtedness evidenced by the Note which is not part of a LIBOR Portion shall constitute a single Base Rate Portion. There shall not be more than seven (7) LIBOR Portions applicable to the Note outstanding at any one time. Anything contained herein to the contrary notwithstanding, the obligation of the Bank to create, continue or effect by conversion any LIBOR Portion shall be conditioned upon the fact that at the time no Default or Event of Default shall have occurred and be continuing. The Borrower hereby promises to pay interest on each Portion of the Note at the rates and times specified in this Section 2.

(b) Base Rate Portion. The Base Rate Portion shall bear interest at the rate per annum equal to the Base Rate as in effect from time to time plus the Applicable Margin, provided that if the Base Rate Portion or any part thereof is not paid when due (whether by lapse of time, acceleration, or otherwise), or at the election of the Bank during the existence of any other Event of Default, such Portion shall bear interest, whether before or after judgment until payment in full thereof, at the rate per annum determined by adding 2.0% to the interest rate which would otherwise be applicable thereto from time to time. Interest on the Base Rate Portion shall be payable monthly in arrears on the last day of each month in each year (commencing on the first such date occurring after the date hereof) and at maturity of the Note, and interest after maturity (whether by lapse of time, acceleration, or otherwise) shall be due and payable upon demand.

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Any change in the interest rate on the Base Rate Portion resulting from a change in the Base Rate shall be effective on the date of the relevant change in the Base Rate.

(c) LIBOR Portions . Each LIBOR Portion shall bear interest for each Interest Period selected therefor at a rate per annum equal to the Adjusted LIBOR for such Interest Period plus the Applicable Margin, provided that if any LIBOR Portion is not paid when due (whether by lapse of time, acceleration, or otherwise), or at the election of the Bank during the existence of any other Event of Default, such Portion shall bear interest, whether before or after judgment until payment in full thereof, through the end of the Interest Period then applicable thereto at the rate per annum determined by adding 2.0% to the interest rate which would otherwise be applicable thereto, and effective at the end of such Interest Period such LIBOR Portion shall automatically be converted into and added to the Base Rate Portion and shall thereafter bear interest at the interest rate applicable to the Base Rate Portion after default. Interest on each LIBOR Portion shall be due and payable on the last day of each Interest Period applicable thereto and, with respect to any Interest Period applicable to a LIBOR Portion in excess of 3 months, on the date occurring every 3 months after the date such Interest Period began and at the end of such Interest Period, and interest after maturity (whether by lapse of time, acceleration, or otherwise) shall be due and payable upon demand. The Borrower shall notify the Bank on or before 11:00 a.m. (Chicago time) on the third Business Day preceding the end of an Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which event the Borrower shall notify the Bank of the new Interest Period selected therefor; and in the event the Borrower shall fail to so notify the Bank, such LIBOR Portion shall automatically be converted into and added to the Base Rate Portion as of and on the last day of such Interest Period.

Section 2.2. Minimum Amounts . Each LIBOR Portion shall be in an amount equal to $100,000 or such greater amount which is an integral multiple of $100,000.

Section 2.3. Computation of Interest . All interest on the Note shall be computed on the basis of a year of 360 days for the actual number of days elapsed.

Section 2.4. Manner of Rate Selection . The Borrower shall notify the Bank by 11:00 a.m. (Chicago time) at least 3 Business Days prior to the date upon which the Borrower requests that any LIBOR Portion be created or that any part of the Base Rate Portion be converted into a LIBOR Portion. If any request is made to convert a LIBOR Portion into the Base Rate Portion hereunder, such conversion shall only be made so as to become effective as of the last day of the Interest Period applicable thereto. All requests for the creation, continuance, and conversion of Portions under this Agreement shall be irrevocable. Such requests may be written or oral and the Bank is hereby authorized to honor telephonic requests for creations, continuances, and conversions received by it from any person the Bank in good faith believes to be an Authorized Representative without the necessity of independent investigation, the Borrower hereby indemnifying the Bank from any liability or loss ensuing from so acting.

Section 2.5. Change of Law. Notwithstanding any other provisions of this Agreement or the Note, if at any time the Bank shall determine that any change in applicable laws, treaties, or regulations, or in the interpretation thereof, makes it unlawful for the Bank to create or continue

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to maintain any LIBOR Portion, it shall promptly so notify the Borrower and the obligation of the Bank to create, continue, or maintain any such LIBOR Portion under this Agreement shall be suspended until it is no longer unlawful for the Bank to create, continue, or maintain such LIBOR Portion. If the continued maintenance of any such LIBOR Portion is unlawful, the Borrower shall prepay on demand to the Bank the outstanding principal amount of the affected LIBOR Portion together with all interest accrued thereon and all other amounts payable to the Bank with respect thereto under this Agreement; provided, however , the Borrower may elect to convert the principal amount of the affected LIBOR Portion into the Base Rate Portion hereunder, subject to the terms and conditions of this Agreement (including, without limitation, Section 2.9 hereof).

Section 2.6. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, Adjusted LIBOR . Notwithstanding any other provision of this Agreement or the Note, if the Bank shall determine prior to the commencement of any Interest Period that deposits in the amount of any LIBOR Portion scheduled to be outstanding during such Interest Period are not readily available to the Bank in the relevant market or, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining Adjusted LIBOR or that LIBOR as determined hereby will not adequately and fairly reflect the cost to the Bank of funding any LIBOR Portion for such Interest Period or that the making or funding of LIBOR Portions has become impracticable, then the Bank shall promptly give notice thereof to the Borrower and the obligations of the Bank to create, continue, or effect by conversion any such LIBOR Portion in such amount and for such Interest Period shall be suspended until deposits in such amount and for the Interest Period selected by the Borrower shall again be readily available in the relevant market and adequate and reasonable means exist for ascertaining Adjusted LIBOR.

Section 2.7. Taxes and Increased Costs. With respect to any LIBOR Portion, if the Bank shall determine that any change in any applicable law, treaty, regulation, or guideline (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System), or any new law, treaty, regulation, or guideline, or any interpretation of any of the foregoing, by any governmental authority charged with the administration thereof or any central bank or other fiscal, monetary, or other authority having jurisdiction over the Bank or its lending branch or the LIBOR Portions contemplated by this Agreement (whether or not having the force of law), in each case occurring after the date hereof, shall:

(i) impose, increase, or deem applicable any reserve, special deposit, or similar requirement against assets held by, or deposits in or for the account of, or loans by, or any other acquisition of funds or disbursements by, the Bank which is not in any instance already accounted for in computing the interest rate applicable to such LIBOR Portion;

(ii) subject the Bank, any LIBOR Portion or the Note to the extent it evidences a LIBOR Portion to any tax (including, without limitation, any United States interest equalization tax or similar tax however named applicable to the acquisition or holding of debt obligations and any interest or penalties with respect thereto), duty, charge, stamp tax, fee, deduction, or withholding in respect of this Agreement, any LIBOR Portion or

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the Note to the extent it evidences a LIBOR Portion, except such taxes as may be measured by the overall net income or gross receipts of the Bank or its lending branches and imposed by the jurisdiction, or any political subdivision or taxing authority thereof, in which the Bank’s principal executive office or its lending branch is located;

(iii) change the basis of taxation of payments of principal and interest due from the Borrower to the Bank hereunder or under the Note to the extent it evidences any LIBOR Portion (other than by a change in taxation of the overall net income or gross receipts of the Bank); or

(iv) impose on the Bank any penalty with respect to the foregoing or any other condition regarding this Agreement, any LIBOR Portion, or its disbursement, or the Note to the extent it evidences any LIBOR Portion;

and the Bank shall determine that the result of any of the foregoing is to increase the cost (whether by incurring a cost or adding to a cost) to the Bank of creating or maintaining any LIBOR Portion hereunder or to reduce the amount of principal or interest received or receivable by the Bank (without benefit of, or credit for, any prorations, exemption, credits, or other offsets available under any such laws, treaties, regulations, guidelines, or interpretations thereof), then the Borrower shall pay on demand to the Bank from time to time as specified by the Bank such additional amounts as the Bank shall reasonably determine are sufficient to compensate and indemnify it for such increased cost or reduced amount; provided , that the Borrower shall not be required to compensate the Bank pursuant to this Section for any increased costs incurred more than 180 days prior to the date that the Bank notifies the Borrower in writing of the increased costs and of the Bank’s intention to claim compensation thereof; provided , further , that if the circumstance giving rise to such increased costs is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. If the Bank makes such a claim for compensation, it shall provide to the Borrower a certificate setting forth the computation of the increased cost or reduced amount as a result of any event mentioned herein in reasonable detail and such certificate shall be conclusive if reasonably determined.

Section 2.8. Change in Capital Adequacy Requirements . If the Bank shall determine that the adoption after the date hereof of any applicable law, rule, or regulation regarding capital adequacy, or any change in any existing law, rule, or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank (or any of its branches) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the Bank’s capital as a consequence of its obligations hereunder or for the credit which is the subject matter hereof to a level below that which the Bank could have achieved but for such adoption, change, or compliance (taking into consideration the Bank’s policies with respect to liquidity and capital adequacy) by an amount deemed by the Bank to be material, then from time to time, within 15 days after demand by the Bank, the Borrower shall pay to the Bank such additional amount or amounts reasonably determined by the Bank as will compensate the Bank for such reduction; provided , that the Borrower shall not be required to compensate the Bank pursuant to this

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Section for any additional amounts incurred more than 180 days prior to the date that the Bank notifies the Borrower in writing of such additional amounts and of the Bank’s intention to claim compensation thereof; provided , further , that if the circumstance giving rise to such additional amounts is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

Section 2.9. Funding Indemnity. In the event the Bank shall incur any loss, cost, or expense (including, without limitation, any loss, cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by the Bank to fund or maintain any LIBOR Portion or the relending or reinvesting of such deposits or other funds or amounts paid or prepaid to the Bank) as a result of:

(i) any payment of a LIBOR Portion on a date other than the last day of the then applicable Interest Period for any reason, whether before or after default, and whether or not such payment is required by any provision of this Agreement; or

(ii) any failure by the Borrower to create, borrow, continue, or effect by conversion a LIBOR Portion on the date specified in a notice given pursuant to this Agreement;

then upon the demand of the Bank, the Borrower shall pay to the Bank such amount as will reimburse the Bank for such loss, cost, or expense. If the Bank requests such a reimbursement, it shall provide to the Borrower a certificate setting forth the computation of the loss, cost, or expense giving rise to the request for reimbursement in reasonable detail and such certificate shall be conclusive if reasonably determined.

Section 2.10. Lending Branch . The Bank may, at its option, elect to make, fund or maintain Portions of the Loans hereunder at such of its branches or offices as the Bank may from time to time elect.

Section 2.11. Discretion of Bank as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, the Bank shall be entitled to fund and maintain its funding of all or any part of the Note in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder (including, without limitation, determinations under Sections 2.6, 2.7, and 2.9 hereof) shall be made as if the Bank had actually funded and maintained each LIBOR Portion during each Interest Period applicable thereto through the purchase of deposits in the relevant market in the amount of such LIBOR Portion, having a maturity corresponding to such Interest Period, and bearing an interest rate equal to the LIBOR for such Interest Period.

Section 2.12. Extension of Termination Date . The Borrower may from time to time request that the Bank extend the Termination Date for a period of one year or such other period as the Borrower and the Bank may mutually agree. Any extension of the Termination Date shall be at the sole and absolute discretion of the Bank.

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Section 3. Fees, Prepayments, Terminations, and Applications.

Section 3.1. Fees.

(a) Commitment Fee . For the period from and including the date hereof to but not including the Termination Date, the Borrower shall pay to the Bank a commitment fee at the rate of 0.25% per annum (computed on the basis of a year of 360 days for the actual number of days elapsed) on the average daily unused portion of the Commitment. Such commitment fee shall be payable quarterly in arrears on the first day of each January, April, July and October in each year (commencing on the first such date occurring after the date hereof) and on the Termination Date.

(b) Letter of Credit Fees. On the first day of each January, April, July and October of each year (commencing on the first such date occurring after the date hereof) to and including, and on, the Termination Date, the Borrower shall pay to the Bank a letter of credit fee at the rate per annum equal to 1.00% per annum (computed on the basis of a year of 360 days for the actual number of days elapsed) on the daily average face amount of Letters of Credit outstanding during the preceding calendar quarter; provided that, at the election of the Bank during the existence of any Event of Default, such letter of credit fee shall be increased by adding 2.0% per annum to the letter of credit fee otherwise applicable thereto. In addition to the letter of credit fee called for above, the Borrower further agrees to pay to the Bank such issuing, processing, and transaction fees and charges as the Bank from time to time customarily imposes in connection with any issuance, amendment, cancellation, negotiation, and/or payment of letters of credit and drafts drawn thereunder.

(c) Closing Fee. The Borrower shall pay to the Bank on the date hereof a non-refundable closing fee in the amount of $150,000.

(d) Audit Fees. The Borrower shall pay to the Bank charges for audits of the Collateral performed by the Bank or its agents or representatives in such amounts as the Bank may from time to time request (the Bank acknowledging and agreeing that such charges shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits); provided, however, that in the absence of any Default or Event of Default, the Borrower shall not be required to pay the Bank for more than one (1) such audit per calendar year (determined exclusive of pre-closing audits conducted prior to the date of this Agreement).

Section 3.2. Voluntary Prepayments . The Borrower may prepay the Loans in whole or in part (but, if in part, then (i) if such Loan or Loans constitutes part of the Base Rate Portion, in an amount not less than $100,000, (ii) if such Loan or Loans constitutes part of a LIBOR Portion, in an amount not less than $100,000, and (iii) in each case, in an amount such that the minimum amount required for a Loan pursuant to Sections 1.2 and 2.2 hereof remain outstanding) at any time upon prior notice to the Bank (such notice if received subsequent to 11:00 a.m. (Chicago time) on a given day to be treated as though received at the opening of business on the next Business Day) by paying to the Bank the principal amount to be prepaid and (i) if such a prepayment prepays the Note in full and is accompanied by the termination of the Commitment in whole, accrued interest thereon to the date of prepayment, and (ii) in the case of any

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prepayment of a LIBOR Portion of the Loans, accrued interest thereon to the date of prepayment plus any amounts due the Bank under Section 2.9 hereof.

Section 3.3. Mandatory Prepayments. The Borrower covenants and agrees that if at any time the sum of the principal amount of the Loans and Letters of Credit then outstanding shall be in excess of the Borrowing Base as then determined and computed, the Borrower shall within three Business Days and without notice or demand pay over the amount of the excess to the Bank as and for a mandatory prepayment on such Obligations, with each such prepayment first to be applied to the Loans until payment in full thereof with any remaining balance to be held by the Bank as collateral security for the Obligations owing with respect to Letters of Credit.

Section 3.4. Terminations . The Borrower shall have the right, at any time and from time to time, upon 5 (five) Business Days prior notice to the Bank, to terminate without premium or penalty and in whole or in part (but if in part, then in an amount not less than $500,000) the Commitment, provided that the Commitment may not be reduced to an amount less than the aggregate principal amount of the Loans and Letters of Credit then outstanding. Any termination of the Commitment pursuant to this Section may not be reinstated.

Section 3.5. Place and Application of Payments . All payments of principal, interest, fees, and all other Obligations payable under the Loan Documents shall be made to the Bank at its office at 115 South LaSalle Street, Chicago, Illinois (or at such other place as the Bank may specify) no later than 1:00 p.m. (Chicago time) on the date any such payment is due and payable. Payments received by the Bank after 1:00 p.m. (Chicago time) shall be deemed received as of the opening of business on the next Business Day. All such payments shall be made in lawful money of the United States of America, in immediately available funds at the place of payment, without set-off or counterclaim and without reduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions, and conditions of any nature imposed by any government or any political subdivision or taxing authority thereof (but excluding any taxes imposed on or measured by the net income of the Bank). Unless the Borrower otherwise directs, principal payments shall be applied first to the Base Rate Portion until payment in full thereof, with any balance applied to the LIBOR Portions in the order in which their Interest Periods expire. The Borrower hereby irrevocably authorizes the Bank to (a) charge from time to time any of the Borrower’s deposit accounts with the Bank and/or (b) make Loans from time to time hereunder (and any such Loan may be made by the Bank hereunder without regard to the provisions of Section 7 hereof), in each case for payment of (i) any interest, principal, Letter of Credit reimbursement obligations, commitment fees and letter of credit fees, in each instance, on the date due, or (ii) after five (5) days prior notice to the Borrower, other fees, costs or expenses payable by the Borrower or any of its Subsidiaries hereunder or under the other Loan Documents, which notice, if requested by the Borrower, shall include a reasonably detailed statement of such amounts; provided that the Bank shall not be under any obligation to charge any such deposit account or make any such Loan under this Section, and the Bank shall incur no liability to the Borrower or any other Person for its failure to do so.

Section 3.6. Notations. All Loans made against the Note, the status of all amounts evidenced by the Note as constituting part of the Base Rate Portion or a LIBOR Portion, and, in

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the case of any LIBOR Portion, the rate of interest and Interest Period applicable to such Portion shall be recorded by the Bank on its books and records or, at its option in any instance, endorsed on a schedule to the Note and the unpaid principal balance and status, rates and Interest Periods so recorded or endorsed by the Bank shall be prima facie evidence in any court or other proceeding brought to enforce the Note of the principal amount remaining unpaid thereon, the status of the Loans evidenced thereby and the interest rates and Interest Periods applicable thereto; provided that the failure of the Bank to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay the principal amount of the Note together with accrued interest thereon.

Section 4. Collateral and Guaranties.

Section 4.1. Collateral . The Obligations shall be secured by valid, perfected, and enforceable Liens on all right, title, and interest of the Borrower and each Domestic Subsidiary in all personal property, fixtures, and real estate, whether now owned or hereafter acquired or arising, and all proceeds thereof; provided, however, that: (i) (A) until a Default or Event of Default has occurred and is continuing and thereafter until notice otherwise by the Bank, Liens on local petty cash accounts maintained by the Borrower and the Guarantors in proximity to their operations need not be perfected provided that the total amount on deposit at any one time not so perfected shall not exceed $100,000 in the aggregate and (B) Liens on payroll accounts maintained by the Borrower and the Guarantors need not be perfected provided the applicable deposit account is a zero balance account and the total amount on deposit at any time does not exceed the current amount of their payroll obligations; (ii) until a Default or Event of Default has occurred and is continuing and thereafter until notice otherwise by the Bank, Liens on vehicles which are subject to a certificate of title law need not be perfected provided that the total value of such property at any one time not so perfected shall not exceed $100,000 individually or $500,000 in the aggregate; (iii) Liens on the equity interests of a Foreign Subsidiary which, if granted, would cause an increase in the Borrower’s federal income tax liability shall be limited to 65% of the total outstanding equity interests of such Foreign Subsidiary; and (iv) unless otherwise required by the Bank during the existence of any Event of Default, Liens on Commercial Tort Claims need not be perfected where the total value of such property at any one time not so perfected shall not exceed $100,000 individually or $250,000 in the aggregate. The Borrower acknowledges and agrees that the Liens on the Collateral shall be valid and perfected first priority Liens (subject to Permitted Liens), in each case pursuant to one or more Collateral Documents in form and substance reasonably satisfactory to the Bank. The Obligations shall further be secured by the Cash Collateral for the period beginning on or prior to the date of the initial extension of credit hereunder and ending on the Cash Collateral Release Date.

Section 4.2. Liens on Real Property . In the event that the Borrower or any Domestic Subsidiary owns or hereafter acquires any fee simple interest in any real property, the Borrower shall, and shall cause any such Domestic Subsidiary to, execute and deliver to the Bank (or a security trustee therefor) a mortgage or deed of trust reasonably acceptable in form and substance to the Bank for the purpose of granting to the Bank a Lien on such real property to secure the Obligations, shall pay all taxes, costs, and reasonable out-of-pocket expenses incurred by the Bank in recording such mortgage or deed of trust, and shall supply to the Bank at the Borrower’s cost and expense a survey, environmental report, hazard insurance policy, and mortgagee’s

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policy of title insurance from a title insurer acceptable to the Bank insuring the validity of such mortgage or deed of trust and its status as a first Lien (subject to Permitted Liens) on the real property encumbered thereby, and such other instrument, documents, certificates, and opinions reasonably required by the Bank in connection therewith.

Section 4.3. Guaranties . The payment and performance of the Obligations shall at all times be guaranteed by each direct and indirect Domestic Subsidiary of the Borrower (each a “Guarantor” and collectively, the “Guarantors” ) pursuant to one or more guaranty agreements in form and substance reasonably acceptable to the Bank, as the same may be amended, modified, or supplemented from time to time (individually a “Guaranty” and collectively the “Guaranties” ).

Section 4.4. Further Assurances . The Borrower agrees that it shall, and shall cause each Domestic Subsidiary to, execute and deliver such documents and do such acts and things as the Bank may from time to time reasonably request in order to provide for or perfect or protect the Bank’s Lien on the Collateral.

Section 5. Definitions; Interpretation.

Section 5.1. Definitions . The following terms when used herein shall have the following meanings:

“Account Debtor” means any Person obligated to make payment on any Receivable.

“Acquired Business” means the entity or assets acquired by the Borrower or a Subsidiary in an Acquisition, whether before or after the date hereof.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Borrower or the Subsidiary is the surviving entity.

“Adjusted LIBOR” means a rate per annum determined by the Bank in accordance with the following formula:


Adjusted LIBOR =	LIBOR

	100%-Reserve Percentage

“Reserve Percentage” means the maximum reserve percentage, expressed as a decimal, at which reserves (including, without limitation, any emergency, marginal, special, and supplemental reserves) are imposed by the Board of Governors of the Federal Reserve System (or any successor) on “eurocurrency liabilities” , as defined in such Board’s Regulation D (or any successor thereto), subject to any amendments of such reserve requirement by such Board or its

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successor, taking into account any transitional adjustments thereto. For purposes of this definition, the relevant Portions of the Loans shall be deemed to be “eurocurrency liabilities” as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D. The Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any such reserve percentage. “LIBOR” means, for each Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the Bank at 11:00 a.m. (London, England time) 2 Business Days before the beginning of such Interest Period by 3 or more major banks in the interbank eurodollar market selected by the Bank for a period equal to such Interest Period and in an amount equal or comparable to the applicable LIBOR Portion scheduled to be outstanding from the Bank during such Interest Period. “LIBOR Index Rate” means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the day 2 Business Days before the commencement of such Interest Period. “LIBOR01 Page” means the display designated as “LIBOR01 Page” on the Reuters Service (or such other page as may replace the LIBOR01 Page on that service or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits). Each determination of LIBOR made by the Bank shall be conclusive and binding absent manifest error.

“Affiliate” means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the other Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise; provided that, in any event for purposes of this definition, any Person that owns, directly or indirectly, 10% or more of the securities having the ordinary voting power for the election of directors or governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person.

“Agreement” means this Credit Agreement, as the same may be amended, modified, or restated from time to time in accordance with the terms hereof.

“Applicable Margin” means, with respect to Loans and Letter of Credit reimbursement obligations, until the first Pricing Date, the rates per annum shown opposite Level III below, and thereafter from one Pricing Date to the next the Applicable Margin means the rates per annum determined in accordance with the following schedule:


Level	EBITDA for the Four Fiscal Quarters then Ended	Applicable Margin for Base Rate Portion shall be:	Applicable Margin for LIBOR Portions Shall Be:
III	less than $[**]	3.80%	4.00%

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Level	EBITDA for the Four Fiscal Quarters then Ended	Applicable Margin for Base Rate Portion shall be:	Applicable Margin for LIBOR Portions Shall Be:
II	greater than or equal to $[], and less than $[]	3.55%	3.75%

I	greater than or equal to $[**]	3.30%	3.50%

For purposes hereof, the term “Pricing Date” means, for any fiscal quarter ending on or after September 30, 2009, the date on which the Bank is in receipt of the Borrower’s most recent financial statements and Compliance Certificate (and, in the case of the year-end financial statements, audit report) for the fiscal quarter then ended, pursuant to Section 8.5 hereof. The Applicable Margin shall be established based on the EBITDA for the most recently completed four fiscal quarters and the Applicable Margin established on a Pricing Date shall remain in effect until the next Pricing Date. If the Borrower has not delivered its financial statements and Compliance Certificate by the date such financial statements and Compliance Certificate (and, in the case of the year-end financial statements, audit report) are required to be delivered under Section 8.5 hereof, until such financial statements, Compliance Certificate and audit report are delivered, the Applicable Margin shall be the highest Applicable Margin ( i.e., Level III shall apply). If the Borrower subsequently delivers such financial statements before the next Pricing Date, the Applicable Margin established by such late delivered financial statements and Compliance Certificate shall take effect from the date of delivery until the next Pricing Date. In all other circumstances, the Applicable Margin established by such financial statements and Compliance Certificate shall be in effect from the Pricing Date that occurs immediately after the end of the calendar month covered by such financial statements until the next Pricing Date. Each determination of the Applicable Margin made by the Bank in accordance with the foregoing shall be conclusive and binding on the Borrowers and the Bank absent demonstrable error.

“Application” is defined in Section 1.3 hereof.

“Ascension” means Ascension Health.

“Authorized Representative” means those persons shown on the list of officers provided by the Borrower pursuant to Section 7.2 hereof or on any update of any such list provided by the Borrower to the Bank, or any further or different officer of the Borrower so named by any Authorized Representative of the Borrower in a written notice to the Bank.

“Bank” is defined in the introductory paragraph hereof.

“Base Rate” means, for any day, the rate per annum equal to the greatest of: (a) the rate of interest announced or otherwise established by the Bank from time to time as its prime commercial rate as in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (it being acknowledged and agreed that such rate may not be the Bank’s best or lowest rate), (b) the sum of (i) the rate determined by the Bank to be the average (rounded

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upward, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the Bank at approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by the Bank for sale to the Bank at face value of Federal funds in the secondary market in an amount equal or comparable to the principal amount for which such rate is being determined, plus (ii) 1/2 of 1%, and (c) the LIBOR Quoted Rate for such day plus 1.00%. As used herein, the term “LIBOR Quoted Rate” means, for any day, the rate per annum equal to the quotient of (i) the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a one-month interest period which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) divided by (ii) one (1) minus the Reserve Percentage.

“Base Rate Portion” is defined in Section 2.1(a) hereof.

“Borrower” is defined in the introductory paragraph hereof.

“Borrowing Base” means, as of any time it is to be determined, the sum of: (a) 75% of the then outstanding unpaid amount of Eligible Receivables, plus (b) 100% of the Cash Collateral; provided that the Borrowing Base shall be computed only as against and on so much of the Collateral as is included on the certificates to be furnished from time to time by the Borrower pursuant to Section 8.5(a) hereof and, if required by the Bank pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence required to be furnished to the Bank pursuant hereto or pursuant to any such Collateral Document.

“Borrowing Base Certificate” means a certificate in the form of Exhibit B hereto, or in such other form acceptable to the Bank, to be delivered to the Bank pursuant to Sections 7.2 and 8.5 hereof.

“Business Day” means any day other than a Saturday or Sunday on which the Bank is not authorized or required to close in Chicago, Illinois and, when used with respect to LIBOR Portions, a day on which the Bank is also dealing in United States Dollar deposits in London, England, and Nassau, Bahamas.

“Capital Expenditures” means, with respect to any Person for any period, the aggregate amount of all expenditures (whether paid in cash or accrued as a liability) by such Person during that period for the acquisition or leasing (pursuant to a Capital Lease) of fixed or capital assets or additions to property, plant, or equipment (including replacements, capitalized repairs, and improvements) which should be capitalized on the balance sheet of such Person in accordance with GAAP.

“Capital Lease” means any lease of Property which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.

“Capitalized Lease Obligation” means the amount of the liability shown on the balance sheet of any Person in respect of a Capital Lease determined in accordance with GAAP.

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“Cash Collateral” means, at any time prior to the Cash Collateral Release Date, an amount not less than $5,000,000 in cash held at the Bank or at one of the Bank’s affiliates, in each case on terms and conditions reasonably satisfactory to the Bank.

“Cash Collateral Release Date” means the latest date on which all of the following events shall have occurred and be continuing:

(a) one calendar year shall have elapsed from the Closing Date;

(b) the Bank shall have received audited financial statements of the Borrower for the period ended December 31, 2009, and unaudited financial statements of the Borrower for the periods ended March 31, 2010, and June 30, 2010, in each case along with the certificate required by Section 8.5(h) hereof with respect to such financial statements, in each case in form and substance reasonably satisfactory to the Bank;

(d) the Bank shall have received a pro forma Borrowing Base Certificate demonstrating unused availability (excluding availability relating to Cash Collateral) under the Revolving Credit of at least $[**].

“Change of Control” means:

(i) prior to an IPO, (a) a majority of the Voting Stock of the Borrower ceases at any time and for any reason (including death or incapacity) to be owned, legally and beneficially, by Mary Tolan, FW Oak Hill Accretive Healthcare Investors, L.P., and/or Accretive Investors SBIC, L.P., and their respective Controlled Investment Affiliates, collectively; and

(ii) upon and after an IPO, the acquisition by any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) at any time of beneficial ownership of 35% or more of the Voting Stock of the Borrower, other than acquisition of such interest by Mary Tolan, FW Oak Hill Accretive Healthcare Investors, L.P., or Accretive Investors SBIC, L.P., and their respective Controlled Investment Affiliates.

“Closing Date” means the date of this Agreement or such later Business Day upon which each condition described in Section 7.2 shall be satisfied or waived in a manner acceptable to the Bank in its discretion.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute thereto.

“Collateral” means all properties, rights, interests, and privileges from time to time subject to the Liens granted to the Bank by the Collateral Documents; provided, however, that

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the “Collateral” shall not include Excluded Assets; provided , further , that if and when any property shall cease to be Excluded Assets, such property shall be deemed at all times from and after the date thereof to constitute Collateral.

“Collateral Documents” means the Security Agreement and all other mortgages, deeds of trust, security agreements, assignments, financing statements and other documents as shall from time to time secure the Obligations or any part thereof.

“Commitment” is defined in Section 1.1 hereof.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

“Controlled Investment Affiliates” means, with respect to any Person, any fund or investment vehicle that (i) is organized by such Person for the purpose of making investments in one or more companies and is controlled by such Person, or (ii) has the same principal fund advisor as such Person. For purposes of this definition, “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.

“Default” means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.

“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.

“EBITDA” means, with reference to any period, Net Income for such period plus the sum of all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income taxes for such period, (c) depreciation of fixed assets and amortization of intangible assets for such period, (d) non-cash adjustments relating to non-cash option expenses and non-cash anti-dilution expense approved in writing by the Bank, (e) reasonable fees, costs and expenses incurred in connection with the execution, negotiation and delivery of this Agreement and approved by the Bank in its sole discretion, and (f) such other amounts as approved by the Bank in its sole discretion. Notwithstanding the foregoing, EBITDA for each of the fiscal quarters ended December 31, 2008, March 31, 2009, and June 30, 2009, shall be deemed to be the amounts set forth on Schedule 5.1 hereof.

“Eligible Line of Business” means any business engaged in as of the date of this Agreement by the Borrower or any of its Subsidiaries, any businesses complementary thereto and any reasonable extensions thereof.

“Eligible Receivables” means any Receivable of the Borrower or any Guarantor which:

(a) arises out of the rendition of services fully performed and accepted by the Account Debtor on such Receivable, and such Receivable does not represent a pre-billed

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Receivable or a progress billing, and such Receivable is net of any deposits made by or for the account of the relevant Account Debtor;

(b) is payable in U.S. Dollars and the Account Debtor on such Receivable is located within the United States of America;

(c) is the valid, binding and legally enforceable obligation of the Account Debtor obligated thereon and such Account Debtor is not (i) a Subsidiary or an Affiliate (other than Ascension) of the Borrower, (ii) a shareholder, director, officer or employee of the Borrower or any Subsidiary, (iii) the United States of America, or any state or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing, unless the Assignment of Claims Act or any similar state or local statute, as the case may be, is complied with to the satisfaction of the Bank, (iv) a debtor under any proceeding under the United States Bankruptcy Code, as amended, or any other comparable bankruptcy or insolvency law, or (v) an assignor for the benefit of creditors;

(d) is not evidenced by an instrument or chattel paper unless the same has been endorsed and delivered to the Bank;

(e) is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of the Bank free and clear of any other Liens;

(f) is not subject to any counterclaim or defense asserted by the Account Debtor or subject to any offset or contra account payable to the Account Debtor (unless the amount of such Receivable is net of such contra account established to the reasonable satisfaction of the Bank);

(g) no surety bond was required or given in connection with said Receivable or the contract or purchase order out of which the same arose;

(h) it is evidenced by an invoice to the Account Debtor dated not more than forty-five (45) Business Days subsequent to the completion of performance of the relevant services and is issued on ordinary trade terms requiring payment within thirty (30) days of invoice date;

(i) is not unpaid more than ninety (90) days after the original invoice date;

(j) is not owed by an Account Debtor who is obligated on Receivables more than [**] of which have been past due for longer than the relevant period specified in subsection (i) above unless the Bank has approved the continued eligibility thereof;

(k) (with respect to such Receivable only) would not cause the total Receivables owing from any one Account Debtor (other than Ascension) and its Affiliates to [**];

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(l) (with respect to such Receivable only) would not cause the total Receivables owing from [**]; and

(m) is not otherwise deemed to be ineligible in the reasonable judgment of the Bank (it being acknowledged and agreed that with five (5) Business Days prior written notice any Receivable of the Borrower or any Guarantor may be deemed ineligible by the Bank acting in its reasonable judgment).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto.

“Event of Default” means any event or condition identified as such in Section 9.1 hereof.

“ Excluded Assets ” has the meaning set forth in the Security Agreement.

“Fixed Charges” means, with reference to any period (each a “Test Period” ), the sum of (a) all scheduled payments of principal made or to be made during such period with respect to Indebtedness of the Borrower and its Subsidiaries, (b) Interest Expense for such period paid in cash, (c) federal, state, and local income taxes paid or payable in cash by the Borrower and its Subsidiaries during such period, (d) unfinanced Capital Expenditures made by the Borrower and its Subsidiaries during such period, and (e) all payments of dividends and distributions made in cash by the Borrower and its Subsidiaries during such period other than the payments made pursuant to Section 8.12(c) and (e) hereof; provided that for any Test Period ending on or prior to the first anniversary of the Closing Date, the Fixed Charge Coverage Ratio shall be equal to the product of (x) the amounts set forth in clauses (a), (b), (c), (d) and (e) above, respectively, for the period from and after the Closing Date to and including the last day of such Test Period times (y) a fraction, the numerator of which is 365 and the denominator of which is the number of days elapsed from and including the Closing Date to and including the last day of such Test Period.

“Foreign Subsidiary” means each Subsidiary which (a) is organized under the laws of a jurisdiction other than the United States of America or any state thereof or the District of Columbia, (b) conducts substantially all of its business outside of the United States of America, and (c) has substantially all of its assets outside of the United States of America.

“Funds Transfer and Deposit Account Liability” means the liability of the Borrower or any Subsidiary owing to the Bank, or any Affiliates of the Bank, arising out of (a) the execution or processing of electronic transfers of funds by automatic clearing house transfer, wire transfer or otherwise to or from deposit accounts of the Borrower and/or any Subsidiary now or hereafter maintained with the Bank or its Affiliates, (b) the acceptance for deposit or the honoring for payment of any check, draft or other item with respect to any such deposit accounts, and (c) any other deposit, disbursement, and cash management services afforded to the Borrower or any Subsidiary by the Bank or its Affiliates.

“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting

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Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

“Guarantor” and “Guarantors” each is defined in Section 4.3 hereof.

“Guaranty” and “Guaranties” each is defined in Section 4.3 hereof.

“Hedging Liability” means the liability of the Borrower or any Subsidiary to the Bank, or any Affiliates of the Bank, in respect of any interest rate, foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar interest rate, currency or commodity hedging arrangement, as the Borrower or such Subsidiary, as the case may be, may from time to time enter into with the Bank or its Affiliates.

“Hostile Acquisition” means the acquisition of the capital stock or other equity interests of a Person through a tender offer or similar solicitation of the owners of such capital stock or other equity interests which has not been approved (prior to such acquisition) by resolutions of the Board of Directors of such Person or by similar action if such Person is not a corporation, or as to which such approval has been withdrawn.

“Indebtedness” means for any Person (without duplication) (a) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business which are not more than ninety (90) days past due and Special Payables), (c) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person, (e) all obligations of such Person on or with respect to letters of credit, bankers’ acceptances and other extensions of credit whether or not representing obligations for borrowed money, and (f) all net obligations of such Person under any interest rate, foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar interest rate, currency or commodity hedging arrangement.

“Interest Expense” means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

“Interest Period” means, with respect to any LIBOR Portion, the period commencing on, as the case may be, the creation, continuation or conversion date with respect to such LIBOR Portion and ending 1, 2, 3, or 6 months thereafter as selected by the Borrower in its notice as provided herein; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day,

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unless in the case of an Interest Period for a LIBOR Portion the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(ii) no Interest Period may extend beyond the final maturity date of the Note; and

(iii) the interest rate to be applicable to each Portion for each Interest Period shall apply from and including the first day of such Interest Period to but excluding the last day thereof.

For purposes of determining an Interest Period, a month means a period starting on one day in a calendar month and ending on a numerically corresponding day in the next calendar month, provided, however , if an Interest Period begins on the last day of a month or if there is no numerically corresponding day in the month in which an Interest Period is to end, then such Interest Period shall end on the last Business Day of such month.

“IPO” means the first underwritten public offering by the Borrower of its equity interests after the Closing Date pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended.

“Letter of Credit” and “Letters of Credit” each is defined in Section 1.3 hereof.

“LIBOR Portions” is defined in Section 2.1(a) hereof.

“Lien” means any mortgage, lien, security interest, pledge, charge, or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other title retention arrangement.

“Loan” and “Loans” each is defined in Section 1.2 hereof.

“Loan Documents” means this Agreement, the Note, the Applications, the Guaranties, the Collateral Documents, and each other instrument or document to be delivered hereunder or thereunder or otherwise in connection therewith.

“Material Adverse Effect” means (a) a material adverse change in, or material adverse effect upon, the operations, business, Property or condition (financial or otherwise) of the Borrower or of the Borrower and its Subsidiaries taken as a whole, (b) a material impairment of the ability of the Borrower or any Subsidiary to perform its obligations under any Loan Document, or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability against the Borrower or any Subsidiary of any Loan Document or the rights and remedies of the Bank thereunder or (ii) the perfection or priority of any Lien granted under any Collateral Document.

“Moody’s” means Moody’s Investors Service, Inc.

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“Net Income” means, with reference to any period, the net income (or net loss) of the Borrower and its Subsidiaries for such period computed on a consolidated basis in accordance with GAAP.

“Note” is defined in Section 1.2 hereof.

“Obligations” means all obligations of the Borrower to pay principal and interest on the Loans, all reimbursement obligations owing under the Applications, all fees and charges payable hereunder, and all other payment obligations of the Borrower arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held, or acquired.

“PBGC” means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA.

“Permitted Acquisition” means any Acquisition with respect to which all of the following conditions shall have been satisfied:

(a) the Acquired Business is in an Eligible Line of Business and has its primary operations within the United States of America;

(b) the Acquisition shall not be a Hostile Acquisition;

(c) the financial statements of the Acquired Business shall have been audited by a nationally recognized accounting firm or such financial statements shall have undergone review of a scope reasonably satisfactory to the Bank;

(d) the Total Consideration for the Acquired Business shall not exceed $[**] and, when taken together with the Total Consideration for all Acquired Businesses acquired during the term of this Agreement, shall not exceed $[**] in the aggregate;

(e) the Borrower shall have notified the Bank not less than 10 Business Days prior to any such Acquisition and furnished to the Bank at such time reasonable details as to such Acquisition (including sources and uses of funds therefor), and 3-year historical financial information (or such lesser time as the Acquired Business has existed) and 2-year pro forma financial forecast of the Acquired Business on a consolidated basis after giving effect to the Acquisition and covenant compliance calculations reasonably satisfactory to the Bank demonstrating satisfaction of the condition described in clause (g) below;

(f) if a new Subsidiary is formed or acquired as a result of or in connection with the Acquisition, the Borrower shall have complied with the requirements of Section 4 hereof in connection therewith; and

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(g) after giving effect to the Acquisition and any extension of credit in connection therewith, no Default or Event of Default shall exist, including with respect to the financial covenants contained in Section 8.23 hereof on a pro forma basis.

“Permitted Liens” is defined in Section 8.8 hereof.

“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or any other entity or organization, including a government or agency or political subdivision thereof.

“Plan” means any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code that either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

“Portion” is defined in Section 2.1(a) hereof.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

“Receivables” means all rights to the payment of a monetary obligation now or hereafter owing to the Borrower or any Guarantor evidenced by accounts, instruments, chattel paper or general intangibles.

“Reimbursement Obligation” is defined in Section 1.3(d) hereof.

“Revolving Credit” is defined in Section 1.1 hereof.

“S&P” means Standard & Poor’s Ratings Services Group, a division of The McGraw-Hill Companies, Inc.

“Security Agreement” means that certain Security Agreement dated as of September 30, 2009, between the Borrower and its Subsidiaries and the Bank, as the same may be amended, modified, supplemented, or restated from time to time.

“Special Payables” means those accounts payable of the Borrower arising by operation of contractual arrangements with a customer for payroll and non-payroll hospital operating costs for which the Borrower recorded a corresponding receivable, and which payable is subject to a bona fide dispute with such customer, all as determined in good faith by the Borrower.

“Subsidiary” means any corporation or other Person more than 50% of the outstanding ordinary voting shares or other equity interests of which is at the time directly or indirectly

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owned by the Borrower, by one or more of its Subsidiaries, or by the Borrower and one or more of its Subsidiaries.

“Termination Date” means September 30, 2011, or such earlier date on which the Commitment is terminated in whole pursuant to Section 3.4, 9.2, or 9.3 hereof.

“Total Consideration” means, with respect to an Acquisition, the sum (but without duplication) of (a) cash paid in connection with any Acquisition, (b) indebtedness payable to the seller in connection with such Acquisition, (c) other future payments which are required to be made over a period of time and are not contingent upon the Borrower or its Subsidiary meeting financial performance objectives (exclusive of salaries paid in the ordinary course of business) (discounted at the Base Rate), but only to the extent not included in clause (a) or (b) above, and (d) the amount of indebtedness assumed in connection with such Acquisition.

“Total Funded Debt” means, at any time the same is to be determined, the sum (but without duplication) of (a) all Indebtedness of the Borrower and its Subsidiaries at such time, and (b) all Indebtedness of any other Person which is directly or indirectly guaranteed by the Borrower or any of its Subsidiaries or which the Borrower or any of its Subsidiaries has agreed (contingently or otherwise) purchased or otherwise acquired or in respect of which the Borrower or any of its Subsidiaries has otherwise assured a creditor against loss, less the Cash Collateral.

“Unfunded Vested Liabilities” means, for any Plan at any time, the amount (if any) by which the present value of all vested nonforfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.

“Welfare Plan” means a “welfare plan” as defined in Section 3(1) of ERISA.

“Wholly-Owned Subsidiary” means a Subsidiary of which all of the issued and outstanding shares of capital stock (other than directors’ qualifying shares as required by law) or other equity interests are owned by the Borrower and/or one or more Wholly-Owned Subsidiaries within the meaning of this definition.

Section 5.2. Interpretation . The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof” , “herein” , and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All references to time of day herein are references to Chicago, Illinois time unless otherwise specifically provided. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement.

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Section 6. Representations and Warranties.

The Borrower represents and warrants to the Bank as follows:

Section 6.1. Organization and Qualification . The Borrower is duly organized, validly existing, and in good standing as a corporation under the laws of the State of Delaware, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying where the failure to do so could reasonably be expected to have a Material Adverse Effect.

Section 6.2. Subsidiaries . Each Subsidiary is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated or organized, as the case may be, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying where the failure to do so could reasonably be expected to have a Material Adverse Effect. Schedule 6.2 hereto identifies each Subsidiary, the jurisdiction of its organization, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by the Borrower and the Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares and other equity interests indicated on Schedule 6.2 as owned by the Borrower or a Subsidiary are owned, beneficially and of record, by the Borrower or such Subsidiary free and clear of all Liens other than Permitted Liens. There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary.

Section 6.3. Authority and Validity of Obligations . The Borrower has full right and authority to enter into this Agreement and the other Loan Documents, to make the borrowings herein provided for, to issue its Note in evidence thereof, to grant to the Bank the Liens described in the Collateral Documents, and to perform all of its obligations hereunder and under the other Loan Documents. Each Subsidiary has full right and authority to enter into the Loan Documents executed by it, to guarantee the Obligations, to grant to the Bank the Liens described in the Collateral Documents executed by it, and to perform all of its obligations under the Loan Documents executed by it. The Loan Documents delivered by the Borrower and its Subsidiaries have been duly authorized, executed, and delivered by such Persons and constitute valid and binding obligations of the Borrower and its Subsidiaries enforceable against them in accordance with their terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, or similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance

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or observance by the Borrower or any Subsidiary of any of the matters and things herein or therein provided for, (a) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Borrower or any Subsidiary, in each case, which could reasonably be expected to have a Material Adverse Effect, or any provision of the organizational documents ( e.g. , charter, certificate or articles of incorporation and by-laws, certificate or articles of association and operating agreement, partnership agreement, or other similar organizational documents) of the Borrower or any Subsidiary or any covenant, indenture or agreement of or affecting the Borrower or any Subsidiary or any of their Property, in each case, which could reasonably be expected to have a Material Adverse Effect, or (b) result in the creation or imposition of any Lien on any Property of the Borrower or any Subsidiary other than Permitted Liens.

Section 6.4. Use of Proceeds; Margin Stock . The Borrower shall use the proceeds of the extensions of credit made available hereunder to finance working capital and for its general working capital purposes. Neither the Borrower nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

Section 6.5. Financial Reports . The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2008, and the related consolidated statements of income, retained earnings, and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of Ernst & Young LLP, independent public accountants, and the unaudited interim consolidated balance sheet of the Borrower and its Subsidiaries as at June 30, 2009, and the related consolidated statements of income, retained earnings, and cash flows of the Borrower and its Subsidiaries for the six months then ended, heretofore furnished to the Bank, fairly present in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis. Neither the Borrower nor any Subsidiary has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 8.5 hereof.

Section 6.6. No Material Adverse Change. Since December 31, 2008, there has been no change in the condition (financial or otherwise) or business prospects of the Borrower or any Subsidiary except those occurring in the ordinary course of business, none of which individually or in the aggregate have been materially adverse.

Section 6.7. Full Disclosure . The statements and information furnished to the Bank in writing in connection with the negotiation of this Agreement and the other Loan Documents and the commitment by the Bank to provide all or part of the financing contemplated hereby do not contain any untrue statements of a material fact or omit a material fact necessary to make the material statements contained herein or therein not misleading, the Bank acknowledging that, as

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to any projections furnished to the Bank, the Borrower only represents that the same were prepared on the basis of information and estimates the Borrower believed to be reasonable as of the date of the applicable projections, and that actual results during the period or periods covered by any such projections may differ from projected results, and such differences may be material.

Section 6.8. Trademarks, Franchises and Licenses . The Borrower and its Subsidiaries own, possess or have the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, know how, and confidential commercial and proprietary information necessary to conduct their businesses as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright, or other proprietary right of any other Person.

Section 6.9. Governmental Authority and Licensing . The Borrower and its Subsidiaries have received all licenses, permits, and approvals of all foreign, federal, state, and local governmental authorities, if any, necessary to conduct their businesses, in each case where the failure to obtain or maintain the same could reasonably be expected to have a Material Adverse Effect. No investigation or proceeding which, if adversely determined, could reasonably be expected to result in revocation or denial of any material license, permit or approval is pending or, to the knowledge of the Borrower, threatened.

Section 6.10. Good Title . The Borrower and its Subsidiaries have good and defensible title (or valid leasehold interests) to their assets as reflected on the most recent consolidated balance sheet of the Borrower and its Subsidiaries furnished to the Bank (except for sales of assets by the Borrower and its Subsidiaries in the ordinary course of business), subject to no Liens other than Permitted Liens.

Section 6.11. Litigation and Other Controversies. There is no litigation or governmental or arbitration proceeding or labor controversy pending, nor to the knowledge of the Borrower threatened, against the Borrower or any Subsidiary or any of their Property which if adversely determined could reasonably be expected to have a Material Adverse Effect.

Section 6.12. Taxes . All federal and state income and other material tax returns required to be filed by the Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and other governmental charges upon the Borrower or any Subsidiary or upon any of their Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees, and governmental charges, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided. The Borrower does not know of any proposed additional tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts. Adequate provisions in accordance with GAAP for taxes on the books of the Borrower and its Subsidiaries have been made for all open years, and for the current fiscal period.

Section 6.13. Approval s. No authorization, consent, license, or exemption from, or filing or registration with, any court or governmental department, agency, or instrumentality, nor any

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approval or consent of any other Person, is or will be necessary to the valid execution, delivery, or performance by the Borrower or any Subsidiary of any Loan Document, except for such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect.

Section 6.14. Affiliate Transactions. Neither the Borrower nor any Subsidiary is a party to any contracts or agreements with any of its Affiliates (other than with Ascension and Wholly-Owned Subsidiaries) on terms and conditions which are less favorable to the Borrower or such Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.

Section 6.15. Investment Company. Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 6.16. ERISA . The Borrower and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of, and is in compliance in all material respects with, ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither the Borrower nor any Subsidiary has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA.

Section 6.17. Compliance with Laws . The Borrower and its Subsidiaries are in compliance with the requirements of all foreign, federal, state and local laws, rules and regulations applicable to or pertaining to their Property or business operations (including, without limitation, the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes and substances), non-compliance with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received notice to the effect that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental, health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 6.18. Other Agreements . Neither the Borrower nor any Subsidiary is in default under the terms of any covenant, indenture or agreement of or affecting the Borrower, any Subsidiary or any of their Property, which default if uncured could reasonably be expected to have a Material Adverse Effect.

Section 6.19. Solvency . The Borrower and its Subsidiaries are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.

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Section 6.20. Broker Fees . No broker’s or finder’s fee or commission will be payable with respect hereto or any of the transactions contemplated thereby; and the Borrower hereby indemnifies the Bank against, and agrees that it will hold the Bank harmless from, any claim, demand, or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable attorneys’ fees) arising in connection with any such claim, demand, or liability.

Section 6.21. No Default. No Default or Event of Default has occurred and is continuing.

Section 7. Conditions Precedent.

The obligation of the Bank to make any extension of credit under this Agreement is subject to the following conditions precedent:

Section 7.1. All Advances. As of the time of the making of each extension of credit (including the initial extension of credit) hereunder:

(a) each of the representations and warranties set forth in Section 6 hereof and in the other Loan Documents shall be true and correct in all material respects as of such time, except to the extent the same expressly relate to an earlier date;

(b) no Default or Event of Default shall have occurred and be continuing or would occur as a result of making such extension of credit;

(c) after giving effect to such extension of credit the aggregate principal amount of all Loans and Letters of Credit outstanding under this Agreement shall not exceed the lesser of (i) the Commitment and (ii) the Borrowing Base;

(d) in the case of the issuance of any Letter of Credit, the Bank shall have received a properly completed Application therefor together with the fees called for hereby; and

(e) such extension of credit shall not violate any order, judgment, or decree of any court or other authority or any provision of law or regulation applicable to the Bank (including, without limitation, Regulation U of the Board of Governors of the Federal Reserve System) as then in effect.

The Borrower’s request for any extension of credit hereunder shall constitute its warranty as to the facts specified in subsections (a) through (d), both inclusive, above.

Section 7.2. Initial Advance. At or prior to the making of the initial extension of credit hereunder, the following conditions precedent shall also have been satisfied:

(a) the Bank shall have received the following (and, with respect to all documents, each to be properly executed and completed) and the same shall have been approved as to form and substance by the Bank:

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(i) the Note;

(ii) the Security Agreement from the Borrower and its Subsidiaries, together with (x) any financing statements requested by the Bank, and (y) certificates evidencing 100% of the equity interests of the Domestic Subsidiaries, together with undated executed blank stock powers therefor;

(iii) the Guaranties;

(iv) evidence of the maintenance of insurance by the Borrower as required hereby or by the Collateral Documents;

(v) copies (executed or certified as may be appropriate) of resolutions or meeting minutes of the Board of Directors or other governing body of the Borrower and of each Subsidiary authorizing the execution, delivery, and performance of the Loan Documents;

(vi) articles of incorporation (or equivalent organizational document) of the Borrower and of each Guarantor certified by the appropriate governmental office of the state of its organization;

(vii) by-laws (or equivalent organizational document) for the Borrower and for each Guarantor certified by an appropriate officer of such Person acceptable to the Bank;

(viii) an incumbency certificate containing the name, title and genuine signature of the Borrower’s Authorized Representatives;

(ix) good standing certificates for the Borrower and each Guarantor, dated as of a date no earlier than 30 days prior to the date hereof, from the appropriate governmental offices in the state of its incorporation or organization and in each state in which it is qualified to do business as a foreign organization and in which the failure to be so qualified could reasonably be expected to have a Material Adverse Effect; and

(x) a duly completed Internal Revenue Service Form W-9 for the Borrower and each Domestic Subsidiary.

(b) the Bank shall have received the initial fees called for hereby;

(c) the Bank shall have received such valuations and certifications as it may require in order to satisfy itself as to the value of the Collateral, the financial condition of the Borrower and its Subsidiaries, and the lack of material contingent liabilities of the Borrower and its Subsidiaries;

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(d) legal matters incident to the execution and delivery of the Loan Documents and to the transactions contemplated hereby shall be satisfactory to the Bank and its counsel; and the Bank shall have received the favorable written opinion of counsel for the Borrower in form and substance reasonably satisfactory to the Bank and its counsel;

(e) the Bank shall have received a Borrowing Base certificate in the form attached hereto as Exhibit B showing the computation of the Borrowing Base in reasonable detail as of the close of business on August 31, 2009, and indicating Eligible Receivables of the Borrower and its Domestic Subsidiaries of at least $[**], and that the total gross receivables of the Borrower computed in accordance with GAAP is at least $[**];

(f) the Bank shall have received financing statement, tax and judgment lien search results against the Property of the Borrower and its Subsidiaries evidencing the absence of Liens on their Property except as permitted by Section 8.8 hereof;

(g) the Liens granted to the Bank under the Collateral Documents shall have been perfected in a manner satisfactory to the Bank and its counsel; and

(h) the Bank shall have received such other agreements, instruments, documents, certificates and opinions as the Bank may reasonably request.

Section 7.3. Post-Closin g. Within the time frames set forth below (or such later date as the Bank may agree to in writing), the following additional conditions must be satisfied: (i) no later than sixty (60) days after the Closing Date and subject to Section 4.1 hereof, the Borrower shall deliver to the Bank one or more account control agreements with respect to any deposit accounts or security accounts of Borrower and each Guarantor maintained by a depository institution other than the Bank, in form and substance reasonably satisfactory to the Bank and (ii) no later than thirty (30) days after the Closing Date, the Borrower shall deliver to the Bank a landlord waiver agreement with respect to 401 North Michigan Avenue Suite 2700, Chicago, Illinois 60611, in form and substance reasonably satisfactory to the Bank. Failure to comply with the conditions set forth herein shall constitute an Event of Default hereunder.

Section 8. Covenants.

The Borrower agrees that, so long as any credit is available to or in use by the Borrower hereunder, except to the extent compliance in any case or cases is waived in writing by the Bank:

Section 8.1. Maintenance of Business. The Borrower shall, and shall cause each Subsidiary to, preserve and maintain its existence, except as otherwise permitted by Section 8.10. The Borrower shall, and shall cause each Subsidiary to, preserve and keep in force and effect all licenses, permits and franchises necessary to the proper conduct of its business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

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Section 8.2. Maintenance of Properties. The Borrower shall maintain, preserve, and keep its property, plant, and equipment in good repair, working order and condition (ordinary wear and tear excepted) and shall from time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, and shall cause each Subsidiary to do so in respect of Property owned or used by it, except (i) to the extent that, in the reasonable business judgment of such Person, any such Property is no longer necessary for the proper conduct of the business of such Person, or (ii) except where such failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 8.3. Taxes and Assessment s. The Borrower shall duly pay and discharge, and shall cause each Subsidiary to duly pay and discharge, all material taxes, rates, assessments, fees, and governmental charges upon or against it or its Property, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.

Section 8.4. Insurance. The Borrower shall insure and keep insured, and shall cause each Subsidiary to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks, and in such amounts, as are insured by Persons similarly situated and operating like Properties; and the Borrower shall insure, and shall cause each Subsidiary to insure, such other hazards and risks (including employers’ and public liability risks) with good and responsible insurance companies, as and to the extent usually insured by Persons similarly situated and conducting similar businesses. The Borrower shall in any event maintain insurance on the Collateral to the extent required by the Collateral Documents. The Borrower shall upon request furnish to the Bank a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section.

Section 8.5. Financial Reports. The Borrower shall, and shall cause each Subsidiary to, maintain a standard system of accounting in accordance with GAAP and shall furnish to the Bank and its duly authorized representatives such information respecting the business and financial condition of the Borrower and its Subsidiaries as the Bank may reasonably request; and without any request, shall furnish to the Bank:

(a) as soon as available, and in any event within 15 days after the last day of each calendar month, a Borrowing Base certificate in the form attached hereto as Exhibit B showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, including an accounts receivable and accounts payable aging, prepared by the Borrower and certified to by its chief financial officer or such other officer reasonably acceptable to the Bank;

(b) as soon as available, and in any event within 45 days after the last day of each calendar month, a copy of the consolidated balance sheet of the Borrower and its Subsidiaries as of the last day of such period and the consolidated statements of income,

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retained earnings, and cash flows of the Borrower and its Subsidiaries for the calendar month and the fiscal year-to-date period then ended, each in reasonable detail showing in comparative form year-to-date against the budget prepared by the Borrower in accordance with GAAP (subject to the absence of footnote disclosures and year end audit adjustments) and certified to by its chief financial officer or such other officer reasonably acceptable to the Bank;

(c) as soon as available, and in any event within 120 days after the last day of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such period and the consolidated statements of income, retained earnings, and cash flows of the Borrower and its Subsidiaries for such period, and accompanying notes thereto, each in reasonable detail showing in comparative form the figures for the previous fiscal year, accompanied by an unqualified opinion thereon of Ernst & Young LLP or another firm of independent public accountants of recognized national standing, selected by the Borrower and reasonably satisfactory to the Bank, to the effect that the financial statements have been prepared in accordance with GAAP and present fairly in all material respects in accordance with GAAP the consolidated financial condition of the Borrower and its Subsidiaries as of the close of such fiscal year and the results of their operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances;

(d) promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of the Borrower’s or any Subsidiary’s operations and financial affairs given to it by its independent public accountants;

(e) as soon as available, and in any event no later than 45 days after the end of each fiscal year of the Borrower, a copy of the Borrower’s consolidated business plan for the following fiscal year, such business plan to show the Borrower’s projected consolidated and consolidating profit and loss, cash flow and balance sheet on a month-by-month basis, such business plan to be in reasonable detail prepared by the Borrower and in form reasonably satisfactory to the Bank;

(f) notice of any Change of Control;

(g) promptly after knowledge thereof shall have come to the attention of any responsible officer of the Borrower, written notice of (i) any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against the Borrower or any Subsidiary or any of their Property which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (ii) the occurrence of any Default or Event of Default hereunder; and

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(h) as soon as available, and in any event within 45 days after the last day of each fiscal quarter of the Borrower, the Borrower shall deliver to the Bank a written certificate in the form attached hereto as Exhibit C signed by the chief financial officer of the Borrower, or such other officer of the Borrower reasonably satisfactory to the Bank, to the effect that to the best of such officer’s knowledge and belief no Default or Event of Default has occurred during the period covered by such statements or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by the Borrower to remedy the same together with calculations supporting such statements in respect of Section 8.23 of this Agreement.

Section 8.6. Inspection . The Borrower shall, and shall cause each Subsidiary to, permit the Bank and its duly authorized representatives and agents to visit and inspect any of the Properties, corporate books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, its officers, employees, and independent public accountants (and by this provision the Borrower hereby authorizes such accountants to discuss with the Bank the finances and affairs of the Borrower and of each Subsidiary) at such reasonable times and reasonable intervals as the Bank may designate, and, so long as no Event of Default exists, with reasonable prior notice to the Borrower.

Section 8.7. Borrowings and Guaranties. The Borrower shall not, nor shall it permit any Subsidiary to, issue, incur, assume, create, or have outstanding any Indebtedness, or incur liabilities for interest rate, currency, or commodity cap, collar, swap, or similar hedging arrangements, or be or become liable as endorser, guarantor, surety, or otherwise for any debt, obligation, or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing shall not restrict nor operate to prevent:

(a) the Obligations of the Borrower and its Subsidiaries owing to the Bank under the Loan Documents and other indebtedness and obligations of such Persons owing to the Bank;

(b) purchase money indebtedness and Capitalized Lease Obligations of the Borrower and its Subsidiaries in an amount not to exceed $[**] in the aggregate at any one time outstanding;

(d) obligations of the Borrower or any Subsidiary arising out of interest rate, foreign currency, and commodity hedging agreements entered into with financial

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institutions in connection with bona fide hedging activities in the ordinary course of business and not for speculative purposes;

(e) intercompany advances from time to time owing by (i) any Guarantor to the Borrower or another Guarantor; (ii) by the Borrower to a Guarantor; or (iii) any Foreign Subsidiary to the Borrower or a Guarantor in an amount which does not exceed $[**] at any time outstanding, in each case in the ordinary course of business;

(f) unsecured indebtedness arising from the endorsement of items for deposit or collection of commercial paper received in the ordinary course of business; and

(g) unsecured indebtedness of the Borrower and its Subsidiaries not otherwise permitted by this Section in an amount not to exceed $[**] in the aggregate at any one time outstanding.

Section 8.8. Liens. The Borrower shall not, nor shall it permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided, however, that the foregoing shall not apply to nor operate to prevent (collectively, “Permitted Liens” ):

(a) Liens arising by statute in connection with worker’s compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, statutory obligations, or other similar charges (other than Liens arising under ERISA), good faith cash deposits in connection with tenders, contracts, or leases to which the Borrower or any Subsidiary is a party or other cash deposits required to be made in the ordinary course of business, provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor;

(b) mechanics’, workmen’s, materialmen’s, landlords’, carriers’, or other similar Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;

(c) judgment liens and judicial attachment Liens not constituting an Event of Default under Section 9.1(g) and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding, provided that the aggregate amount of liabilities of the Borrower and its Subsidiaries secured by a pledge of assets permitted under this subsection, including interest and penalties thereon, if any, shall not be in excess of $500,000 at any one time outstanding;

(d) Liens on Property of the Borrower or any Subsidiary created solely for the purpose of securing indebtedness permitted by Section 8.7(b) hereof, representing or incurred to finance the purchase price of such Property, provided that no such Lien shall extend to or cover other Property of the Borrower or such Subsidiary other than the

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respective Property so acquired, and the principal amount of indebtedness secured by any such Lien shall at no time exceed the original purchase price of such Property, as reduced by repayments of principal thereon;

(e) any interest or title of a lessor under any operating lease;

(f) easements, rights-of-way, restrictions, and other similar encumbrances against real property incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any Subsidiary;

(g) Liens granted in favor of the Bank pursuant to the Collateral Documents;

(h) Liens existing on the date of this Agreement and set forth on Schedule 8.8;

(i) rights of setoff imposed by law upon deposit of cash and cash equivalents in favor of banks or other depository institutions incurred in the ordinary course of business in deposit accounts maintained with such bank or depository institution; and

(l) licenses, sublicenses, leases or subleases granted to third parties in the ordinary course of Borrower’s business not interfering in any material respect with the ordinary conduct of Borrower’s business and otherwise permitted hereby.

Section 8.9. Investments, Acquisitions, Loans and Advances . The Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly, make, retain, or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to, any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof; provided, however, that the foregoing shall not apply to nor operate to prevent:

(a) investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;

(b) investments in commercial paper rated at least P-1 by Moody’s and at least A-1 by S&P maturing within one year of the date of issuance thereof;

(c) investments in certificates of deposit issued by the Bank or by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less;

(d) investments in repurchase obligations with a term of not more than 7 days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided all such

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agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System;

(e) investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c), and (d) above;

(f) the Borrower’s investment existing on the date of this Agreement in its Subsidiaries;

(g) intercompany advances made from time to time by the Borrower or a Guarantor to another Guarantor or by a Guarantor to the Borrower in the ordinary course of business to finance working capital needs;

(h) investments in account debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors or settlement of delinquent accounts or disputes with account debtors;

(i) loans and advances to employees, officers and directors of Borrower or any Guarantor to the extent used to acquire equity interests (or options to acquire equity interests) of Borrower to the extent such transactions are cashless and other loans and advances to officers, directors and employees in an aggregate principal amount not to exceed $500,000 at any time outstanding;

(j) Permitted Acquisitions;

(k) intercompany advances made from time to time by the Borrower or a Guarantor to a Foreign Subsidiary in an amount which does not exceed $[**] at any one time outstanding;

(l) investments in money market funds, mutual funds, AAA-rated bonds and fixed income investments in an aggregate amount not to exceed (i) prior to an IPO, $20,000,000, and (ii) upon and after an IPO, $125,000,000; and

(m) other investments, loans and advances in addition to those otherwise permitted by this Section in an amount not to exceed $[**] in the aggregate at any one time outstanding.

In determining the amount of investments, acquisitions, loans, and advances permitted under this Section, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.

Section 8.10. Mergers, Consolidations and Sales. The Borrower shall not, nor shall it permit any Subsidiary to, be a party to any merger or consolidation, or sell, transfer, lease, or otherwise dispose of all or any part of its Property, including any disposition of Property as part

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of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided, however, that this Section shall not apply to nor operate to prevent:

(a) the sale or lease of inventory in the ordinary course of business;

(b) the sale, transfer, lease, or other disposition of Property of the Borrower and its Subsidiaries to one another in the ordinary course of its business;

(c) the sale of delinquent notes or accounts receivable in the ordinary course of business for purposes of collection only (and not for the purpose of any bulk sale or securitization transaction);

(d) the sale, transfer, or other disposition of any tangible personal property that, in the reasonable business judgment of the Borrower or its Subsidiary, has become uneconomical, obsolete, or worn out, and which is disposed of in the ordinary course of business;

(e) the merger of any Subsidiary with and into the Borrower, provided that, the Borrower is the entity surviving the merger;

(f) the sale, transfer, lease or other disposition of Property of the Borrower or any Subsidiary (including any disposition of Property as part of a sale and leaseback transaction) aggregating for the Borrower and its Subsidiaries not more than $[**] during any fiscal year of the Borrower;

(g) the abandonment or cancellation of any intellectual property that is not material or is no longer used or useful in any material respect in the business of the Borrower and its Subsidiaries; and

(h) sales or forgiveness of accounts receivable which are past due in the ordinary course of business in connection with the collection or compromise thereof.

Section 8.11. Maintenance of Subsidiaries. The Borrower shall not assign, sell or transfer, nor shall it permit any Subsidiary to issue, assign, sell or transfer, any shares of capital stock of a Subsidiary; provided, however, that the foregoing shall not operate to prevent (a) the issuance, sale and transfer to any person of any shares of capital stock of a Subsidiary solely for the purpose of qualifying, and to the extent legally necessary to qualify, such person as a director of such Subsidiary, (b) Liens on the capital stock of Subsidiaries granted to the Bank pursuant to the Collateral Documents, and (c) any transaction permitted under Section 8.10.

Section 8.12. Dividends and Certain Other Restricted Payments. The Borrower shall not, nor shall it permit any Subsidiary to, (a) declare or pay any dividends on or make any other distributions in respect of any class or series of its capital stock or other equity interests, or (b) directly or indirectly purchase, redeem or otherwise acquire or retire any of its capital stock or other equity interests, including without limitation options or warrants to acquire the same

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(collectively referred to herein as “Restricted Payments” ); provided, however, that the foregoing shall not operate to prevent (a) the making of dividends or distributions by any Wholly-owned Subsidiary to the Borrower, (b) the making of dividends or distributions by the Borrower during any fiscal year in amounts necessary to allow each of its shareholders to make payments in respect of its federal income tax liability (and, if applicable, state income tax liability) attributable to its pro rata share of the Borrower’s taxable income (determined in accordance with the Code) (including estimated tax payments determined in good faith by the Borrower which are required to be made by its shareholders with respect thereto) so long as the Borrower shall have elected to be treated as an S Corporation for income tax purposes, (c) so long as no Event of Default has occurred and is continuing or would result therefrom, the Borrower may make a one-time dividend to the shareholders of the Borrower existing on the Closing Date so long as the aggregate amount of the dividends paid pursuant to this clause (c) does not exceed $15,000,000, (d) purchases, redemptions or other acquisitions of shares of (or options to purchase shares of) equity interests in the Borrower or options therefor from present or former directors, officers, other service providers, or employees (or permitted transferees, assigns, estates or heirs of the foregoing) of the Borrower or any of its Subsidiaries upon their death, disability, termination of their employment or retirement, so long as before and after giving effect to any such Restricted Payments for such purpose, (x) no Event of Default shall have occurred and be continuing, and (y) such purchases or payments after the date hereof do not exceed $500,000 in any fiscal year, and (e) the Borrower may make a one-time distribution to the preferred equity holders of the Borrower out of the proceeds of its IPO in accordance with the shareholders agreement of the Borrower in an aggregate amount not to exceed $17,500,000.

Section 8.13. ERISA. The Borrower shall, and shall cause each Subsidiary to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any of its Property. The Borrower shall, and shall cause each Subsidiary to, promptly notify the Bank of: (a) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (b) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the occurrence of any event with respect to any Plan which would result in the incurrence by the Borrower or any Subsidiary of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower or any Subsidiary with respect to any post-retirement Welfare Plan benefit.

Section 8.14. Compliance with Laws. The Borrower shall, and shall cause each Subsidiary to, comply in all respects with the requirements of all foreign, federal, state, local laws, rules, regulations, ordinances and orders applicable to or pertaining to its Property or business operations, where any such non-compliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or result in a Lien upon any of its Property.

Section 8.15. Burdensome Contracts With Affiliates. The Borrower shall not, nor shall it permit any Subsidiary to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than Guarantors and Ascension) on terms and conditions which are less favorable to the Borrower or such Guarantor or Ascension than would be usual and customary in

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similar contracts, agreements or business arrangements between Persons not affiliated with each other.

Section 8.16. No Changes in Fiscal Year. The fiscal year of the Borrower and its Subsidiaries ends on December 31 of each year; and the Borrower shall not, nor shall it permit any Subsidiary to, change its fiscal year from its present basis.

Section 8.17. Formation of Subsidiaries. Promptly upon the formation or acquisition of any Subsidiary, the Borrower shall provide the Bank notice thereof and immediately comply with the requirements of Section 4 hereof (at which time Schedule 6.2 shall be deemed amended to include reference to such Subsidiary).

Section 8.18. Change in the Nature of Business. The Borrower shall not, nor shall it permit any Subsidiary to, engage in any business or activity if as a result the general nature of the business of the Borrower or any Subsidiary would be changed in any material respect from the general nature of the business engaged in by it as of the date hereof.

Section 8.19. Use of Proceeds . The Borrower shall use the credit extended under this Agreement solely for the purposes set forth in, or otherwise permitted by, Section 6.4 hereof.

Section 8.20. No Restrictions . Except as provided herein, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Borrower or any Subsidiary to: (a) pay dividends or make any other distribution on any Subsidiary’s capital stock or other equity interests owned by the Borrower or any other Subsidiary, (b) pay any indebtedness owed to the Borrower or any other Subsidiary, (c) make loans or advances to the Borrower or any other Subsidiary, (d) transfer any of its Property to the Borrower or any other Subsidiary, or (e) guarantee the Obligations and/or grant Liens on its assets to the Bank as required by the Loan Documents.

Section 8.21. Deposit Accounts . The Borrower shall, and shall cause its Subsidiaries to, from and after the date 90 days immediately following the Closing Date, maintain their principal operating accounts at the Bank or the Bank’s affiliates.

Section 8.22. Clean Up. For a period of no less than five consecutive Business Days during each calendar year, the Borrower agrees that the aggregate principal amount of all Loans outstanding hereunder shall be $0.

Section 8.23. Financial Covenants . (a) EBITDA. As of the last day of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending September 30, 2009, the Borrower shall not permit EBITDA for the four fiscal quarters ending during the relevant period set forth below to be less than the corresponding amount set forth opposite such period:

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Period(s) Ending		EBITDA Shall Not be Less Than
Fiscal Quarter ending on or about 9/30/09		$16,000,000

Fiscal Quarters ending on or about 12/31/09 — 9/30/10		$23,852,000

Fiscal Quarters ending on or about 12/31/10 and all Fiscal Quarters ending thereafter		$32,000,000

(b) Total Leverage . As of the last day of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending September 30, 2009, the Borrower shall not permit the ratio of (i) Total Funded Debt to (ii) EBITDA for the four fiscal quarters of the Borrower then ended to be greater than 1.00 to 1.0.

(c) Fixed Charge Coverage Ratio . As of the last day of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending September 30, 2009, the Borrower shall not permit the ratio of (i) EBITDA for the four fiscal quarters of the Borrower then ended, to (ii) Fixed Charges for the same four fiscal quarters then ended to be less than 1.35 to 1.00.

(d) Capital Expenditures . The Borrower shall not, nor shall it permit any of its Subsidiaries to, incur Capital Expenditures in an amount in excess of $12,000,000 (herein, the “Maximum Permitted Amount” ) in the aggregate during any fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2009; provided that the Borrower may carry over into the immediately succeeding fiscal year 100% of the Maximum Permitted Amount to the extent not actually incurred for capital expenditures during the immediately preceding fiscal year.

Section 9. Events of Default and Remedies.

Section 9.1. Events of Default . Any one or more of the following shall constitute an “Event of Default” hereunder:

(a) default in the payment when due of all or any part of the principal of any Loan (whether at the stated maturity thereof or at any other time provided for in this Agreement) or of any Reimbursement Obligation, or default for a period of three (3) Business Days in the payment when due of any interest, fee or other Obligation payable hereunder or under any other Loan Document;

(b) default in the observance or performance of any covenant set forth in Sections 8.1, 8.3, 8.4, 8.5, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.15, 8.16, 8.17, 8.18, 8.19, 8.20, 8.22 or 8.23 hereof or of any provision of any Loan Document requiring the maintenance of insurance on the Collateral subject thereto or dealing with the use or remittance of proceeds of Collateral; or

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(c) default in the observance or performance of any other provision hereof or of any other Loan Document which is not remedied within 30 days after the earlier of (i) the date on which such failure shall first become known to any officer of the Borrower or (ii) written notice thereof is given to the Borrower by the Bank; or

(d) any representation or warranty made by the Borrower or any Subsidiary herein or in any other Loan Document, or in any statement or certificate furnished by it pursuant hereto or thereto, or in connection with any extension of credit made hereunder, proves untrue in any material respect as of the date of the issuance or making thereof; or

(e) (i) any event occurs or condition exists (other than those described in subsections (a) through (d) above) which is specified as an event of default under any of the other Loan Documents, or any of the Loan Documents shall for any reason not be or shall cease to be in full force and effect, or any of the Loan Documents is declared to be null and void, or (ii) any Subsidiary takes any action for the purpose of terminating, repudiating or rescinding any Loan Document executed by it or any of its obligations thereunder, or (iii) any of the Collateral Documents shall for any reason fail to create a valid and perfected first priority Lien (subject to Permitted Liens) in favor of the Bank in any Collateral purported to be covered thereby except as expressly permitted by the terms thereof, or (iv) the Borrower or any Subsidiary makes any payment on account of any Subordinated Debt which is prohibited under the terms of any instrument subordinating such Subordinated Debt to any Obligations owed to the Bank, or any subordination provision in any document or instrument (including, without limitation, any intercreditor or subordination agreement) relating to any Subordinated Debt shall cease to be in full force and effect, or any Person (including the holder of any Subordinated Debt) shall contest in any manner the validity, binding nature or enforceability of any such provision; or

(f) default shall occur under any Indebtedness issued, assumed or guaranteed by the Borrower or any Subsidiary aggregating more than $500,000, or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness (whether or not such maturity is in fact accelerated), or any such Indebtedness shall not be paid when due (whether by lapse of time, acceleration or otherwise); or

(g) any judgment or judgments, writ or writs, or warrant or warrants of attachment, or any similar process or processes in an aggregate amount in excess of $500,000 shall be entered or filed against the Borrower or any Subsidiary or against any of their Property and which remains unvacated, unbonded, unstayed or unsatisfied for a period of 30 days; or

(h) the Borrower or any member of its Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $500,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in

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excess of $500,000 (collectively, a “Material Plan” ) shall be filed under Title IV of ERISA by the Borrower or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against the Borrower or any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or

(i) dissolution or termination of the existence of the Borrower or any Subsidiary except as otherwise permitted by Section 8.10, or any Change of Control shall occur; or

(j) the Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 9.1(k) hereof; or

(k) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any Subsidiary or any substantial part of any of their Property, or a proceeding described in Section 9.1(j)(v) shall be instituted against the Borrower or any Subsidiary, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 60 days.

Section 9.2. Non-Bankruptcy Defaults . When any Event of Default (other than those described in subsection (j) or (k) of Section 9.1 with respect to the Borrower) has occurred and is continuing, the Bank may, by notice to the Borrower, take one or more of the following actions:

(a) terminate the obligation of the Bank to extend any further credit hereunder on the date (which may be the date thereof) stated in such notice;

(b) declare the principal of and the accrued interest on the Note to be forthwith due and payable and thereupon the Note, including both principal and interest and all fees, charges and other Obligations payable hereunder and under the other Loan

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Documents, shall be and become immediately due and payable without further demand, presentment, protest or notice of any kind; and

Section 9.3. Bankruptcy Defaults. When any Event of Default described in subsection (j) or (k) of Section 9.1 with respect to the Borrower has occurred and is continuing, then the Note, including both principal and interest, and all fees, charges and other Obligations payable hereunder and under the other Loan Documents, shall immediately become due and payable without presentment, demand, protest or notice of any kind, and the obligation of the Bank to extend further credit pursuant to any of the terms hereof shall immediately terminate. In addition, the Bank may exercise any and all remedies available to it under the Loan Documents or applicable law.

Section 9.4. Collateral for Undrawn Letters of Credit . When any Event of Default, other than an Event of Default described in subsection (j) or (k) of Section 9.1 with respect to the Borrower, has occurred and is continuing, the Borrower shall, upon demand of the Bank, and when any Event of Default described in subsection (j) or (k) of Section 9.1 with respect to the Borrower has occurred, the Borrower shall, without notice or demand from the Bank, immediately pay to the Bank the full amount of each Letter of Credit then outstanding, the Borrower agreeing to immediately make such payment and acknowledging and agreeing that the Bank would not have an adequate remedy at law for failure of the Borrower to honor any such demand and that the Bank shall have the right to require the Borrower to specifically perform such undertaking whether or not any draws have been made under any such Letters of Credit.

Section 10. Miscellaneous.

Section 10.1. Non-Business Days. If any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day on which date such payment shall be due and payable. In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.

Section 10.2. No Waiver, Cumulative Remedies. No delay or failure on the part of the Bank or on the part of the holder of the Obligations in the exercise of any power or right shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of the Bank and of the holder of the Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have.

Section 10.3. Amendments, Etc. No amendment, modification, termination or waiver of any provision of this Agreement or of any other Loan Document, nor consent to any departure by

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the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank and the Borrower. No notice to or demand on the Borrower in any case shall, except as otherwise provided herein, entitle the Borrower to any other or further notice or demand in similar or other circumstances.

Section 10.4. Costs and Expenses; Indemnification. (a) The Borrower agrees to pay on demand the reasonable, out-of-pocket costs and expenses of the Bank in connection with the negotiation, preparation, execution and delivery of this Agreement, the other Loan Documents and the other instruments and documents to be delivered hereunder or thereunder, a nd in connection with the recording or filing of any of the foregoing, and in connection with the transactions contemplated hereby or thereby, and in connection with any consents hereunder or waivers or amendments hereto or thereto, including the reasonable fees and expenses of counsel for the Bank with respect to all of the foregoing (whether or not the transactions contemplated hereby are consummated). The Borrower further agrees to pay to the Bank or any other holder of the Obligations all reasonable, out-of-pocket costs and expenses (including court costs and reasonable attorneys’ fees), if any, incurred or paid by the Bank or any other holder of the Obligations in connection with any Default or Event of Default or in connection with the enforcement of this Agreement or any of the other Loan Documents or any other instrument or document delivered hereunder or thereunder (including, without limitation, all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving the Borrower or any guarantor). The Borrower further agrees to indemnify the Bank, and any security trustee, and their respective directors, officers and employees, against all reasonable, out-of-pocket losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor, whether or not the indemnified Person is a party thereto) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of any extension of credit made available hereunder, other than those which arise from the gross negligence or willful misconduct of the party claiming indemnification. The Borrower, upon demand by the Bank at any time, shall reimburse the Bank for any reasonable, out-of-pocket legal or other expenses incurred in connection with investigating or defending against any of the foregoing except if the same is directly due to the gross negligence or willful misconduct of the party to be indemnified. The obligations of the Borrower under this Section shall survive the termination of this Agreement.

(b) The Borrower unconditionally agrees to forever indemnify, defend and hold harmless, and covenants not to sue for any claim for contribution against, the Bank for any damages, costs, loss or expense, including without limitation, response, remedial or removal costs, arising out of any of the following: (i) any presence, release, threatened release or disposal of any hazardous or toxic substance or petroleum by the Borrower or any Subsidiary or otherwise occurring on or with respect to their Property, (ii) the operation or violation of any environmental law, whether federal, state, or local, and any regulations promulgated thereunder, by the Borrower or any Subsidiary or otherwise occurring on or with respect to their Property, (iii) any claim for personal injury or property damage in connection with the Borrower or any Subsidiary or otherwise occurring on or with respect to their Property, and (iv) the inaccuracy or breach of any environmental representation, warranty or covenant by the Borrower or any

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Subsidiary made herein or in any mortgage, deed of trust, security agreement or any other instrument or document evidencing or securing any indebtedness, obligations, or liabilities of the Borrower or any Subsidiary owing to the Bank or setting forth terms and conditions applicable thereto or otherwise relating thereto, except for damages arising from the Bank’s willful misconduct or gross negligence. This indemnification shall survive the payment and satisfaction of all Obligations owing to the Bank and the termination of this Agreement, and shall remain in force beyond the expiration of any applicable statute of limitations and payment or satisfaction in full of any single claim under this indemnification. This indemnification shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of Bank and its directors, officers, employees, agents, and collateral trustees, and their successors and assigns.

Section 10.5. Documentary Taxes. The Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or any other Loan Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.

Section 10.6. Survival of Representations. All representations and warranties made herein or in any of the other Loan Documents or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.

Section 10.7. Survival of Indemnities . All indemnities and other provisions relative to reimbursement to the Bank of amounts sufficient to protect the yield of the Bank with respect to the Loans, including, but not limited to, Sections 2.7 and 2.9 hereof, shall survive the termination of this Agreement and the payment of the Note.

Section 10.8. Notices. Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation, notice by telecopy) and shall be given to the relevant party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices hereunder shall be addressed:

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to the Borrower at:		to the Bank at:

Accretive Health, Inc. 401 North Michigan Avenue, Suite 2700 Chicago, Illinois 60611		Bank of Montreal 115 South LaSalle Street Chicago, Illinois 60603
Attention: Greg Kazarian, General Counsel		Attention: Geraldine Rudig Telephone: (312) 461-3139
Telephone: (312) 324-7820 Telecopy: (312) 324-5355		Telecopy: (312) 293-4355

Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and a confirmation of such telecopy has been received by the sender, (ii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses specified in this Section; provided that any notice given pursuant to Section 1 or Section 2 hereof shall be effective only upon receipt.

Section 10.9. Construction. The provisions of this Agreement relating to Subsidiaries shall only apply during such times as the Borrower has one or more Subsidiaries. Nothing contained herein shall be deemed or construed to permit any act or omission which is prohibited by the terms of any of the other Loan Documents, the covenants and agreements contained herein being in addition to and not in substitution for the covenants and agreements contained in the other Loan Documents .

Section 10.10. Headings. Section headings used in this Agreement are for convenience of reference only and are not a part of this Agreement for any other purpose.

Section 10.11. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 10.12. Counterparts . This Agreement may be executed in any number of counterparts, and by different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument.

Section 10.13. Binding Nature, Governing Law, Etc. This Agreement shall be binding upon the Borrower and its successors and assigns, and, subject to Section 10.16(b), shall inure to the benefit of the Bank and the benefit of its successors and assigns, including any subsequent holder of the Obligations. The Borrower may not assign its rights hereunder without the written consent of the Bank. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby. This Agreement and the rights and duties of the parties hereto shall be governed by, and construed in accordance with, the internal laws of the State of Illinois without regard to principles of conflicts of laws.

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Section 10.14. Submission to Jurisdiction; Waiver of Jury Trial . The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois State court sitting in the City of Chicago for purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The Borrower and the Bank hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or relating to any Loan Document or the transactions contemplated thereby.

Section 10.15. USA Patriot Act . The Bank hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act” ), it is required to obtain, verify, and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Bank to identify the Borrower in accordance with the Act.

Section 10.16. Participations and Assignments . (a) The Bank shall have the right at its own cost to grant participations (to be evidenced by one or more agreements or certificates of participation) in the Loans and Letters of Credit at any time and from time to time to one or more other Persons; provided that no such participation shall relieve the Bank of any of its obligations under this Agreement, and, provided, further that no such participant shall have any rights under this Agreement except as provided in this Section, and the Bank shall have no obligation or responsibility to such participant. Any agreement pursuant to which such participation is granted shall provide that the granting Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower under this Agreement and the other Loan Documents including, without limitation, the right to approve any amendment, modification or waiver of any provision of the Loan Documents, except that such agreement may provide that the Bank will not agree to any modification, amendment or waiver of the Loan Documents that would reduce the amount of or postpone any fixed date for payment of any Obligation in which such participant has an interest. Any party to which such a participation has been granted shall have the benefits of Section 2.7 and Section 2.9 hereof. The Borrower authorizes the Bank and its assigns to disclose to any participant or prospective participant under this Section any financial or other information pertaining to the Borrower or any Subsidiary.

(b) The Bank shall have the right at any time to sell, assign, transfer or negotiate all or any part of its rights and obligations under the Loan Documents (including, without limitation, the indebtedness evidenced by the Notes then held by the Bank, together with an equivalent percentage of its obligation to make Loans and participate in Letters of Credit) to one or more Persons pursuant to one or more assignment agreements in form and substance acceptable to the Bank, provided that so long as no Default or Event of Default has occurred and is continuing the Borrower shall have consented in writing to such assignment (such consent not to be unreasonably withheld). Any such assignee shall become a holder of the Obligations (and Commitments, as applicable) assigned for all purposes hereunder to the extent of the rights and obligations under the Loan Documents it assumes and the assignee shall be released from its

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obligations, and will have released its rights, under the Loan Documents to the extent of such assignment. The address for notices to such assignee shall be as specified in the assignment agreement executed by it. Promptly upon the effectiveness of any such assignment agreement, the Borrower shall execute and deliver replacement Notes to the assignee and the assignor in the respective amounts of their Commitments (or assigned principal amounts, as applicable) after giving effect to the reduction occasioned by such assignment (all such Notes to constitute “Notes” for all purposes of the Loan Documents). The Borrower authorizes the Bank and its permitted assigns to disclose to any purchaser or prospective purchaser of an interest in the Loans and interest in Letters of Credit owed to it or its Commitments under this Section any financial or other information pertaining to the Borrower or any Subsidiary.

(c) The Bank or any permitted assignee may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement to secure obligations of the Bank or such assignee, including any such pledge or grant to a Federal Reserve Bank, and this Section shall not apply to any such pledge or grant of a security interest; provided that no such pledge or grant of a security interest shall release the Bank or such assignee from any of its obligations hereunder or substitute any such pledgee or secured party for the Bank or such assignee as a party hereto; provided further, however, the right of any such pledgee or grantee (other than any Federal Reserve Bank) to further transfer all or any portion of the rights pledged or granted to it, whether by means of foreclosure or otherwise, shall be at all times subject to the terms of this Agreement.

Section 10.17. Confidentiality . The Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors to the extent any such Person has a need to know such Information (it being understood that the Persons to whom such disclosure is made will first be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) to the extent necessary in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary and its obligations, (g) with the prior written consent of the Borrower, (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Bank on a non-confidential basis from a source other than the Borrower or any Subsidiary or any of their directors, officers, employees or agents, including accountants, legal counsel and other advisors, (i) to rating agencies if requested or required by such agencies in connection with a rating relating to the Loans or Commitments hereunder, or (j) to entities which compile and publish information about the syndicated loan market, provided that only basic information about the pricing and structure of the transaction evidenced hereby may be disclosed

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pursuant to this subsection (j). For purposes of this Section, “Information” means all information received from the Borrower or any of the Subsidiaries or from any other Person on behalf of the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses.

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This Credit Agreement is entered into between us for the uses and purposes hereinabove set forth as of the date first above written.


	“Borrower” Accretive Health, Inc.
By	/s/ John T. Staton
	Name John T. Staton
	Title Chief Financial Officer

	“Bank” Bank of Montreal
By	/s/ Geraldine M. Rudig
	Name Geraldine M. Rudig
	Title Director

[Signature Page to Credit Agreement]

Exhibit A
Revolving Note


$15,000,000		Chicago, Illinois September 30, 2009

On the Termination Date, for value received, the undersigned, Accretive Health, Inc., a Delaware corporation (the “Borrower” ), hereby promises to pay to the order of Bank of Montreal (the “Bank” ) at its office at 115 South LaSalle Street, Chicago, Illinois, the principal sum of (i) Fifteen Million and no/100 Dollars ($15,000,000), or (ii) such lesser amount as may at the time of the maturity hereof, whether by acceleration or otherwise, be the aggregate unpaid principal amount of all Loans owing from the Borrower to the Bank under the Revolving Credit provided for in the Credit Agreement hereinafter mentioned.

This Note evidences Loans made and to be made to the Borrower by the Bank under the Revolving Credit provided for under that certain Credit Agreement dated as of September 30, 2009, between the Borrower and the Bank (said Credit Agreement, as the same may be amended, modified or restated from time to time, being referred to herein as the “Credit Agreement” ), and the Borrower hereby promises to pay interest at the office described above on such Loans evidenced hereby at the rates and at the times and in the manner specified therefor in the Credit Agreement.

This Note is issued by the Borrower under the terms and provisions of the Credit Agreement and is secured by, among other things, the Collateral Documents, and this Note and the holder hereof are entitled to all of the benefits and security provided for thereby or referred to therein, to which reference is hereby made for a statement thereof. This Note may be declared to be, or be and become, due prior to its expressed maturity, voluntary prepayments may be made hereon, and certain prepayments are required to be made hereon, all in the events, on the terms and with the effects provided in the Credit Agreement. All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in the Credit Agreement.

The Borrower hereby promises to pay all reasonable, out-of-pocket costs and expenses (including reasonable attorneys’ fees) suffered or incurred by the holder hereof in collecting this Note or enforcing any rights in any collateral therefor. The Borrower hereby waives presentment for payment and demand. This Note shall be construed in accordance with, and governed by, the internal laws of the State of Illinois without regard to principles of conflicts of laws.


		Accretive Health, Inc.

		By

			Name

			Title

Exhibit B

Accretive Health, Inc.
Borrowing Base Certificate

To: Bank of Montreal

Pursuant to the terms of the Credit Agreement dated as of September 30, 2009, between Accretive Health, Inc. and you (the “Credit Agreement” ), we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this certificate is true, correct and complete as of the date of this certificate.


I. Borrowing Base Calculation

A. Receivables in Borrowing Base

1. Gross Receivables


2. Less

(a) Ineligible sales (i.e. not within the U.S.)

(b) Owed by an account debtor who is a Subsidiary or an Affiliate

(c) Owed by an account debtor who is in an insolvency or reorganization proceeding

(d) Unpaid more than 90 days

(e) Ineligible as to Ascension receivables because of ____% concentration factor

(f) Ineligible as to Account Debtors other than Ascension because of [**]% concentration factor

(g) Otherwise ineligible

Total Deductions (sum of lines A2a - A2f)


3. Eligible Receivables (line A1 minus line A2)


4. Eligible Receivables in Borrowing Base (line A3 x .75)


B. Cash Collateral

1. Cash Collateral


2. Cash Collateral in Borrowing Base (line B1 x 1.00)


C. Total Borrowing Base

(sum of lines A4 and B2)


D. Revolving Credit Advances

1. Loans


2. Letters of Credit


3. Total Revolving Credit Outstanding (line D1 plus D2)


E. Unused Availability

(lesser of Commitment ($15,000,000) and line C above, minus line D3)


II. Accounts Receivable Aging


General Ledger Activity		Accounts Receivable Aging

A/R at	$	Current

Add Sales	$	30-60 Days

Less Cash	( )	60-90 Days

Less Cm’s	( )	Over 90 Days

A/R at	$	Total	$

III. Accounts Payable Aging

			Current

			30-60 Days

			60-90 Days

			Total

-2-

IV. Withholding taxes have been paid through

(date)

Dated as of this day of , .


		Accretive Health, Inc.

		By

			Name

			Title

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Exhibit C

Accretive Health, Inc.
Compliance Certificate

To: Bank of Montreal

This Compliance Certificate is furnished to Bank of Montreal (the “Bank” ) pursuant to that certain Credit Agreement dated as of September 30, 2009, between Accretive Health, Inc. (the “Borrower” ) and the Bank (the “Credit Agreement” ). Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Credit Agreement.

The Undersigned hereby certifies on behalf of the Borrower and not in my individual capacity that:

1. I am the duly elected of the Borrower;

2. I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below;

4. The financial statements required by Section 8.5 of the Credit Agreement and being furnished to you concurrently with this certificate are, to the best of my knowledge, true, correct and complete in all material respects as of the dates and for the periods covered thereby; and

5. The Attachment hereto sets forth financial data and computations evidencing the Borrower’s compliance with certain covenants of the Credit Agreement, all of which data and computations are, to the best of my knowledge, true, complete and correct in all material respects and have been made in accordance with the relevant Sections of the Credit Agreement.

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

The foregoing certifications, together with the computations set forth in the Attachment hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of ____________, ___.


		Accretive Health, Inc.

		By

				Name
				Title

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Attachment to Compliance Certificate
Accretive Health, Inc.

Compliance Calculations for Credit Agreement
Dated as of September 30, 2009
Calculations as of _____________, ___


A.	EBITDA (Section 8.23(a))
	1.	Net Income for past 4 quarters	$
	2.	Interest Expense for past 4 quarters	$
	3.	Income taxes for past 4 quarters	$
	4.	Depreciation and Amortization Expense for past 4 quarters	$
	5.	Non-cash adjustments approved by the Bank for past 4 quarters	$
	6.	Fees, costs and expenses incurred in connection with the execution, negotiation and delivery of the Credit Agreement approved by the Bank	$
	7.	Other amounts approved by the Bank	$
	8.	Sum of Lines A1, A2, A3, A4, A5, A6 and A7 ( “EBITDA” )	$
	9.	Line A must be at least	$
	10.	The Borrower is in compliance (circle yes or no)	yes/no

B.	Total Leverage Ratio (Section 8.23(b))
	1.	Total Funded Debt	$
	2.	EBITDA (Line A6)	$
	3.	Ratio of Line B1 to B2	___:1.0
	4.	Line B3 ratio shall not be greater than	1:00 to 1.0
	5.	The Borrower is in compliance (circle yes or no)	yes/no

C.	Fixed Charge Coverage Ratio (Section 8.23(c))
	1.	EBITDA (Line A6)	$
	2.	Payments for past 4 quarters	$
	3.	Interest Expense for past 4 quarters	$
	4.	Income taxes for past 4 quarters	$
	5.	Cash Collateral	$5,000,000


	6.	Sum of Lines C2, C3, and C4, minus Line C5	$
	7.	Ratio of Line C1 to Line C6	___:1.0
	8.	Line C7 ratio must not be less than	1:35:1.0
	9.	The Borrower is in compliance (circle yes or no)	yes/no

D.	Capital Expenditures (Section 8.23(d))
	1.	Year-to-date Capital Expenditures	$
	2.	Maximum permitted amount (including carry forward of $____________from prior period)	$
	3.	The Borrower is in compliance (circle yes or no)	yes/no

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Schedule 5.1

EBITDA


Fiscal Quarter Ended		EBITDA
December 31, 2008		$2,673,000

March 31, 2009		$5,673,000

June 30, 2009		$5,984,000

Schedule 6.2

Subsidiaries


		Percentage
Name	Jurisdiction of Incorporation	Ownership
SDI Acquisition, Inc.	Delaware	100%

Accretive Health India Private Limited	India	100%

Accretive Health India Services Private Limited	India	100%

Exhibit 10.22

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

Security Agreement

This Security Agreement (the “Agreement” ) is dated as of September 30, 2009, among Accretive Health, Inc., a Delaware corporation (the “Borrower” ), and the other parties executing this Agreement under the heading “Debtors” (the Borrower and such other parties, along with any parties who execute and deliver to the Secured Party referred to herein an agreement attached hereto as Schedule H, being hereinafter referred to collectively as the “Debtors” and individually as a “Debtor” ), each with its mailing address as set forth in Section 12(b) hereof, and Bank of Montreal, a Canadian chartered bank, acting through its Chicago branch (the “Secured Party” ), with its mailing address as set forth in Section 12(b) hereof. The term “Debtor” and “Debtors” as used herein shall mean and include the Debtors collectively and also each individually, with all grants, representations, warranties and covenants of and by the Debtors, or any of them, herein contained to constitute joint and several grants, representations, warranties and covenants of and by the Debtors; provided, however, that unless the context in which the same is used shall otherwise require, any grant, representation, warranty or covenant contained herein related to the Collateral shall be made by each Debtor only with respect to the Collateral owned by it or represented by such Debtor as owned by it.

Preliminary Statement

A. The Borrower and the Secured Party have entered into a Credit Agreement dated as of September 30, 2009 (the Credit Agreement, as the same may be amended or modified from time to time, including amendments and restatements thereof in its entirety, being referred to herein as the “Credit Agreement” ; capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the Credit Agreement) pursuant to which the Secured Party may from time to time extend credit or otherwise make financial accommodations available to or for the account of the Borrower.

B. The Debtors (other than the Borrower) are subsidiaries or affiliates of the Borrower.

C. Each Debtor provides each of the other Debtors with substantial financial, management, administrative, and technical support.

D. The interdependent nature of the businesses of the Debtors is such that the viability of each Debtor is dependent upon the continued success of the other Debtors and, upon the continuation of such Debtor’s business relationships with the other Debtors, and the continuation thereof necessitates the Borrower’s access to credit and other financial accommodations from the Secured Party.

E. As a condition to extending credit or otherwise making financial accommodations available to or for the account of the Borrower (whether under the Credit Agreement or otherwise), the Secured Party requires, among other things, that each Debtor grant the Secured Party a security interest in such Debtor’s personal property described herein subject to the terms and conditions hereof.

Now, Therefore, in consideration of the benefits accruing to the Debtors, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Grant of Security Interest. As collateral security for the Secured Obligations (as defined below), each Debtor hereby grants to the Secured Party a lien on and security interest in, and acknowledges and agrees that the Secured Party has and shall continue to have a continuing lien on and security interest in, all right, title, and interest of each Debtor, whether now owned or existing or hereafter created, acquired or arising, in and to all of the following:

(a) Accounts (including Healthcare Insurance Receivables, if any);

(b) Chattel Paper;

(d) Documents;

(e) General Intangibles (including Payment Intangibles and Software, patents, trademarks, tradestyles, copyrights, and all other intellectual property rights, including all applications, registration, and licenses therefor, and all goodwill of the business connected therewith or represented thereby);

(f) Letter-of-Credit Rights;

(g) Supporting Obligations;

(h) Deposit Accounts;

(i) Investment Property (including certificated and uncertificated Securities, Securities Accounts, Security Entitlements, Commodity Accounts, and Commodity Contracts);

(j) Inventory;

(k) Equipment (including all software, whether or not the same constitutes embedded software, used in the operation thereof);

(l) Fixtures;

(m) Commercial Tort Claims (as described on Schedule F hereto or on one or more supplements to this Agreement);

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(n) Rights to merchandise and other Goods (including rights to returned or repossessed Goods and rights of stoppage in transit) which is represented by, arises from, or relates to any of the foregoing;

(o) Monies, personal property, and interests in personal property of such Debtor of any kind or description now held by the Secured Party or at any time hereafter transferred or delivered to, or coming into the possession, custody, or control of, the Secured Party, or any agent or affiliate of the Secured Party, whether expressly as collateral security or for any other purpose (whether for safekeeping, custody, collection or otherwise), and all dividends and distributions on or other rights in connection with any such property;

(p) Supporting evidence and documents relating to any of the above-described property, including, without limitation, computer programs, disks, tapes and related electronic data processing media, and all rights of such Debtor to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes, and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers, and cabinets in which the same are reflected or maintained;

(q) Accessions and additions to, and substitutions and replacements of, any and all of the foregoing; and

(r) Proceeds and products of the foregoing, and all insurance of the foregoing and proceeds thereof;

all of the foregoing being herein sometimes referred to as the “Collateral” ; provided , however, that in no event will the Collateral described above be deemed to include any Excluded Assets. All terms which are used in this Agreement which are defined in the Uniform Commercial Code of the State of Illinois as in effect from time to time ( “UCC” ) shall have the same meanings herein as such terms are defined in the UCC, unless this Agreement shall otherwise specifically provide. For purposes of this Agreement, (a) the term “Receivables” means all rights to the payment of a monetary obligation, whether or not earned by performance, and whether evidenced by an Account, Chattel Paper, Instrument, General Intangible, or otherwise, and (b) the term “Excluded Assets” means (i) except as may otherwise be required by Section 4.2 of the Credit Agreement, outstanding equity interests of any Foreign Subsidiary in excess of 65% of all equity interests of such Foreign Subsidiary, and (ii) any permit or license issued by a governmental authority to any Debtor or any agreement to which any Debtor is a party, in each case only to the extent and for so long as the terms of such permit, license or agreement or any requirement of applicable law effectively (after giving effect to Sections 9-406 -9-409, inclusive, of the Uniform Commercial Code in the applicable state (or any successor provision or provisions) or any other applicable law) prohibit the creation by such Debtor of a security interest in such permit, license or agreement in favor of the Bank or would result in an effective (after giving effect to Sections 9-406 — 9-409, inclusive, of the Uniform Commercial Code in the applicable state (or any successor provision or provisions) or any other applicable law)

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invalidation, termination or breach of the terms of any such permit, license or agreement, in each case unless and until any required consents are obtained, provided further that, notwithstanding anything set forth above to the contrary, the Collateral shall include, and the security interest granted in the Collateral shall attach to, (x) all Proceeds, substitutions or replacements of any such excluded items referred to herein unless such Proceeds, substitutions or replacements would constitute excluded items hereunder, (y) all rights to payment due or to become due under any such excluded items referred to herein, and (z) in the case of any permit, license or agreement, if and when the prohibition which prevents the granting of a security interest in any such property is removed, terminated, or otherwise becomes unenforceable as a matter of law, the Bank will be deemed to have, and at all times to have had, a security interest in such property, and the Collateral will be deemed to include, and at all times to have included, such property.

Section 2. Obligations Hereby Secured . The lien and security interest herein granted and provided for is made and given to secure, and shall secure, the payment and performance of (a) all “Obligations,” “Hedging Liability,” and “Funds Transfer and Deposit Account Liability,” as such terms are defined in the Credit Agreement, including, without limitation, all obligations with respect to Loans made and to be made under the Credit Agreement (whether or not evidenced by a Note issued thereunder), all obligations of the Borrower to reimburse the Secured Party for the amount of all drawings on all Letters of Credit issued pursuant to the Credit Agreement and all other obligations of the Borrower under all Applications for Letters of Credit, all obligations of the Debtors, and of any of them individually, with respect to any Hedging Liability, all obligations of the Debtors, and of any of them individually, with respect to any Funds Transfer and Deposit Account Liability, and all obligations of the Debtors, and of any of them individually, arising under any guaranty issued by it relating to the foregoing or any part thereof, in each case whether now existing or hereafter arising (and whether arising before or after the filing of a petition in bankruptcy and including all interest, costs, fees, and charges after the entry of an order for relief against a Debtor in a case under Title 11 of the United States Bankruptcy Code or any similar proceeding, whether or not such interest, costs, fees and charges would be an allowed claim against such Debtor in such proceeding), due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired, and (b) any and all expenses and charges, legal or otherwise, suffered or incurred by the Secured Party in collecting or enforcing any of such indebtedness, obligations, or liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation, the lien and security interest granted hereby (all of the foregoing being hereinafter referred to as the “Secured Obligations” ). Notwithstanding anything in this Agreement to the contrary, the right of recovery against any Debtor (other than the Borrower to which this limitation shall not apply) under this Agreement shall not exceed $1.00 less than the lowest amount that would render such Debtor’s obligations under this Agreement void or voidable under applicable law, including fraudulent conveyance law.

Section 3. Covenants, Agreements, Representations and Warranties . The Debtors hereby covenant and agree with, and represents and warrants to, the Secured Party that:

(a) Each Debtor is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. No Debtor shall change its jurisdiction of organization without the Secured Party’s prior written consent. Each Debtor is the sole and lawful owner of

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its Collateral, and has full right, power, and authority to enter into this Agreement and to perform each and all of the matters and things herein provided for. The execution and delivery of this Agreement, and the observance and performance of each of the matters and things herein set forth, will not (i) contravene or constitute a default under any provision of law or any judgment, injunction, order, or decree binding upon any Debtor which could reasonably be expected to result in a Material Adverse Effect or any provision of any Debtor’s organizational documents ( e.g. , charter, articles or certificate of incorporation and by-laws, articles or certificate of formation and limited liability company operating agreement, partnership agreement, or other similar organizational documents) or any covenant, indenture, or agreement of or affecting any Debtor or any of its property or (ii) result in the creation or imposition of any lien or encumbrance on any property of any Debtor except for Permitted Liens. Each Debtor’s organizational registration number (if any) is set forth under its name under Column 1 on Schedule A.

(b) Each Debtor’s respective chief executive office is at the location listed under Column 2 on Schedule A attached hereto opposite such Debtor’s name; and such Debtor has no other executive offices or places of business other than those listed under Column 3 on Schedule A attached hereto opposite such Debtor’s name. The Collateral owned or leased by each Debtor is and shall remain in such Debtor’s possession or control at the locations listed under Columns 2 and 3 on Schedule A attached hereto opposite such Debtor’s name (collectively for each Debtor, as such locations may be amended or supplemented from time to time with written notice to the Secured Party as provided below, the “Permitted Collateral Locations” ). If for any reason any Collateral is at any time kept or located at a location other than a Permitted Collateral Location, the Secured Party shall nevertheless have and retain a lien on and security interest therein. The Debtors own and shall at all times own all Permitted Collateral Locations, except to the extent otherwise disclosed under Columns 2 and 3 on Schedule A. No Debtor shall move its chief executive office or maintain a place of business at a location other than those specified under Columns 2 or 3 on Schedule A or permit the Collateral to be located at a location other than those specified under Columns 2 or 3 on Schedule A, in each case without first providing the Secured Party 30 days’ prior written notice of such Debtor’s intent to do so (at which time Schedule A will be deemed amended or supplemented with such additional or modified locations); provided that each Debtor shall at all times maintain its chief executive office and, unless otherwise specifically agreed to in writing by the Secured Party, Permitted Collateral Locations in the United States of America and, with respect to any new chief executive office or place of business or location of Collateral, such Debtor shall have taken all action reasonably requested by the Secured Party to maintain the lien and security interest of the Secured Party in the Collateral at all times fully perfected and in full force and effect.

(c) Each Debtor’s legal name and jurisdiction of organization is correctly set forth under Column 1 on Schedule A of this Agreement. No Debtor has transacted business at any time during the immediately preceding five-year period, and does not currently transact business, under any other legal names or trade names other than the prior legal names and trade names (if any) set forth on Schedule B attached hereto. No Debtor shall change its legal name or transact business under any other trade name without first giving 30 days’ prior written notice of its intent to do so to the Secured Party.

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(d) The Collateral and every part thereof is and shall be free and clear of all security interests, liens (including, without limitation, mechanics’, laborers’ and statutory liens), attachments, levies, and encumbrances of every kind, nature and description, whether voluntary or involuntary, except Permitted Liens. Each Debtor shall warrant and defend the Collateral against any claims and demands of all persons at any time claiming the same or any interest in the Collateral adverse to the Secured Party.

(e) Each Debtor shall promptly pay when due all taxes, assessments, and governmental charges and levies upon or against such Debtor or any of its Collateral, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings which prevent foreclosure or other realization upon any of the Collateral and preclude interference with the operation of such Debtor’s business in the ordinary course, and such Debtor shall have established adequate reserves therefor.

(f) No Debtor shall use, manufacture, sell, or distribute any Collateral in violation of any statute, ordinance, or other governmental requirement which could reasonably be expected to have a Material Adverse Effect. No Debtor shall waste or destroy the Collateral or any material part thereof or be negligent in the care or use of any material Collateral. Each Debtor shall perform in all material respects its obligations under any contract or other agreement constituting part of the Collateral, it being understood and agreed that the Secured Party has no responsibility to perform such obligations.

(g) Subject to Sections 4(b), 6(b), 6(c), and 7(c) hereof and the terms of the Credit Agreement (including, without limitation, Section 8.10 thereof), no Debtor shall, without the Secured Party’s prior written consent, sell, assign, mortgage, lease, or otherwise dispose of the Collateral or any interest therein.

(h) The Debtors shall at all times insure the Collateral consisting of tangible personal property against such risks and hazards as other persons similarly situated insure against, and including in any event loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Secured Party may reasonably specify. All insurance required hereby shall be maintained in amounts and under policies and with insurers reasonably acceptable to the Secured Party, and all such policies shall contain loss payable clauses naming the Secured Party as loss payee as its interest may appear (and, if the Secured Party requests, naming the Secured Party as an additional insured therein) in a form reasonably acceptable to the Secured Party. All premiums on such insurance shall be paid by the Debtors. Certificates of insurance evidencing compliance with the foregoing and, at the Secured Party’s request, the policies of such insurance shall be delivered by the Debtors to the Secured Party. All insurance required hereby shall provide that any loss shall be payable to the Secured Party notwithstanding any act or negligence of any Debtor, shall provide that no cancellation thereof shall be effective until at least 15 days after receipt by the relevant Debtor and the Secured Party of written notice thereof, and shall be reasonably satisfactory to the Secured Party in all other respects. In case of any material loss, damage to or destruction of the Collateral or any part thereof, the relevant Debtor shall promptly give written notice thereof to the Secured Party generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral or

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any part thereof, the relevant Debtor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Debtor’s cost and expense, shall promptly repair or replace the Collateral so lost, damaged, or destroyed, except to the extent such Collateral is not necessary for or of importance to the proper conduct of such Debtor’s business in the ordinary course. In the event any Debtor shall receive any proceeds of such insurance, such Debtor shall immediately pay over such proceeds to the Secured Party which will thereafter be applied to the reduction of the Secured Obligations (whether or not then due) or held as collateral security therefor, as the Secured Party may then determine in accordance with the Credit Agreement; provided, however , that the Secured Party agrees to release such insurance proceeds to the relevant Debtor for replacement or restoration of the portion of the Collateral lost, damaged or destroyed if, but only if, (i) at the time of release no Event of Default exists, (ii) written application for such release is received by the Agent from the relevant Debtor within 120 days after such Collateral is lost, damaged or destroyed, and (iii) the Secured Party has received evidence reasonably satisfactory to it that the Collateral lost, damaged or destroyed has been or will be replaced or restored to its condition immediately prior to the loss, destruction or other event giving rise to the payment of such insurance proceeds. Each Debtor hereby authorizes the Secured Party, at the Secured Party’s option, to adjust, compromise, and settle any losses under any insurance afforded and each Debtor does hereby irrevocably constitute the Secured Party, and each of its nominees, officers, agents, attorneys, and any other person whom the Secured Party may designate, as such Debtor’s attorneys-in-fact, with full power and authority to effect such adjustment, compromise, and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes and to receive and receipt for any unearned premiums due under policies of such insurance. Unless the Secured Party elects to adjust, compromise, or settle losses as aforesaid, any adjustment, compromise, and/or settlement of any losses under any insurance shall be made by the relevant Debtor subject to final approval of the Secured Party (regardless of whether or not an Event of Default shall have occurred) in the case of losses exceeding $250,000. All insurance proceeds shall be subject to the lien and security interest of the Secured Party hereunder.

Unless the Debtors provide the Secured Party with evidence of the insurance coverage required by this Agreement, the Secured Party may purchase insurance at the Debtors’ expense to protect the Secured party’s interests in the Collateral. This insurance may, but need not, protect the debtors’ interests in the Collateral. The coverage purchased by the Secured Party may not pay any claims that any Debtor makes or any claim that is made against any Debtor in connection with the Collateral. The relevant Debtor may later cancel any such insurance purchased by the Secured Party, but only after providing the Secured Party with evidence that such Debtor has obtained insurance as required by this Agreement. If the Secured Party purchases insurance for the Collateral, the Debtors will be responsible for the costs of that insurance, including interest and any other charges that the Secured Party may impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Secured Obligations secured hereby. The costs of the insurance

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may be more than the cost of insurance the Debtors may be able to obtain on its own.

(i) Each Debtor shall at all times allow the Secured Party and its representatives free access to and right of inspection of the Collateral; provided that, unless an Event of Default exists, any such access or inspection shall only be permitted during the relevant Debtor’s normal business hours and after reasonable notice to the relevant Debtor.

(j) If any Collateral is in the possession or control of any of any agents or processors of a Debtor and the Secured Party so requests, such Debtor agrees to notify such agents or processors in writing of the Secured Party’s security interest therein and instruct them to hold all such Collateral for the Secured Party’s account and subject to the Secured Party’s instructions. Each Debtor shall, upon the reasonable request of the Secured Party, authorize and instruct all bailees and other parties, if any, at any time processing, labeling, packaging, holding, storing, shipping, or transferring all or any part of the Collateral to permit the Secured Party and its representatives to examine and inspect any of the Collateral then in such party’s possession and to verify from such party’s own books and records any information concerning the Collateral or any part thereof which the Secured Party or its representatives may seek to verify. As to any premises not owned by a Debtor wherein any of the Collateral is located, the relevant Debtor shall, at the Secured Party’s request, use commercially reasonable efforts to cause each party having any right, title or interest in, or lien on, any of such premises to enter into an agreement (any such agreement to contain a legal description of such premises) (each a “Landlord Agreement” ) whereby such party disclaims any right, title and interest in, and lien on, the Collateral and allows the removal of such Collateral by the Secured Party and is otherwise in form and substance reasonably acceptable to the Secured Party. Each Debtor agrees that it will not keep any books and records (other than copies thereof) relating to the Collateral at any location for which it has not delivered to the Secured Party a Landlord Agreement in form and substance reasonably satisfactory to the Secured Party.

(k) Each Debtor agrees from time to time to deliver to the Secured Party such evidence of the existence, identity, and location of its Collateral and of its availability as collateral security pursuant hereto (including, without limitation, schedules describing all Receivables created or acquired by such Debtor, copies of customer invoices or the equivalent, and original shipping or delivery receipts for all merchandise and other goods sold or leased or services rendered, together with such Debtor’s warranty of the genuineness in all material respects thereof, and reports stating the book value of Inventory and Equipment by major category and location), in each case as the Secured Party may reasonably request. The Secured Party shall have the right to verify all or any part of the Collateral in any manner, and through any medium, which the Secured Party considers appropriate and reasonable, and each Debtor agrees to furnish all assistance and information, and perform any acts, which the Secured Party may reasonably require in connection therewith.

(l) Each Debtor shall comply in all material respects with the terms and conditions of all leases, easements, right-of-way agreements, and other similar agreements binding upon such Debtor or affecting the Collateral or any part thereof, and all orders, ordinances, laws, and statutes of any city, state, or other governmental entity, department, or agency having

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jurisdiction with respect to the premises wherein such Collateral is located or the conduct of business thereon.

(m) Schedule C attached hereto contains a true, complete, and current listing of all patents, trademarks, tradestyles, copyrights, and other intellectual property rights (including all registrations and applications therefor) owned by the Debtors as of the date hereof that are registered with any governmental authority. The Debtors shall promptly notify the Secured Party in writing of any additional intellectual property rights acquired or arising after the date hereof, and shall submit to the Secured Party a supplement to Schedule C to reflect such additional rights (provided any Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). Each Debtor owns or possesses rights to use all franchises, licenses, patents, trademarks, trade names, tradestyles, copyrights, and rights with respect to the foregoing which are required to conduct its business. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and the Debtors are not liable to any person for infringement under applicable law with respect to any such rights as a result of its business operations, which could reasonably be expected to result in a Material Adverse Effect.

(n) Schedule F attached hereto contains a true, complete and current listing of all Commercial Tort Claims held by the Debtors as of the date hereof, each described by reference to the specific incident giving rise to the claim. Subject to Section 4.2 of the Credit Agreement, each Debtor agrees to execute and deliver to the Secured Party a supplement to this Agreement in the form attached hereto as Schedule G, or in such other form reasonably acceptable to the Secured Party, promptly upon becoming aware of any other Commercial Tort Claim held or maintained by such Debtor arising after the date hereof (provided such Debtor’s failure to do so shall not impair the Secured Party’s security interest therein).

(o) Each Debtor agrees to execute and deliver to the Secured Party such further agreements, assignments, instruments, and documents and to do all such other things as the Secured Party may reasonably deem necessary or appropriate to assure the Secured Party its lien and security interest hereunder, including, without limitation, (i) such financing statements, and amendments thereof or supplements thereto, and such other instruments and documents as the Secured Party may from time to time reasonably require in order to comply with the UCC and any other applicable law, (ii) such agreements with respect to patents, trademarks, copyrights, and similar intellectual property rights as the Secured Party may from time to time reasonably require to comply with the filing requirements of the United States Patent and Trademark Office and the United States Copyright Office, and (iii) such control agreements with respect to all Deposit Accounts, Investment Property, Letter-of-Credit Rights, and electronic Chattel Paper, and to cause the relevant depository institutions, financial intermediaries, and issuers to execute and deliver such control agreements, as the Secured Party may from time to time reasonably require. Each Debtor hereby agrees that a carbon, photographic, or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Secured Party without notice thereof to such Debtor wherever the Secured Party in its sole discretion desires to file the same. Each Debtor hereby authorizes the Secured Party to file any and all financing statements covering the Collateral or any part thereof as the Secured Party may require, including financing statements describing the Collateral as “all assets” or “all personal

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property” or words of like meaning. The Secured Party may order lien searches from time to time against each Debtor and the Collateral, and the Debtor shall promptly reimburse the Secured Party for all reasonable costs and expenses incurred in connection with such lien searches. In the event for any reason the law of any jurisdiction other than Illinois becomes or is applicable to the Collateral or any part thereof, or to any of the Secured Obligations, each Debtor agrees to execute and deliver all such instruments and documents and to do all such other things as the Secured Party in its sole discretion deems necessary or appropriate to preserve, protect, and enforce the lien and security interest of the Secured Party under the law of such other jurisdiction. Each Debtor agrees to mark its books and records to reflect the lien and security interest of the Secured Party in the Collateral.

(p) On failure of any Debtor to perform any of the covenants and agreements herein contained, the Secured Party may, at its option, perform the same and in so doing may expend such sums as the Secured Party may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, liens, and encumbrances, expenditures made in defending against any adverse claims, and all other expenditures which the Secured Party may be compelled to make by operation of law or which the Secured Party may make by agreement or otherwise for the protection of the security hereof. All such sums and amounts so expended shall be repayable by the relevant Debtor immediately without notice or demand, shall constitute additional Secured Obligations secured hereunder and shall bear interest from the date said amounts are expended at the rate per annum (computed on the basis of a 360-day year for the actual number of days elapsed) determined by adding 2.0% to the rate per annum from time to time announced by Bank of Montreal as its prime commercial rate with any change in such rate per annum as so determined by reason of a change in such prime commercial rate to be effective on the date of such change in said prime commercial rate (such rate per annum as so determined being hereinafter referred to as the “Default Rate” ). No such performance of any covenant or agreement by the Secured Party on behalf of any Debtor, and no such advancement or expenditure therefor, shall relieve the Debtor of any default under the terms of this Agreement or in any way obligate the Secured Party to take any further or future action with respect thereto. The Secured Party, in making any payment hereby authorized, may do so according to any bill, statement, or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement, or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, or title or claim. The Secured Party, in performing any act hereunder, shall be the sole judge of whether any Debtor is required to perform same under the terms of this Agreement. The Secured Party is hereby authorized to charge any account of the relevant Debtor maintained with the Secured Party for the amount of such sums and amounts so expended.

Section 4. Special Provisions Re: Receivables.

(a) As of the time any Receivable owned by a Debtor becomes subject to the security interest provided for hereby, and at all times thereafter, such Debtor shall be deemed to have warranted as to each and all of such Receivables that all warranties of such Debtor set forth in this Agreement are true and correct with respect to each such Receivable; that each Receivable and all papers and documents relating thereto are genuine and in all material respects what they

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purport to be; that each Receivable is valid and subsisting; that no such Receivable is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has theretofore been endorsed by such Debtor and delivered to the Secured Party (except to the extent the Secured Party specifically requests such Debtor not to do so with respect to any such Instrument or Chattel Paper); that no surety bond was required or given in connection with such Receivable or the contracts or purchase orders out of which the same arose; that the amount of the Receivable represented as owing is the correct amount actually and unconditionally owing, except for normal cash discounts on normal trade terms in the ordinary course of business; and that the amount of such Receivable represented as owing is not disputed and is not subject to any set-offs, credits, deductions, or countercharges other than those arising in the ordinary course of such Debtor’s business which are disclosed to the Secured Party in writing promptly upon such Debtor becoming aware thereof. Without limiting the foregoing, if any Receivable arises out of a contract with the United States of America, or any state or political subdivision thereof, or any department, agency, or instrumentality of any of the foregoing, each Debtor agrees to notify the Secured Party and, at the Secured Party’s request, execute whatever instruments and documents are required by the Secured Party in order that such Receivable shall be assigned to the Secured Party and that proper notice of such assignment shall be given under the federal Assignment of Claims Act (or any successor statute) or any similar state or local statute, as the case may be.

(b) Unless and until an Event of Default occurs and is continuing, any merchandise or other goods which are returned by a customer or account debtor or otherwise recovered may be resold by a Debtor in the ordinary course of its business as presently conducted in accordance with Section 6(b) hereof or Section 8.10 of the Credit Agreement; and, during the existence of any Event of Default, such merchandise and other goods shall be set aside at the request of the Secured Party and held by the relevant Debtor as trustee for the Secured Party and shall remain part of the Secured Party’s Collateral. Unless and until an Event of Default occurs and is continuing, the Debtors may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries, and grant discounts, credits, and allowances in the ordinary course of its business as presently conducted for amounts and on terms which the relevant Debtor in good faith considers advisable; and, during the existence of any Event of Default, at the Secured Party’s request, the Debtors shall notify the Secured Party promptly of all returns and recoveries and, on the Secured Party’s request, deliver any such merchandise or other goods to the Secured Party. During the existence of any Event of Default, at the Secured Party’s request, the Debtor shall also notify the Secured Party promptly of all disputes and claims and settle or adjust them at no expense to the Secured Party, but no discount, credit, or allowance other than on normal trade terms in the ordinary course of business as presently conducted shall be granted to any customer or account debtor and no returns of merchandise or other goods shall be accepted by any Debtor without the Secured Party’s consent. The Secured Party may, at all times during the existence of any Event of Default, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms which the Secured Party considers advisable.

(c) Unless delivered to the Secured Party or its agent, all tangible Chattel Paper and Instruments shall contain a legend reasonably acceptable to the Secured Party indicating that such Chattel Paper or Instrument is subject to the security interest of the Secured Party contemplated by this Agreement.

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Section 5. Collection of Receivables.

(a) Except as otherwise provided in this Agreement, the Debtors shall make collection of all Receivables and may use the same to carry on its business in accordance with sound business practice and otherwise subject to the terms hereof.

(b) In the event the Secured Party requests any Debtor to do so during the existence of an Event of Default:

(i) all Instruments and Chattel Paper at any time constituting part of the Receivables or any other Collateral (including any postdated checks) shall, upon receipt by such Debtor, be immediately endorsed to and deposited with the Secured Party; and/or

(ii) such Debtor shall instruct all customers and account debtors to remit all payments in respect of Receivables or any other Collateral to a lockbox or lockboxes under the sole custody and control of the Secured Party and which are maintained at post office(s) in Chicago, Illinois selected by the Secured Party.

(c) Upon the occurrence and during the continuation of any Event of Default, whether or not the Secured Party has exercised any or all of its rights under other provisions of this Section 5, the Secured Party or its designee may notify the Debtors’ customers and account debtors at any time that Receivables or any other Collateral have been assigned to the Secured Party or of the Secured Party’s security interest therein, and either in its own name, or the relevant Debtor’s name, or both, demand, collect (including, without limitation, through a lockbox analogous to that described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound, and give acquittance for any or all amounts due or to become due on Receivables or any other Collateral, and in the Secured Party’s discretion file any claim or take any other action or proceeding which the Secured Party may deem reasonably necessary or appropriate to protect or realize upon the security interest of the Secured Party in the Receivables or any other Collateral.

(d) Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Secured Party pursuant to any of the provisions of Sections 5(b) or 5(c) hereof may be handled and administered by the Secured Party in and through a remittance account at the Secured Party, and the Debtors acknowledge that the maintenance of such remittance account by the Secured Party is solely for the Secured Party’s convenience and that the Debtors do not have any right, title, or interest in such remittance account. The Secured Party may, after the occurrence and during the continuation of any Event of Default, apply all or any part of any proceeds of Receivables or other Collateral received by it from any source to the payment of the Secured Obligations (whether or not then due and payable), such applications to be made in such amounts, in such manner and order and at such intervals as the Secured Party may from time to time in its discretion determine, but not less often than once each week. The Secured Party need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the Secured Party has received final payment therefor at its office in cash or final solvent credits current in Chicago, Illinois, acceptable to the Secured Party as such. However, if the Secured Party does give credit for any item prior to receiving final payment therefor and the Secured

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Party fails to receive such final payment or an item is charged back to the Secured Party for any reason, the Secured Party may at its election in either instance charge the amount of such item back against the remittance account or any account of the relevant Debtor maintained with the Secured Party, together with interest thereon at the Default Rate. Concurrently with each transmission of any proceeds of Receivables or other Collateral to the remittance account, upon the reasonable request of the Secured Party, each Debtor shall furnish the Secured Party with a report in such form as the Secured Party shall reasonably require identifying the particular Receivable or other Collateral from which the same arises or relates. Unless and until an Event of Default shall have occurred and be continuing, the Secured Party will release proceeds of Collateral which the Secured Party has not applied to the Secured Obligations as provided above from the remittance account from time to time promptly after receipt thereof. Each Debtor hereby indemnifies the Secured Party from and against all liabilities, damages, losses, actions, claims, judgments, reasonable out-of-pocket costs, expenses, charges and attorneys’ fees suffered or incurred by the Secured Party because of the maintenance of the foregoing arrangements; provided, however, that no Debtor shall be required to indemnify the Secured Party for any of the foregoing to the extent they arise solely from the gross negligence or willful misconduct of the Secured Party. The Secured Party shall have no liability or responsibility to any Debtor for accepting any check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement whatsoever or be responsible for determining the correctness of any remittance.

Section 6. Special Provisions Re: Inventory and Equipment.

(a) Each Debtor shall at its own cost and expense maintain, keep and preserve the Inventory in good and merchantable condition and keep and preserve the Equipment in good repair, working order and condition, ordinary wear and tear excepted, and, without limiting the foregoing, make all necessary and proper repairs, replacements and additions to the Equipment so that the efficiency thereof shall be fully preserved and maintained, except (i) to the extent, in the reasonable judgment of the relevant Debtor, any such Equipment is no longer necessary for the proper conduct of the business of such Debtor or (ii) except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Secured Party, use, consume and sell the Inventory in the ordinary course of its business, but a sale in the ordinary course of business and as otherwise permitted by Section 8.10 of the Credit Agreement shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by such Debtor.

(c) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Secured Party, sell or otherwise dispose of Equipment to the extent permitted by Section 8.10 of the Credit Agreement.

(d) As of the time any Inventory or Equipment becomes subject to the security interest provided for hereby and at all times thereafter, the relevant Debtor shall be deemed to have warranted as to any and all of such Inventory and Equipment that all warranties of such Debtor set forth in this Agreement are true and correct with respect to such Inventory and Equipment;

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that all of such Inventory and Equipment is located at a location set forth pursuant to Section 3(b) hereof; and that, in the case of Inventory, such Inventory is new and unused and in good and merchantable condition. Each Debtor warrants and agrees that no Inventory owned by it is or will be consigned to any other person without the Secured Party’s prior written consent.

(e) Upon the Secured Party’s reasonable request, each Debtor shall at its own cost and expense cause the lien of the Secured Party in and to any portion of the Collateral subject to a certificate of title law to be duly noted on such certificate of title or to be otherwise filed in such manner as is prescribed by law in order to perfect such lien and shall cause all such certificates of title and evidences of lien to be deposited with the Secured Party.

(f) None of the Equipment is or will be attached to real estate in such a manner that the same may become a fixture.

(g) If any of the Inventory is at any time evidenced by a document of title, upon Secured Party’s reasonable request, such document shall be promptly delivered by the relevant Debtor to the Secured Party.

Section 7. Special Provisions Re: Investment Property and Deposits.

(a) Unless and until an Event of Default has occurred and is continuing and thereafter until notified to the contrary by the Secured Party pursuant to Section 9(d) hereof:

(i) the Debtors shall be entitled to exercise all voting and/or consensual powers pertaining to the Investment Property or any part thereof, for all purposes not inconsistent with the terms of this Agreement or any other document evidencing or otherwise relating to any Secured Obligations; and

(ii) the Debtors shall be entitled to receive and retain all cash dividends paid upon or in respect of the Investment Property.

(b) All Investment Property (including all securities, certificated or uncertificated, securities accounts, and commodity accounts) of the Debtors on the date hereof is listed and identified on Schedule E attached hereto and made a part hereof. Each Debtor shall promptly notify the Secured Party of any other Investment Property acquired or maintained by such Debtor after the date hereof, and shall submit to the Secured Party a supplement to Schedule E to reflect such additional rights (provided such Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). Certificates for all certificated securities now or at any time constituting Investment Property shall be promptly delivered by the Debtors to the Secured Party duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto, including, without limitation, all stock received in respect of a stock dividend or resulting from a split-up, revision, or reclassification of the Investment Property or any part thereof or received in addition to, in substitution of, or in exchange for the Investment Property or any part thereof as a result of a merger, consolidation, or otherwise. With respect to any uncertificated securities or any Investment Property held by a securities intermediary,

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commodity intermediary, or other financial intermediary of any kind, at the Secured Party’s request, the Debtors shall execute and deliver, and shall cause any such issuer or intermediary to execute and deliver, an agreement among the relevant Debtor, the Secured Party, and such issuer or intermediary in form and substance reasonably satisfactory to the Secured Party which provides, among other things, for the intermediary’s agreement that it shall comply with entitlement orders, and apply any value distributed on account of any such Investment Property, as directed by the Secured Party without further consent by any Debtor. The Secured Party may at any time, after the occurrence and during the continuation of an Event of Default, cause to be transferred into its name or the name of its nominee or nominees all or any part of the Investment Property hereunder.

(c) Unless and until an Event of Default has occurred and is continuing, the Debtors may sell or otherwise dispose of any Investment Property to the extent permitted by the Credit Agreement, provided that except to the extent permitted by the Credit Agreement no Debtor shall sell or otherwise dispose of any capital stock of or other equity interests in any direct or indirect subsidiary without the prior written consent of the Secured Party. After the occurrence and during the continuation of any Event of Default, no Debtor shall sell all or any part of the Investment Property without the prior written consent of the Secured Party.

(d) The Debtors represent that on the date of this Agreement, none of the Investment Property consists of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) except to the extent the Debtors have delivered to the Secured Party a duly executed and completed Form U-1 with respect to such stock. If at any time the Investment Property or any part thereof consists of margin stock, the Debtors shall promptly so notify the Secured Party and deliver to the Secured Party a duly executed and completed Form U-1 and such other instruments and documents reasonably requested by the Secured Party in form and substance reasonably satisfactory to the Secured Party.

(e) Notwithstanding anything to the contrary contained herein, in the event any Investment Property is subject to the terms of a separate security agreement in favor of the Secured Party, the terms of such separate security agreement shall govern and control unless otherwise agreed to in writing by the Secured Party.

(f) All Deposit Accounts of the Debtors on the date hereof are listed and identified (by account number and depository institution) on Schedule E attached hereto and made a part hereof. Each Debtor shall promptly notify the Secured Party of any other Deposit Account opened or maintained by such Debtor after the date hereof, and shall submit to the Secured Party a supplement to Schedule E to reflect such additional accounts (provided such Debtor’s failure to do so shall not impair the Secured Party’s security interest therein). With respect to any Deposit Account maintained by a depository institution other than the Secured Party, and as a condition to the establishment and maintenance of any such Deposit Account except as otherwise permitted by the Credit Agreement, such Debtor, the depository institution, and the Secured Party shall execute and deliver an account control agreement in form and substance reasonably satisfactory to the Secured Party which provides, among other things, for the depository institution’s agreement that it will comply with instructions originated by the Secured Party

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directing the disposition of the funds in the Deposit Account without further consent by such Debtor.

(g) The Borrower shall, until the Cash Collateral Release Date, maintain that certain money market account number 165-141-3 (the “Cash Collateral Account” ) at Harris N.A. (the “Depositary Bank” ) on the terms and conditions provided for herein and in the Credit Agreement.

(h) The Borrower hereby agrees that, upon request of the Secured Party, it shall deposit an amount equal to $5,000,000 into the Cash Collateral Account.

(i) Until the Cash Collateral Release Date, the Borrower shall not terminate the Cash Collateral Account without the Secured Party’s prior written consent. Until the Cash Collateral Release Date, the Borrower hereby agrees no funds or other amounts in the Cash Collateral Account may be withdrawn by the Borrower, notwithstanding any provisions to the contrary contained in any other agreement between the Borrower and the Depositary Bank; provided that, so long as no Event of Default (as hereinafter defined) has occurred and is continuing, the Borrower shall be entitled to all payments with respect to interest (if any) on the Cash Collateral Account.

(j) The Cash Collateral Account, until the Cash Collateral Release Date, shall at all times be subject to a control agreement reasonably satisfactory to the Secured Party.

(k) Upon the existence of an Event of Default, the Secured Party may at any time direct the Depositary Bank to withdraw the Cash Collateral or any part thereof from the Cash Collateral Account, and deliver such Cash Collateral to the Secured Party and/or to transfer such Cash Collateral or any part thereof into the Secured Party’s name or into the name of its nominee or nominees, for application to the Secured Obligations in accordance with the Credit Agreement.

(l) The Borrower shall cause the Depositary Bank to, and hereby irrevocably authorizes and directs the Depositary Bank to, furnish to the Secured Party a copy of each monthly statement pertaining to the Cash Collateral Account and the Cash Collateral and such other information regarding the Cash Collateral as is requested from time to time by the Secured Party which would ordinarily be available if requested by the Borrower.

(m) The Depositary Bank shall be fully protected in, and shall not in any way be liable to the Borrower for, acting on any order or direction of the Secured Party respecting the Cash Collateral Account or the Cash Collateral, or any interest therein, without making any inquiry whatsoever as to the Secured Party’s right or authority to give such order or direction or as to the application of any payment made pursuant thereto, and any payment in respect of the Cash Collateral Account or the Cash Collateral made to the Secured Party pursuant to any such order or direction shall satisfy and discharge any liability of the Depositary Bank to the Borrower to the extent of such payment. The Borrower hereby irrevocably authorizes and directs the Depositary Bank to comply solely with instructions of the Secured Party with respect to the Cash Collateral Account and the Cash Collateral, and all transfers, withdrawals, and other dispositions

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of funds from the Cash Collateral Account or otherwise representing the Cash Collateral, without further consent of the Borrower. The Borrower agrees that the Depositary Bank shall have no liability to the Borrower, or its estate, personal representatives, successors, or assigns, for any loss or damage that it may claim to have suffered or incurred, either directly or indirectly, by reason of this Agreement, unless the Depositary Bank’s actions or omissions are due to its gross negligence or willful misconduct. In no event will the Depositary Bank be liable for any special, indirect, exemplary or consequential damages, including but not limited to lost profits. The Depositary Bank will be excused from failing to act or delay in acting, and no such failure or delay shall constitute a breach of this Agreement or otherwise give rise to any liability of the Depositary Bank, if (i) such failure or delay is caused by circumstances beyond the Depositary Bank’s reasonable control, including but not limited to legal constraint, emergency conditions, action or inaction of governmental, civil or military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood, earthquake or other natural disaster, breakdown of public or private or common carrier communications or transmission facilities, equipment failure, or act, negligence or default of the Borrower or Secured Party or (ii) such failure or delay resulted from the Depositary Bank’s reasonable belief that the action would have violated any court order, any guideline, rule or regulation of any governmental authority, or any applicable law.

Section 8. Power of Attorney. In addition to any other powers of attorney contained herein, each Debtor hereby appoints the Secured Party, its nominee, and any other person whom the Secured Party may designate, as such Debtor’s attorney-in-fact, with full power and authority upon the occurrence and during the continuation of any Event of Default to sign such Debtor’s name on verifications of Receivables and other Collateral; to send requests for verification of Collateral to such Debtor’s customers, account debtors, and other obligors; to endorse such Debtor’s name on any checks, notes, acceptances, money orders, drafts, and any other forms of payment or security that may come into the Secured Party’s possession or on any assignments, stock powers, or other instruments of transfer relating to the Collateral or any part thereof; to sign such Debtor’s name on any invoice or bill of lading relating to any Collateral, on claims to enforce collection of any Collateral, on notices to and drafts against customers and account debtors and other obligors, on schedules and assignments of Collateral, on notices of assignment and on public records; to notify the post office authorities to change the address for delivery of such Debtor’s mail to an address designated by the Secured Party; to receive, open and dispose of all mail addressed to such Debtor; and to do all things necessary to carry out this Agreement. Each Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither the Secured Party nor any such attorney will be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than such person’s gross negligence or willful misconduct. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Secured Obligations have been fully paid and satisfied and all agreements of the Secured Party to extend credit to or for the account of the Borrower have expired or otherwise have been terminated.

Section 9. Defaults and Remedies.

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(a) The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:

(i) default in the payment when due (whether by demand, lapse of time, acceleration or otherwise) of any principal portion the Secured Obligations or any part thereof or default for a period of three (3) Business Days of any interest, fee, or other portion of the Secured Obligations; or

(ii) default in the observance or performance of any covenant set forth in Sections 5(b), 7(b), or 7(f) hereof or of any provision hereof requiring the maintenance of insurance on the Collateral or dealing with the use or remittance of proceeds of Collateral; or

(iii) default in the observance or performance of any other provision hereof which is not remedied within 30 days after the earlier of (a) the date on which such default shall first become known to any officer of any Debtor or (b) written notice thereof is given to the Debtors by the Secured Party; or

(iv) any representation or warranty made by any Debtor herein, or in any statement or certificate furnished by it pursuant hereto, or in connection with any loan or extension of credit made to or on behalf of or at the request of any Debtor by the Secured Party, shall be false in any material respect as of the date of the issuance or making thereof; or

(v) any event shall occur or condition shall exist which is specified as an “Event of Default” under the Credit Agreement, or any other default shall occur in the observance or performance of any terms or provisions of any instrument or document evidencing or securing any Secured Obligations or setting forth terms and conditions applicable thereto or otherwise relating thereto, in each case, subject to any applicable cure periods, or this Agreement shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void.

(b) Upon the occurrence and during the continuation of any Event of Default, the Secured Party shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further the Secured Party may, without demand and, to the extent permitted by applicable law, without advertisement, notice, hearing, or process of law, all of which the Debtors hereby waive, to the extent permitted by applicable law, at any time or times, sell and deliver all or any part of the Collateral (and any other property of the Debtors attached thereto or found therein) held by or for it at public or private sale, for cash, upon credit, or otherwise, at such prices and upon such terms as the Secured Party deems advisable, in its sole discretion. In addition to all other sums due the Secured Party hereunder, the Debtors shall pay the Secured Party all reasonable out-of-pocket costs and expenses incurred by the Secured Party, including reasonable attorneys’ fees and court costs, in obtaining, liquidating or enforcing payment of Collateral or the Secured Obligations or in the prosecution or defense of any action

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or proceeding by or against the Secured Party or any Debtor concerning any matter arising out of or connected with this Agreement or the Collateral or the Secured Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the United States Bankruptcy Code (or any successor statute). Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to each Debtor in accordance with Section 12(b) hereof at least 10 days before the time of sale or other event giving rise to the requirement of such notice; provided however, no notification need be given to any Debtor if such Debtor has signed, after an Event of Default has occurred, a statement renouncing any right to notification of sale or other intended disposition. The Secured Party shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Secured Party may be the purchaser at any such sale. Each Debtor hereby waives all of its rights of redemption from any such sale. The Secured Party may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Secured Party may further postpone such sale by announcement made at such time and place. The Secured Party has no obligation to prepare the Collateral for sale. The Secured Party may sell or otherwise dispose of the Collateral without giving any warranties as to the Collateral or any part thereof, including disclaimers of any warranties of title or the like, and each Debtor acknowledges and agrees that the absence of such warranties shall not render the disposition commercially unreasonable.

(c) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default, the Secured Party shall have the right, in addition to all other rights provided herein or by law, to take physical possession of any and all of the Collateral and anything found therein, the right for that purpose to enter without legal process any premises where the Collateral may be found (provided such entry be done lawfully), and the right to maintain such possession on the relevant Debtor’s premises (each Debtor hereby agreeing to the extent it may lawfully do so to lease such premises without cost or expense to the Secured Party or its designee if the Secured Party so requests) or to remove the Collateral or any part thereof to such other places as the Secured Party may desire. Upon the occurrence and during the continuation of any Event of Default, the Secured Party shall have the right to exercise any and all rights with respect to all Deposit Accounts of each Debtor including, without limitation, the right to direct the disposition of the funds in each Deposit Account and to collect, withdraw, and receive all amounts due or to become due or payable under each such Deposit Account. Upon the occurrence and during the continuation of any Event of Default, each Debtor shall, upon the Secured Party’s demand, promptly assemble the Collateral and make it available to the Secured Party at a place designated by the Secured Party. If the Secured Party exercises its right to take possession of the Collateral, the relevant Debtor shall also at its expense perform any and all other steps requested by the Secured Party to preserve and protect the security interest hereby granted in the Collateral, such as placing and maintaining signs indicating the security interest of the Secured Party, appointing overseers for the Collateral, and maintaining Collateral records.

(d) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default, all rights of each Debtor to exercise the voting and/or consensual powers which it is entitled to exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the distributions which it is entitled to receive and retain pursuant to Section 7(a)(ii) hereof, shall, at the option of the Secured Party, cease and thereupon become vested in the Secured Party, which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Investment Property (including, without limitation, the right to deliver notice of control with respect to any Investment Property held in a securities account or commodity account and deliver all entitlement orders with respect thereto) and/or to receive and retain the distributions which any Debtor would otherwise have been authorized to retain pursuant to

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Section 7(a)(ii) hereof and shall then be entitled solely and exclusively to exercise any and all rights of conversion, exchange, or subscription or any other rights, privileges, or options pertaining to any Investment Property as if the Secured Party were the absolute owner thereof, including without limitation, the right to exchange, at its discretion, any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization, or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Secured Party of any right, privilege, or option pertaining to any Investment Property and, in connection therewith, to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar, or other designated agency upon such terms and conditions as the Secured Party may determine. In the event the Secured Party in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities laws, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable.

(e) Without in any way limiting the foregoing, each Debtor hereby grants to the Secured Party a royalty-free irrevocable license and right to use all of such Debtor’s patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade names, trade styles, copyrights, copyright applications, copyright licenses, and similar intangibles in connection with any foreclosure or other realization by the Secured Party on all or any part of the Collateral to the extent permitted by applicable law. The license and right granted the Secured Party hereby shall be without any royalty or fee or charge whatsoever.

(f) The powers conferred upon the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose on it any duty to exercise such powers. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially equivalent to that which the Secured Party accords its own property, consisting of similar type assets, it being understood, however, that the Secured Party shall have no responsibility for ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relating to any such Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters. This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of the Debtors, or any of them, in any way related to the Collateral, and the Secured Party shall have no duty or obligation to discharge any such duty or obligation. The Secured Party shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral or initiating any action to protect the Collateral against the possibility of a decline in market value. Neither the Secured Party nor any party acting as attorney for the Secured Party shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct.

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(g) Failure by the Secured Party to exercise any right, remedy, or option under this Agreement or any other agreement between the Debtors, or any of them, and the Secured Party or provided by law, or delay by the Secured Party in exercising the same, shall not operate as a waiver; and no waiver by the Secured Party shall be effective unless it is in writing and then only to the extent specifically stated. The rights and remedies of the Secured Party under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Secured Party may have. For purposes of this Agreement, an Event of Default shall be construed as continuing after its occurrence until waived in writing by the Secured Party.

Section 10. Application of Proceeds . The proceeds and avails of the Collateral at any time received by the Secured Party after the occurrence and during the continuation of any Event of Default shall, when received by the Secured Party in cash or its equivalent, be applied by the Secured Party as follows:

(i) first, to the payment and satisfaction of all sums paid and costs and expenses incurred by the Secured Party hereunder or otherwise in connection herewith, including such monies paid or incurred in connection with protecting, preserving or realizing upon the Collateral or enforcing any of the terms hereof, including attorneys’ fees and court costs, together with any interest thereon (but without preference or priority of principal over interest or of interest over principal), to the extent the Secured Party is not reimbursed therefor by the Debtors; and

(ii) second, to the payment and satisfaction of the remaining Secured Obligations, whether or not then due (in whatever order the Secured Party elects), both for interest and principal.

The Debtors shall remain liable to the Secured Party for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to the Debtors or to whomsoever the Secured Party reasonably determines is lawfully entitled thereto.

Section 11. Continuing Agreement . This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Secured Obligations, both for principal and interest, have been fully paid and satisfied and all commitments of the Secured Party to extend credit to or for the account of the Borrower under the Credit Agreement have expired or otherwise have been terminated. Upon such termination of this Agreement, the Secured Party shall, upon the request and at the expense of the Debtors, forthwith release its liens and security interest hereunder.

Section 12. Miscellaneous.

(a) This Agreement cannot be changed or terminated orally. All of the rights, privileges, remedies, and options given to the Secured Party hereunder shall inure to the benefit of its successors and permitted assigns, and all the terms, conditions, covenants, agreements, representations, and warranties of and in this Agreement shall bind the Debtors and their legal representatives, successors and assigns, provided that no Debtor may assign its rights or delegate its duties hereunder without the Secured Party’s prior written consent.

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(b) Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation, notice by telecopy) and shall be given to the relevant party at its address or telecopier number set forth below (or, if no such address is set forth below, at the address of the relevant Debtor as shown on the records of the Secured Party), or such other address or telecopier number as such party may hereafter specify by notice to the other given by courier, by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices hereunder shall be addressed:


to the Debtors at:		to the Secured Party at:
Accretive Health, Inc.		Bank of Montreal
401 North Michigan Avenue, Suite 2700		115 South LaSalle Street
Chicago, Illinois 60611		Chicago, Illinois 60603
Attention: Greg Kazarian, General Counsel		Attention: Geraldine Rudig
Telephone: (312) 324-7820		Telephone: (312) 461-3139
Telecopy: (312) 324-5355		Telecopy: (312) 293-4355

(c) In the event and to the extent that any provision hereof shall be deemed to be invalid or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Agreement shall to such extent be construed as not containing such provision, but only as to such jurisdictions where such law or interpretation is operative, and the invalidity or unenforceability of such provision shall not affect the validity of any remaining provisions hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. Without limiting the generality of the foregoing, in the event that this Agreement shall be deemed to be invalid or otherwise unenforceable with respect to any Debtor, such invalidity or unenforceability shall not affect the validity of this Agreement with respect to the other Debtors.

(d) The lien and security interest herein created and provided for stand as direct and primary security for the Secured Obligations of the Borrower arising under or otherwise relating to the Credit Agreement as well as for any of the other Secured Obligations secured hereby. No application of any sums received by the Secured Party in respect of the Collateral or any disposition thereof to the reduction of the Secured Obligations or any part thereof shall in any manner entitle any Debtor to any right, title or interest in or to the Secured Obligations or any collateral or security therefor, whether by subrogation or otherwise, unless and until all Secured Obligations (other than claims not yet asserted, including indemnification claims, that by their express terms survive the termination hereof and termination of the Credit Agreement) have been fully paid and satisfied and all commitments to extend credit to or for the account of each Debtor under the Credit Agreement have expired or otherwise have been terminated. Each Debtor

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acknowledges that the lien and security interest hereby created and provided are absolute and unconditional and shall not in any manner be affected or impaired by any acts of omissions whatsoever of the Secured Party or any other holder of any Secured Obligations, and without limiting the generality of the foregoing, the lien and security interest hereof shall not be impaired by any acceptance by the Secured Party or any other holder of any Secured Obligations of any other security for or guarantors upon any of the Secured Obligations or by any failure, neglect or omission on the part of the Secured Party or any other holder of any Secured Obligations to realize upon or protect any of the Secured Obligations or any collateral or security therefor. The lien and security interest hereof shall not in any manner be impaired or affected by (and the Secured Party, without notice to anyone, is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the Secured Obligations or of any collateral or security therefor, or of any guaranty thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Secured Party may at its discretion at any time grant credit to any Debtor without notice to the other Debtors in such amounts and on such terms as the Secured Party may elect (all of such to constitute additional Secured Obligations hereby secured) without in any manner impairing the lien and security interest created and provided for herein. In order to realize hereon and to exercise the rights granted the Secured Party hereunder and under applicable law, there shall be no obligation on the part of the Secured Party or any other holder of any Secured Obligations at any time to first resort for payment to any one or more Debtors or to any guaranty of the Secured Obligations or any portion thereof or to resort to any other collateral, security, property, liens or any other rights or remedies whatsoever, and the Secured Party shall have the right to enforce this Agreement against any Debtor or any of its Collateral irrespective of whether or not other proceedings or steps seeking resort to or realization upon or from any of the foregoing are pending.

(e) In the event the Secured Party shall at any time in its discretion permit a substitution of Debtors hereunder or a party shall wish to become a Debtor hereunder, such substituted or additional Debtor shall, upon executing an agreement in the form attached hereto as Schedule H, become a party hereto and be bound by all the terms and conditions hereof to the same extent as though such Debtor had originally executed this Agreement and, in the case of a substitution, in lieu of the Debtor being replaced. Any such agreement shall contain information as to such Debtor necessary to update Schedule A, B, C, D, E, and F hereto with respect to it. No such substitution shall be effective absent the written consent of the Secured Party nor shall it in any manner affect the obligations of the other Debtors hereunder.

(f) This Agreement shall be deemed to have been made in the State of Illinois and shall be governed by, and construed in accordance with, the laws of the State of Illinois. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof.

(g) This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same instrument. Each Debtor acknowledges that this Agreement is and shall be effective upon its execution and delivery by such Debtor to the Secured Party, and it

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shall not be necessary for the Secured Party to execute this Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

(h) Each Debtor hereby submits to the non-exclusive jurisdiction of the United States District Court for the Northern District of Illinois and of any Illinois state court sitting in the City of Chicago for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Debtor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient form. The Debtors and the Secured Party each hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

[Signature Page to Follow]

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In Witness Whereof , the Debtors have caused this Security Agreement to be duly executed and delivered as of the date and year first above written.


	Accretive Health, Inc.
	By	/s/ John T. Staton
		Name John T. Staton
		Title Chief Financial Officer


	SDI Acquisition, Inc.
	By	/s/ Greg Kazarian
		Name Greg Kazarian
		Title President

Accepted and agreed to in Chicago, Illinois, as of the date and year first above written.


	Bank of Montreal
	By	/s/ Geraldine M. Rudig
		Name Geraldine M. Rudig
		Title Director

Accepted and agreed to in Chicago, Illinois, as of the date and year first above written.


	Harris N.A., as Depositary Bank
	By
		Name
		Title

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Schedule A

Locations


Column 1	Column 2	Column 3	Column 4	Column 5
				If Record Owner is
				other Debtor, list
				Nature of Location
Name of Debtor		Additional Places of		(i.e., business office,
(and State of		Business and		warehouse, location
Organization and		Collateral	If Record Owner is	where significant
Organizational	Chief Executive Office	Locations (and name	other than Debtor,	inventory or
Registration	(and name of record	of record owner of	list Address of	equipment is stored,
Number)	owner of such Location)	such Locations)	Record Owner	etc.)
Accretive Health, Inc., a Delaware Corporation (020698101)	401 N. Michigan Avenue Suite 2700 Chicago, IL 60611 Record Owner: Zeller 401 Realty Group Derrick Johnson 401 N. Michigan Avenue Chicago, IL 60611 Previous Location: 676 N. Michigan Avenue Chicago, IL 60611	1. 229 North Rose Kalamazoo, MI 49007 2. 660 Woodward Avenue Suite 1442 Detroit, MI 48226 3. 2811 Wintergreen Drive Cape Girardeau, MO 63701 4. 725 N. Highway A1A Jupiter, FL 33477	1. First State Investors- 225-229&245 N. Rose St. Kalamazoo, MI 49007 (Steven Volitica) 2. First National Building-660 Woodward Avenue Suite 1442 Detroit, MI 48226 (Jeff Clements)	1. Business Office 2. Business Office 3. Business Office 4. Business Office


Column 1	Column 2	Column 3	Column 4	Column 5
			3. DTL Properties, LLC- 2811 Wintergreen Drive Cape Girardeau, MO 63701 (Mike Ketcherside) 4. A. Krisch Management Fl-c/o Seacoast National Bank 585 W. Indiantown Road Jupiter, FL 33458 (Andrew Gonzonlis)

SDI Acquisition, Inc., a Delaware corporation (14-1966195)	401 N. Michigan Avenue Suite 2700 Chicago, IL 60611 (Record Owner: Zeller 401 Realty Group) Previous Location: 676 N. Michigan Avenue Chicago, Illinois 60611	1. 229 North Rose Kalamazoo, MI 49007 2. 660 Woodward Avenue Suite 1442 Detroit, MI 48226 3. 2811 Wintergreen Drive Cape Girardeau, MO 63701 4. 725 N. Highway A1A Jupiter, FL 33477	1. First State Investors- 225-229&245 N. Rose St. Kalamazoo, MI 49007 (Steven Volitica) 2. First National Building-660 Woodward Avenue Suite 1442 Detroit, MI 48226 (Jeff Clements)	1. Business Office 2. Business Office 3. Business Office 4. Business Office

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Column 1	Column 2	Column 3	Column 4	Column 5
			3. DTL Properties, LLC- 2811 Wintergreen Drive Cape Girardeau, MO 63701 (Mike Ketcherside) 4. A. Krisch Management Fl-c/o Seacoast National Bank 585 W. Indiantown Road Jupiter, FL 33458 (Andrew Gonzonlis)

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Schedule B

Other Names


A. Prior Legal Names

Name of Debtor				Prior Legal Name and Date of Such Change (and to the extent the prior legal name is the result of a merger, list the state of incorporation and collateral locations of the merged company)

Accretive Health, Inc.				Healthcare Services, Inc.

SDI Acquisition, Inc.				SureDecisions, Inc., a Missouri corporation

B. Trade Names

Name of Debtor				Tradename
				(and if invoices use tradename only, please indicate)

Accretive Health, Inc.				Accretive Health

SDI Acquisition, Inc.				SureDecisions Inc.

Schedule C

Intellectual Property Rights


	Name of Intellectual
	Property (i.e., patent,
	trademark,	Registration or		Registration or
Name of Debtor	copyright,etc.)	Application No.		Application Date
Accretive Health, Inc.	Trademark		77776634	7/8/09

	Trademark		77768580	6/25/09

	Trademark		77768576	6/25/09

	Trademark		77768587	6/25/09

	Trademark		77767246	6/24/09

	Trademark		77767283	6/24/09

	Trademark		77767257	6/24/09

	Trademark		77714463	4/15/09

	Trademark		77714619	4/15/09

	Trademark		77714478	4/15/09

	Trademark		77714563	4/15/09

	Trademark		77710873	4/9/09

	Trademark		77711027	4/9/09

	Patent		[**]	4/26/07 (pending)

	Patent		[**]	8/20/08 (pending)

	Patent		[**]	2/20/09 (pending)

	Patent		[**]	4/28/09 (pending)


SDI Acquisition, Inc.	None.

Schedule D

Real Estate Legal Descriptions

None.

Schedule E

Investment Property and Deposits

A. Investment Property

Name and

Cusip Number

Location of

Percentage of

(if

Pledgor

Name of Issuer

Issuer’s Stock

No. of Shares

Class

Certificate No.

applicable)

Accretive Health,

SDI Acquisition, Inc.

100

Common

N/A

Inc.

B. Deposits


		Deposit Accounts (i.e., name of depository
Name of Debtor		institution, account number, type of account)
Accretive Health, Inc.		US Bank — [**] (checking)
		US Bank — [**] (trust)
		US Bank — [**] (payroll)
		US Bank — [**] (letter of credit)
		US Bank — [**] (eurodollar sweep)
		US Bank — [**] (investment account)
SDI Acquisition, Inc.		US Bank — [**] (checking)
		US Bank — [**] (escrow account)

Schedule F

Commercial Tort Claims

None.

Schedule G

Supplement to Security Agreement

This Supplement to Security Agreement (the “Supplement” ) is dated as of this day of , 20 , from , a(n) corporation/limited liability company/partnership (the “Debtor” ), to (the “Secured Party” ).

Preliminary Statements

A. The Debtor and certain affiliates of the Debtor and the Secured Party are parties to that certain Security Agreement dated as of September 30, 2009 (such Security Agreement, as the same may from time to time be amended, modified or restated, being hereinafter referred to as the “Security Agreement” ). All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in the Security Agreement.

B. Pursuant to the Security Agreement, the Debtor granted to the Secured Party, among other things, a continuing security interest in all Commercial Tort Claims.

C. The Debtor has acquired a Commercial Tort Claim, and executes and delivers this Supplement to confirm and assure the Secured Party’s security interest therein.

Now, Therefore, in consideration of the benefits accruing to the Debtor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. In order to secure payment of the Secured Obligations, whether now existing or hereafter arising, the Debtor does hereby grant to the Secured Party a continuing lien on and security interest in the Commercial Tort Claim described below:

2. Schedule F (Commercial Tort Claims) to the Security Agreement is hereby amended to include reference to the Commercial Tort Claim referred to in Section 1 above. The Commercial Tort Claim described herein is in addition to, and not in substitution or replacement for, the Commercial Tort Claims heretofore described in and subject to the Security Agreement, and nothing contained herein shall in any manner impair the priority of the liens and security interests heretofore granted by the Debtor in favor of the Secured Party under the Security Agreement.

3. The Debtor agrees to execute and deliver such further instruments and documents and do such further acts and things as the Secured Party may deem necessary or proper to carry out more effectively the purposes of this Supplement.

4. No reference to this Supplement need be made in the Security Agreement or in any other document or instrument making reference to the Security Agreement, any reference to the Security Agreement in any of such items to be deemed a reference to the Security Agreement as supplemented hereby. The Debtor acknowledges that this Supplement shall be effective upon its execution and delivery by the Debtor to the Secured Party, and it shall not be necessary for the Secured Party to execute this Supplement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

5. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois (without regard to principles of conflicts of law).

[Insert Name of Debtor]

Name

Title

Schedule H

Assumption and Supplemental Security Agreement

This Agreement dated as of this day of , 20___ from [ new debtor ], a corporation/limited liability company/partnership (the “New Debtor” ), to (the “Secured Party” ).

Witnesseth that:

Whereas, Accretive Health, Inc. (the “Borrower” ) and certain other parties have executed and delivered to the Secured Party that certain Security Agreement dated as of September 30, 2009 (such Security Agreement, as the same may from time to time be modified or amended, including supplements thereto which add additional parties as Debtors thereunder, being hereinafter referred to as the “Security Agreement” ), pursuant to which such parties (the “Existing Debtors” ) have granted to the Secured Party a lien on and security interest in each such Existing Debtor’s Collateral (as such term is defined in the Security Agreement) to secure the Secured Obligations (as such term is defined in the Security Agreement); and

Whereas, the Borrower provides the New Debtor with substantial financial, managerial, administrative, technical and other support and the New Debtor will directly and substantially benefit from credit and other financial accommodations extended and to be extended by the Secured Party to the Borrower;

Now, therefore, for value received, and in consideration of advances made or to be made, or credit accommodations given or to be given, to the Borrower by the Secured Party from time to time, the New Debtor hereby agrees as follows:

1. The New Debtor acknowledges and agrees that it shall become a “Debtor” party to the Security Agreement effective upon the date the New Debtor’s execution of this Agreement and the delivery of this Agreement to the Secured Party, and that upon such execution and delivery, all references in the Security Agreement to the terms “Debtor” or “Debtors” shall be deemed to include the New Debtor. Without limiting the generality of the foregoing, the New Debtor hereby repeats and reaffirms all grants (including the grant of a lien and security interest), covenants, agreements, representations and warranties contained in the Security Agreement as amended hereby, each and all of which are and shall remain applicable to the Collateral from time to time owned by the New Debtor or in which the New Debtor from time to time has any rights. Without limiting the foregoing, in order to secure payment of the Secured Obligations, whether now existing or hereafter arising, the New Debtor does hereby grant to the Secured Party, and hereby agrees that the Secured Party has and shall continue to have a continuing lien on and security interest in, among other things, all of the New Debtor’s Collateral (as such term is defined in the Security Agreement), including, without limitation, all of the New Debtor’s Accounts, Chattel Paper, Instruments, Documents, General Intangibles, Letter-of-Credit Rights, Supporting Obligations, Deposit Accounts, Investment Property, Inventory, Equipment, Fixtures,

Commercial Tort Claims, and all Proceeds thereof and all of the other Collateral described in the granting clauses of the Security Agreement, each and all of such granting clauses being incorporated herein by reference with the same force and effect as if set forth in their entirety except that all references in such clauses to the Existing Debtors or any of them shall be deemed to include references to the New Debtor. Nothing contained herein shall in any manner impair the priority of the liens and security interests heretofore granted in favor of the Secured Party under the Security Agreement.

2. Schedules A (Locations), Schedule B (Other Names), Schedule C (Intellectual Property Rights), Schedule D (Real Estate), Schedule E (Investment Property and Deposits), and Schedule F (Commercial Tort Claims) to the Security Agreement shall be supplemented by the information stated below with respect to the New Debtor:

Supplement to Schedule A


		Additional Places of
Name of Debtor(and		Business and Collateral
State of Organization	Chief Executive Office (and	Locations (and name of
and Organizational	name of record owner of	record owner of such
Registration Number)	such location)	locations)

Supplement to Schedule B


Name of Debtor		Prior Legal Names and Trade Names of Such Debtor

Supplement to Schedule C

Intellectual Property Rights

Supplement to Schedule D

Real Estate Legal Descriptions

Supplement to Schedule E

Investment Property and Deposits

Supplement to Schedule F

Commercial Tort claims

3. The New Debtor hereby acknowledges and agrees that the Secured Obligations are secured by all of the Collateral according to, and otherwise on and subject to, the terms and conditions of the Security Agreement to the same extent and with the same force and effect as if the New Debtor had originally been one of the Existing Debtors under the Security Agreement and had originally executed the same as such an Existing Debtor.

4. All capitalized terms used in this Agreement without definition shall have the same meaning herein as such terms have in the Security Agreement, except that any reference to the term “Debtor” or “Debtors” and any provision of the Security Agreement providing meaning to such term shall be deemed a reference to the Existing Debtors and the New Debtor. Except as specifically modified hereby, all of the terms and conditions of the Security Agreement shall stand and remain unchanged and in full force and effect.

5. The New Debtor agrees to execute and deliver such further instruments and documents and do such further acts and things as the Secured Party may reasonably deem necessary or proper to carry out more effectively the purposes of this Agreement.

6. No reference to this Agreement need be made in the Security Agreement or in any other document or instrument making reference to the Security Agreement, any reference to the Security Agreement in any of such to be deemed a reference to the Security Agreement as modified hereby.

7. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois (without regard to principles of conflicts of law).


		[Insert Name of New Debtor ]

		By

				Name
				Title

Accepted and agreed to as of the date first above written.


		Bank of Montreal

		By

				Name
				Title

Exhibit 10.23

ACCRETIVE HEALTH, INC.
2010 STOCK INCENTIVE PLAN

1. Purpose

The purpose of this 2010 Stock Incentive Plan (the “Plan”) of Accretive Health, Inc., a Delaware corporation (the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers and directors, as well as consultants and advisors (as such terms are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”) or any successor form) are eligible to be granted Awards under the Plan. Each person who is granted an Award under the Plan is deemed a “Participant”. “Award” means Options (as defined in Section 5), SARs (as defined in Section 6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based Awards (as defined in Section 8).

3. Administration and Delegation

(a) Administration by Board of Directors . The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award.

(b) Appointment of Committees . To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers. Notwithstanding anything herein to the contrary to the extent that the Committee is comprised solely of an officer of the Company who is also a Board member, such

officer shall not be authorized to grant any Awards to any “officer” of the Company (as defined by Rule 16a-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

(c) Delegation to Officers . To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Options and other Awards that constitute rights under Delaware law (subject to any limitations under the Plan) to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of such Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to such Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant such Awards to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act). The Board may not delegate authority under this Section 3(c) to grant Restricted Stock, unless Delaware law then permits such delegation.

4. Stock Available for Awards

(a) Number of Shares . Subject to adjustment under Section 9, Awards may be made under the Plan for up to such number of shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”) (up to 6,218,050 shares) as is equal to the sum of (x) the number of shares of Common Stock reserved for issuance under the Company’s Amended and Restated Stock Option Plan (the “Existing Plan”) that remain available for grant under the Existing Plan immediately prior to the closing of the Company’s initial public offering and (y) the number of shares of Common Stock subject to awards granted under the Existing Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options (as hereinafter defined) to any limitations of the Code). Any or all of the shares of Awards may be issued in the form of Incentive Stock Options.

If any Award expires or is terminated, surrendered or canceled without having been fully exercised, is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right), is settled in cash or otherwise results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock delivered (either by actual delivery or attestation) to the Company by a Participant to exercise an Award or to satisfy any applicable tax withholding obligation (including shares retained from the Award creating the tax obligation) shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Substitute Awards . In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in

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the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.

5. Stock Options

(a) General . The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option shall be designated a “Nonstatutory Stock Option”.

(b) Incentive Stock Options . An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of Accretive Health, Inc., any of Accretive Health, Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or to any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or if the Company converts an Incentive Stock Option to a Nonstatutory Stock Option.

(c) Exercise Price . The Board shall establish the exercise price of each Option and specify the exercise price in the applicable Option agreement. The exercise price shall be not less than 100% of the fair market value as determined by (or in a manner approved by) the Board (“Fair Market Value”) on the date the Option is granted; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on such future date.

(d) Duration of Options . Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

(e) Exercise of Options . Options may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic form) approved by the Company together with payment in full (in the manner specified in Section 5(f) of the exercise price for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company as soon as practicable following exercise.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as may otherwise be provided in the applicable Option agreement, or approved by the Board, in its sole discretion, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the

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exercise price and any required tax withholding;

(3) to the extent provided for in the applicable Option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

(4) to the extent provided for in the applicable Nonstatutory Stock Option Agreement or approved by the Board in its sole discretion, by delivery of a notice of “net exercise” to the company, as a result of which the Participant would receive the number of shares of Common Stock underlying the Option so exercised reduced by the number of shares of Common Stock equal to the aggregate exercise price of the portion of the Option being exercised by the Fair Market Value of the Common Stock on the date of exercise;

(5) to the extent permitted by applicable law and provided for in the applicable Option agreement or approved by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(6) by any combination of the above permitted forms of payment.

6. Stock Appreciation Rights .

(a) General . The Board may grant Awards consisting of Stock Appreciation Rights (“SARs”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board) determined by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common Stock over the measurement price established pursuant to Section 6(c). The date as of which such appreciation is determined shall be the exercise date.

(b) Grants . SARs may be granted in tandem with, or independently of, Options granted under the Plan.

(1) Tandem Awards . When SARs are expressly granted in tandem with Options, (i) the SAR will be exercisable only at such time or times, and to the extent, that the related Option is exercisable (except to the extent designated by the Board in connection with a Reorganization Event) and will be exercisable in accordance with the procedure required for exercise of the related Option; (ii) the SAR will terminate and no longer be exercisable upon the termination or exercise of the related Option, except to the extent designated by the Board in connection with a Reorganization Event and except that a SAR granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the SAR; (iii) the Option will terminate and no longer be exercisable upon the exercise of the related SAR; and (iv) the SAR will be transferable only with the related Option.

(2) Independent SARs . A SAR not expressly granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Board may

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specify in the SAR Award.

(3) Measurement Price . The Board shall establish the measurement price of each SAR and specify it in the applicable SAR agreement. The measurement price shall not be less than 100% of the Fair Market Value on the date the SAR is granted; provided that if the Board approves the grant of a SAR effective as of a future date, the measurement price shall be not less than 100% of the Fair Market Value on such future date.

(4) Duration of SARs . Each SAR shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable SAR agreement.

(5) Exercise of SARs . SARs may be exercised by delivery to the Company of a notice of exercise in a form (which may be in electronic form) approved by the Company, together with any other documents required by the Board.

7. Restricted Stock; Restricted Stock Units .

(a) General . The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).

(b) Terms and Conditions for All Restricted Stock Awards . The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

(1) Dividends . Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided in the Restricted Stock Agreement. Unless otherwise provided by the Board, if any dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the date the dividends are paid to stockholders of that class of stock.

(2) Stock Certificates . The Company may require that any stock certificates issued in respect of shares of Restricted Stock as well as dividends or distributions paid on such Restricted Stock shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or to his or her Designated Beneficiary.

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“Designated Beneficiary” means (i) the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death, or (ii) in the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.

(d) Additional Provisions Relating to Restricted Stock Units .

(1) Settlement . Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash equal to the Fair Market Value of one share of Common Stock, as provided in the applicable Award agreement. The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant in each case in a manner that complies with Section 409A of the Code.

(2) Voting Rights . A Participant shall have no voting rights with respect to any Restricted Stock Units.

(3) Dividend Equivalents . To the extent provided by the Board, in its sole discretion, a grant of Restricted Stock Units may provide Participants with the right to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be paid currently or credited to an account for the Participants, may be settled in cash and/or shares of Common Stock and may be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, as determined by the Board in its sole discretion, subject in each case to such terms and conditions as the Board shall establish, in each case to be set forth in the applicable Award agreement.

8. Other Stock-Based Awards

Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.

9. Adjustments for Changes in Common Stock and Certain Other Events .

(a) Changes in Capitalization . In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the number and class of securities and exercise price per share of each outstanding Option, (iii) the share- and per-share provisions and the measurement price of

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each outstanding SAR, (iv) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (v) the share- and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(b) Reorganization Events .

(1) Definition . A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation or dissolution of the Company.

(2) Consequences of a Reorganization Event on Awards Other than Restricted Stock Awards . In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding Awards other than Restricted Stock on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide that the Participant’s unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant (to the extent then exercisable) within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) the number of shares of Common Stock subject to the vested portion of the Award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such Reorganization Event) multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise or purchase price of such Award and any applicable tax withholdings, in exchange for the termination of such Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 9(b), the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.

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For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

(3) Consequences of a Reorganization Event on Restricted Stock . Upon the occurrence of a Reorganization Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect to outstanding Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board may provide for the termination or deemed satisfaction of such repurchase or other rights under the Restricted Stock Agreement or any other agreement between the Participant and the Company, either initially or by amendment. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied.

10. General Provisions Applicable to Awards

(a) Transferability of Awards . Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, that the Board may permit or provide in an Award for the gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if, with respect to such proposed transferee, the Company would be eligible to use a Form S-8 for the registration of the sale of the Common Stock subject to such Award under the Securities Act of 1933, as amended; provided, further, that the Company shall not be required to recognize any such transfer until such time as the Participant and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory

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to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this Section 10(a) shall be deemed to restrict a transfer to the Company.

(b) Documentation . Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion . Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status . The Board shall determine the effect on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.

(e) Withholding . The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise vesting, or release from forfeiture of an Award or, if the Company so requires, at the same time as payment of the exercise or purchase price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

(f) Amendment of Award . The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option. The Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 9.

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(g) Conditions on Delivery of Stock . The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(h) Acceleration . The Board may at any time provide that any Award shall become immediately exercisable in whole or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be.

11. Miscellaneous

(a) No Right To Employment or Other Status . No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder . Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares.

(c) Effective Date and Term of Plan . The Plan shall become effective immediately prior to the closing of the Company’s initial public offering of its Common Stock. No Awards shall be granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan . The Board may amend, suspend or terminate the Plan or any portion thereof at any time provided that (i) to the extent required by Section 162(m) of the Code, no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)); and (ii) no amendment that would require stockholder approval under the rules of the New York Stock Exchange (“NYSE”) may be made effective unless and until the Company’s stockholders approve such amendment; and (iii) if the NYSE amends its corporate governance rules so that such rules no longer require stockholder approval of “material revisions” to equity compensation plans, then, from and after the effective date of such amendment to the NYSE rules, no amendment to the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section 4(b) or 9), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding the class of participants eligible to

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participate in the Plan shall be effective unless and until the Company’s stockholders approve such amendment. In addition, if at any time the approval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan.

(e) Authorization of Sub-Plans . The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

(f) Section 409A of the Code . Except as provided in individual Award agreements initially or by amendment, if and to the extent any portion of any payment, compensation or other benefit provided to a Participant in connection with his or her employment termination is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with its procedures, by which determination the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Code Section 409A) (the “New Payment Date”), except as Code Section 409A may then permit. The aggregate of any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining payments will be paid on their original schedule.

The Company makes no representations or warranty and shall have no liability to the Participant or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Code Section 409A but do not to satisfy the conditions of that section.

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(g) Limitations on Liability . Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee, or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, other employee, or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee, or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning this Plan unless arising out of such person’s own fraud or bad faith.

(h) Governing Law . The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state.

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Exhibit 10.24

Accretive Health, Inc.

Incentive Stock Option Agreement
Granted Under 2010 Stock Incentive Plan

1. Grant of Option .

This agreement evidences the grant by Accretive Health, Inc., a Delaware corporation (the “Company”), on , 20[ ] (the “Grant Date”) to [ ], an employee of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2010 Stock Incentive Plan (the “Plan”), a total of [ ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on the tenth anniversary of the Grant Date (the “Final Exercise Date”).

It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

2. Vesting Schedule .

This option will become exercisable (“vest”) as to [25]% of the original number of Shares on the [first] anniversary of the [commencement of the Participant’s service to the Company] (the “Vesting Commencement Date”) and as to an additional [25]% of the original number of Shares at the end of each successive anniversary of the Vesting Commencement Date until the [fourth] anniversary of the Vesting Commencement Date.

The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.

3. Exercise of Option .

(a) Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share. No Shares will be issued until the Participant has executed any and all agreements that the Company may require the Participant to execute in connection with such exercise and / or in connection with any transactions involving the Shares (for example, by not by limitation, lock-up agreements and FINRA questionnaires).

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee or officer

of, or consultant or advisor to, the Company or any parent or subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an “Eligible Participant”).

(c) Termination of Relationship with the Company . If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraph (d) below, the right to exercise this option shall terminate sixty (60) days after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, including the provisions of Section 6 of this Agreement, the right to exercise this option shall terminate immediately upon such violation.

(d) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s employment is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment. If the Participant is party to an employment or severance agreement with the Company that contains a definition of “cause” for termination of employment, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company, and including the provisions of Section 6 of this Agreement), as determined by the Company, which determination shall be conclusive. The Participant’s employment shall be considered to have been terminated for Cause if the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted. In the event that the Participant is terminated for Cause, the Company shall be entitled to pursue the remedies set forth in Section 6(h) of this Agreement.

4. Tax Matters .

(a) Withholding . No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.

(b) Disqualifying Disposition . If the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition.

5. Transfer Restrictions .

This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant.

6. Restrictive Covenants .

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(a) General . This option represents a substantial economic benefit to the Participant. The Participant, by virtue of such Participant’s role with the Company, has access to, and is involved in the formulation of, certain confidential and secret information of the Company regarding its operations and each Participant could materially harm the business of the Company by competing with the Company or soliciting employees or customers of the Company.

(b) Non -Solicitation . During the time in which Participant performs services for the Company and for a period of eighteen (18) months after the Participant ceases to perform services for the Company, regardless of the reason, Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation:

(i) Hire, recruit, solicit or otherwise attempt to employ or retain or enter into any business relationship with, any person who is or was an employee of the Company within the twelve (12) month period immediately preceding the cessation of Participant’s service with the Company; or

(ii) Solicit the sale of any products or services that are similar to or competitive with products or services offered by, manufactured by, designed by, or distributed by Company, to any person, company or entity which was or is a customer or potential customer of Company for such products or services.

(i) Participant will not, without the Company’s prior written permission, directly or indirectly, utilize for any purpose other than for a legitimate business purpose solely on behalf of the Company, or directly or indirectly, disclose to anyone outside of the Company, either during or after Participant’s relationship with the Company ends, the Company’s Confidential Information, as long as such matters remain Confidential Information.

(ii) This Agreement shall not prevent Participant from revealing evidence of criminal wrongdoing to law enforcement or prohibit Participant from divulging the Company’s Confidential Information by order of court or agency of competent jurisdiction. However, Participant shall promptly inform the Company of any such situations and shall take such reasonable steps to prevent disclosure of the Company’s Confidential Information until the Company has been informed of such requested disclosure and the Company has had an opportunity to respond to the court or agency.

(d) Return of Company Property . Participant agrees that, in the event that Participant’s service to the Company is terminated for any reason, Participant shall immediately return all of the Company’s property, including without limitation, (i) tools, pagers, computers, printers, key cards, documents or other tangible property of the Company, and (ii) the Company’s Confidential Information in any media, including paper or electronic form, and Participant shall not retain in Participant’s possession any copies of such information.

(e) Ownership of Software and Inventions . All discoveries, designs, improvements, ideas, inventions, software, whether patentable or copyrightable or not, shall be works-made-for-hire and Company shall be deemed the sole owner throughout the universe of any and all rights of whatsoever nature therein, with the rights to use the same in perpetuity in any manner the

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Company determines in its sole discretion without any further payment after the term of the agreement to Participant whatsoever. If, for any reason, any of such results and proceeds which relate to the business shall not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then Participant hereby irrevocably assigns and agrees to quitclaim any and all of Participant’s right, title and interest thereto including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to Participant whatsoever. Participant shall, from time to time, as may be reasonably requested by the Company, at the Company’s expense, do any and all things which the Company may deem useful or desirable to establish or document the Company’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent Participant has any rights in the results and proceeds of Participant’s services that cannot be assigned in the manner described above, Participant unconditionally and irrevocably waives the enforcement of such rights. Notwithstanding anything to the contrary set forth herein, works developed by the Participant (i) which are developed independently from the work developed for the Company regardless of whether such work was developed before or after the Participant performed services for the Company; or (ii) applications independently developed which are unrelated to the business and which Participant develops during non-business hours using non-business property shall not be deemed work for hire and shall not be the exclusive property of the Company.

(f) Non-Competition .

(i) During the time in which Participant performs services for the Company and for a period of twelve (12) months after the cessation of Participant’s service to the Company, regardless of the reason, Participant shall not, directly or indirectly, either alone or in conjunction with any person, firm, association, company or corporation, within the Restricted Area, own, manage, operate, or participate in the ownership, management, operation, or control of, or be employed by or provide services to, any entity which is in competition with the Company.

(ii) Notwithstanding anything to the contrary, nothing in this Paragraph (f) prohibits Participant from being a passive owner of not more than one percent (1%) of the outstanding stock of any class of a corporation which is publicly traded, so long as Participant has no active participation in the business of such corporation.

(g) Acknowledgments . Participant acknowledges and agrees that the restrictions contained in this Agreement with respect to time, geographical area and scope of activity are reasonable and do not impose a greater restraint than is necessary to protect the goodwill and other legitimate business interests of the Company and that the Participant has had the opportunity to review the provisions of this Agreement with his legal counsel. In particular, the Participant agrees and acknowledges (a) that the Company is currently engaging in business and actively marketing its services and products throughout the United States, (b) that Participant’s duties and responsibilities for the Company are co-extensive with the entire scope of the Company’s business, (c) that the Company has spent significant time and effort developing and protecting the confidentiality of their methods of doing business, technology, customer lists, long term customer

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relationships and trade secrets, and (d) that such methods, technology, customer lists, customer relationships and trade secrets have significant value.

(h) Enforcement . The Participant agrees that the restrictions contained in this Agreement are necessary for the protection of the business, the Confidential Information, customer relationships and goodwill of the Company and are considered by the Participant to be reasonable for that purpose and that the scope of restricted activities, the geographic scope and the duration of the restrictions set forth in the Agreement are considered by the Participant to be reasonable. The Participant further agrees that any breach of any of the restrictive covenants in the Agreement would cause the Company substantial, continuing and irrevocable harm for which money damages would be inadequate and therefore, in the event of any such breach or any threatened breach, in addition to such other remedies as may be available, the Company shall be entitled to specific performance and injunctive relief. The Agreement shall not in any way limit the remedies in law or equity otherwise available to the Company or its Affiliates. The Participant further agrees that to the extent any provision or portion of the restricted covenants of the Agreement shall be held, found or deemed to be unreasonable, unlawful or unenforceable by a court of competent jurisdiction, then any such provision or portion thereof shall be deemed to be modified to the extent necessary in order that any such provision or portion thereof shall be legally enforceable to the fullest extent permitted by applicable law. Without limitation to any other remedies available hereunder or at law, the Participant agrees that any Shares purchased by the Participant pursuant to this Agreement shall be subject to repurchase by the Company, in its sole discretion, at a price equal to the exercise price set forth in Section 1 of this Agreement. In the event that the Participant sold the Shares purchased by the Participant pursuant to this Agreement, then the Participant shall be required to pay to the Company in cash, within 30 days of a request by the Company for such payment, the difference between the exercise price set forth in Section 1 of this Agreement and the price at which the Participant sold the Shares.

(i) Severability; Modification . It is expressly agreed by Participant that:

(i) Modification . If, at the time of enforcement of this Agreement, a court holds that the duration, geographical area or scope of activity restrictions stated herein are unreasonable under circumstances then existing or impose a greater restraint than is necessary to protect the goodwill and other business interests of the Company, Participant agrees that the maximum duration, scope or area reasonable under such circumstances will be substituted for the stated duration, scope or area and that the court will be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law, in all cases giving effect to the intent of the parties that the restrictions contained herein be given effect to the broadest extent possible; and

(ii) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law, such invalidity, illegality or unenforceability will not affect any other provision, but this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein.

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(iii) Non-Disparagement . Participant understands and agrees that Participant will not disparage the Company, its officers, directors, administrators, representatives, employees, contractors, consultants or customers and will not engage in any communications or other conduct which might interfere with the relationship between the Company and its current, former, or prospective employees, contractors, consultants, customers, suppliers, regulatory entities, and/or any other persons or entities.

(j) Definitions .

(i) Affiliate . “Affiliate” means any entity controlling or controlled by or under common control with the Company or another Affiliate, at the time of execution of the Agreement and any time thereafter, where “control” is defined as the ownership of at least fifty percent (50%) of the equity or beneficial interest of such entity, and any other entity with respect to which the Company has significant management or operational responsibility (even though the Company may own less than fifty percent (50%) of the equity of such entity).

(ii) Confidential Information . “Confidential Information” as used in this Agreement shall include the Company’s trade secrets as defined under Illinois law, as well as any other information or material which is not generally known to the public, and which:

	a)		is generated, collected by or utilized in the operations of the Company’s business and relates to the actual or anticipated business, research or development of the Company; or

	b)		is suggested by or results from any task assigned to Participant by the Company or work performed by Participant for or on behalf of the Company.

Confidential Information shall not be considered generally known to the public if Participant or others improperly reveal such information to the public without the Company’s express written consent and/or in violation of an obligation of confidentiality to the Company. Examples of Confidential Information include, but are not limited to, all customer, client, supplier and vendor lists, budget information, contents of any database, contracts, product designs, technical know-how, engineering data, pricing and cost information, research and development work, software, business plans, proprietary data, projections, market research, perceptual studies, strategic plans, marketing information, financial information (including financial statements), sales information, training manuals, employee lists and compensation of employees, and all other competitively sensitive information with respect to the Company, whether or not it is in tangible form, and including without limitation any of the foregoing contained or described on paper or in computer software or other storage devices, as the same may exist from time to time.

(iii) Restricted Area. For purposes of this Agreement, the term “Restricted Area” shall mean the United States of America.

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7. Applicable Law .

This Agreement shall be construed, interpreted and enforced, and its validity and enforceability determined, strictly in accordance with the laws of the State of Delaware without applying its conflicts of laws principles.

8. Exclusive Jurisdiction/ Venue .

All disputes that arise from or relate to this Agreement shall be decided exclusively by binding arbitration in Cook County, Illinois under the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”). The parties agree that the arbitrator’s award shall be final, and may be filed with and enforced as a final judgment by any court of competent jurisdiction. Notwithstanding the foregoing, any disputes related to the enforcement of the restrictive covenants contained in Section 6 of this Agreement shall be subject to and determined under Delaware law and adjudicated in Illinois courts.

9. Provisions of the Plan .

This option is subject to the provisions of the Plan (including the provisions relating to amendments to the Plan), a copy of which is furnished to the Participant with this option.

IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.


	Accretive Health, Inc.
	By:
		Name:
		Title:

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PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2010 Stock Incentive Plan. ¹


	PARTICIPANT:

		Address:


¹		If the Participant resides in a community property state, it is desirable to have the Participant’s spouse also accept the option by signature here. The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. Although Wisconsin is not formally a community property state, it has laws governing the division of marital property similar to community property states and it may be desirable to have a Wisconsin Participant’s spouse also accept the option. In addition, if the Company is granting an option to a California Participant, it must comply with California blue sky rules which, if applicable, require modification to this option.

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Exhibit 10.25

Accretive Health, Inc.

Nonstatutory Stock Option Agreement
Granted Under 2010 Stock Incentive Plan

1. Grant of Option.

This agreement evidences the grant by Accretive Health, Inc., a Delaware corporation (the “Company”), on , 20[ ] (the “Grant Date”) to [ ], an [employee], [consultant], [director] of the Company (the “Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2010 Stock Incentive Plan (the “Plan”), a total of [ ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on the tenth anniversary of the Grant Date (the “Final Exercise Date”).

It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

2. Vesting Schedule.

This option will become exercisable (“vest”) as to [25%] of the original number of Shares on the first anniversary of the [commencement of the Participant’s service to the Company] (the “Vesting Commencement Date”) and as to an additional [25%] of the original number of Shares at the end of each successive anniversary of the Vesting Commencement Date until the [fourth] anniversary of the Vesting Commencement Date.

3. Exercise of Option.

(a) Form of Exercise . Each election to exercise this option shall be in writing, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share. No Shares will be issued until the Participant has executed any and all agreements that the Company may require the Participant to execute in connection with such exercise and / or in connection with any transactions involving the Shares (for example, by not by limitation, lock-up agreements and FINRA questionnaires).

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or

she exercises this option, is, and has been at all times since the Grant Date, an employee or officer of or consultant or advisor to, the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).

(d) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s employment or other relationship with the Company is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment or other relationship. If the Participant is party to an employment, consulting or severance agreement with the Company that contains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company, and including the provisions of Section 6 of this Agreement), as determined by the Company, which determination shall be conclusive. The Participant’s employment or other relationship shall be considered to have been terminated for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted. In the event that the Participant is terminated for Cause, the Company shall be entitled to pursue the remedies set forth in Section 6(h) of this Agreement.

4. Withholding.

No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.

5. Transfer Restrictions.

6. Restrictive Covenants.

(a) General . This option represents a substantial economic benefit to the Participant.

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The Participant, by virtue of such Participant’s role with the Company, has access to, and is involved in the formulation of, certain confidential and secret information of the Company regarding its operations and each Participant could materially harm the business of the Company by competing with the Company or soliciting employees or customers of the Company.

-3-

agreement to Participant whatsoever. If, for any reason, any of such results and proceeds which relate to the business shall not legally be a work-for-hire and/or there are any rights which do not accrue to the Company under the preceding sentence, then Participant hereby irrevocably assigns and agrees to quitclaim any and all of Participant’s right, title and interest thereto including, without limitation, any and all copyrights, patents, trade secrets, trademarks and/or other rights of whatsoever nature therein, whether or not now or hereafter known, existing, contemplated, recognized or developed to the Company, and the Company shall have the right to use the same in perpetuity throughout the universe in any manner the Company determines without any further payment to Participant whatsoever. Participant shall, from time to time, as may be reasonably requested by the Company, at the Company’s expense, do any and all things which the Company may deem useful or desirable to establish or document the Company’s exclusive ownership of any and all rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright and/or patent applications or assignments. To the extent Participant has any rights in the results and proceeds of Participant’s services that cannot be assigned in the manner described above, Participant unconditionally and irrevocably waives the enforcement of such rights. Notwithstanding anything to the contrary set forth herein, works developed by the Participant (i) which are developed independently from the work developed for the Company regardless of whether such work was developed before or after the Participant performed services for the Company; or (ii) applications independently developed which are unrelated to the business and which Participant develops during non-business hours using non-business property shall not be deemed work for hire and shall not be the exclusive property of the Company.

(f) Non-Competition.

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relationships and trade secrets, and (d) that such methods, technology, customer lists, customer relationships and trade secrets have significant value.

(i) Severability; Modification . It is expressly agreed by Participant that:

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(j) Definitions .

	a)		is generated, collected by or utilized in the operations of the Company’s business and relates to the actual or anticipated business, research or development of the Company; or

	b)		is suggested by or results from any task assigned to Participant by the Company or work performed by Participant for or on behalf of the Company.

(iii) Restricted Area. For purposes of this Agreement, the term “Restricted Area” shall mean the United States of America.

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7. Applicable Law .

8. Exclusive Jurisdiction/ Venue .

9. Provisions of the Plan.

This option is subject to the provisions of the Plan (including the provisions relating to amendments to the Plan), a copy of which is furnished to the Participant with this option.

IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorized officer. This option shall take effect as a sealed instrument.


	Accretive Health, Inc.
	By:
		Name:
		Title:

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PARTICIPANT’S ACCEPTANCE


	PARTICIPANT:

		Address:


¹		If the Participant resides in a community property state, it is desirable to have the Participant’s spouse also accept the option by signature here. The following are community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. Although Wisconsin is not formally a community property state, it has laws governing the division of marital property similar to community property states and it may be desirable to have a Wisconsin Participant’s spouse also accept the option. In addition, if the Company is granting an option to a California Participant, it must comply with California blue sky rules which require modification to this option.

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Exhibit 21.1

Subsidiaries of Accretive Health, Inc.


Subsidiary		Jurisdiction of Organization
SDI Acquisition, Inc. (doing business as SureDecisions)		Delaware

Accretive Mauritius, Inc.		Mauritius

Accretive Health Private Limited		India

Accretive Health Services Private Limited		India

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated March 12, 2010 (except for the “Stock Split” section of Note 2, as to which the date is ________, 2010) in Amendment No. 4 to the Registration Statement (Form S-1 No. 333-162186) and related Prospectus of Accretive Health, Inc. for the registration of shares of its common stock.

Chicago, Illinois
________, 2010

The foregoing consent is in the form that will be signed upon the completion of the stock split described in Note 2 to the consolidated financial statements.

/s/ Ernst & Young LLP

Chicago, Illinois
April 23, 2010