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SERIES A 3.00% REDEEMABLE CONVERTIBLE PREFERRED STOCK
12 Months Ended
Dec. 31, 2013
Equity [Abstract]  
SERIES A 3.00% REDEEMABLE CONVERTIBLE PREFERRED STOCK
SERIES A 3.00% REDEEMABLE CONVERTIBLE PREFERRED STOCK
On September 1, 2009, the Company issued and sold 75,000 shares of the Company's Series A 3 percent Redeemable Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $75.0 million (the "Equity Financing") pursuant to the Securities Purchase Agreement dated August 14, 2009, by and between the Company and OEP AC Holdings, LLC ("OEP").
Cumulative dividends on the Series A Preferred Stock are payable-in-kind on a quarterly basis at the rate per annum of 3 percent of the liquidation preference of $1,000 per share (the "Liquidation Preference") until October 1, 2014, (the "Dividend Duration Period"). As of December 31, 2013, 2012 and 2011, dividends of $10.4 million, $7.9 million and $5.5 million were accrued, respectively. Gross proceeds from the sale of the Series A Preferred Stock were reduced by direct issuance cost of $5.6 million, including the amount used to pay the expenses of the investor, and will be accreted over a five year period using the effective interest rate method. Total accretion charges for the periods ended December 31, 2013, 2012 and 2011 were $1.2 million, $1.1 million and $1.0 million and were recorded as a dividend.
The closing value of the Company's common stock on the date of issuance was $17.45 (the "Closing Price") resulting in an intrinsic value of $4.65 per Conversion Share calculated as the Closing Price of $17.45 less the Conversion Price of $12.92 less approximately $0.7 million in proceeds which were used to pay expenses of the investor. This resulted in a beneficial conversion feature of $27.0 million on the sale of the Series A Preferred Stock based on the intrinsic value of each Conversion Share multiplied by the number of Conversion Shares. The beneficial conversion feature was immediately charged against net loss applicable to common stockholders as the Series A Preferred stock can be converted into common stock at the option of the holder.
The holders of the Series A Preferred Stock may convert their shares at any time, in whole or in part, at a rate of 66.667 shares of the Company's Common Stock per $1,000 of Liquidation Preference of the Series A Preferred Stock, subject to customary anti-dilution adjustments (the "Conversion Rate"), representing an initial conversion price of $15.00 per share of Common Stock. If a conversion occurs prior to the expiration of the Dividend Duration Period, the number of shares of Common Stock received shall be increased for a make-whole adjustment equal to the number of additional shares of Series A Preferred Stock the holder would have otherwise been paid during the Dividend Duration Period, multiplied by the Conversion Rate (the "Make-Whole Adjustment"). As of December 31, 2013, none of the shares of Series A Preferred Stock have been converted into Common Stock.
The Company may, at any time, cause an automatic conversion of all outstanding shares of Series A Preferred Stock upon no less than 10 days prior notice if all of the following events occur: the closing sales price of the Common Stock equals or exceeds $35.00 per share (subject to adjustment in the event of a stock split, stock dividend, combination or other similar recapitalization) for the prior 20 consecutive trading days; the Company is current on its reporting requirements with the SEC; the Company has an effective resale registration statement and related prospectus that permits the Common Stock issued upon such automatic conversion to be immediately resold thereunder; and the current DOJ investigations of the Company initiated by the U.S. Attorney's offices in Florida and North Carolina have been terminated, settled or adjudicated.
On February 11, 2014, the Series A Preferred Stock was converted to 5,805,921 shares of the Company's Common Stock in accordance with the terms of the automatic conversion feature.