Subsequent Events

On July 16, 2014, the Company completed its previously announced acquisition of Sheridan Healthcare (or “Sheridan”), in a cash and stock transaction valued at approximately $2.35 billion. At closing, the Company paid approximately $2.1 billion in cash and issued approximately 5.7 million shares of its common stock to the former owners of Sheridan. The transaction was consummated in the form of a merger (the "Merger") between Arizona Merger Corporation and Arizona II Merger Corporation, Delaware corporations and direct wholly-owned subsidiaries of AmSurg, and Sunbeam GP Holdings, LLC, a Delaware limited liability company, Sunbeam GP LLC, a Delaware limited liability company and the general partner of the Partnership, Sunbeam Holdings, L.P., a Delaware limited partnership (the “Partnership”), and Sunbeam Primary Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of the Partnership. The operations of Sheridan Healthcare fully consolidates into Sunbeam Primary Holdings, Inc.

Sheridan, a leading national provider of multi-specialty outsourced physician services to hospitals, ambulatory surgery centers and other healthcare facilities, is one of the largest and most experienced providers of outsourced anesthesia services and children’s services, with strong operations in radiology and emergency medicine services as well. Management believes the combined operations of AmSurg and Sheridan will be better positioned to capitalize on current and anticipated trends in healthcare in the United States and meet the needs of physicians, health systems, communities and payors.

In connection with the transaction, the Company entered into a registration rights agreement (the “Equity Registration Rights Agreement”) with the former owners of Sheridan, which provides certain demand and piggy-back registration rights with respect to the shares of Company common stock issued pursuant to the merger. Under the Equity Registration Rights Agreement, the Company may be required, at the demand of the former owners of Sheridan, to file a shelf registration statement to register the shares of common stock issued pursuant to the merger agreement. The Equity Registration Rights Agreement provides certain demand rights for registrations of marketed, underwritten offerings; provided, that such demands for marketed, underwritten offerings involve the lesser of (i) securities with a minimum anticipated offering price of at least $100,000,000 or (ii) all remaining registrable securities. The Equity Registration Rights Agreement also provides for unlimited demand rights for registrations of non-marketed, underwritten offerings; provided, that such demands involve the lesser of (i) securities with a minimum anticipated offering price of at least $50,000,000 or (ii) all remaining registrable securities then held by holders of registrable securities. The Company is not obligated to effect more than three demand registrations in a 360 days period (whether marketed or not) or more than one demand registration in any 90 days period (whether marketed or not). The Company may delay the filing or effectiveness of any registration statement for up to 60 days in the event that the Company’s board of directors determines a valid business purpose exists for such delay or suspension; provided, the Company cannot delay or suspend more than three times in any 12 month period and not more than 120 days in the aggregate in any 12 month period.

To fund the transaction, the Company completed its offerings of common stock and mandatory convertible preferred stock resulting in the issuance of 9,775,000 shares of common stock and 1,725,000 shares of mandatory convertible preferred stock. Proceeds from the common stock offering and mandatory preferred stock offering, net of estimated transaction fees, were approximately $421,580,000 and $167,025,000, respectively. In addition, on July 16, 2014, the Company entered into a new senior secured credit facility which includes an $870,000,000 term loan and a $300,000,000 revolving credit facility and completed a private offering of $1,100,000,000 aggregate principle amount of 5.625% senior unsecured notes due 2022 (the “2022 Senior Unsecured Notes”).

The mandatory convertible preferred stock pays dividends at an annual rate of 5.25% of the initial liquidation preference of $100 per share. Dividends accrue and cumulate from the date of issuance and, to the extent lawful and declared by the Company's board of directors, will be paid on each January 1, April 1, July 1 and October 1 in cash or, at the Company's election (subject to certain limitations), by delivery of any combination of cash and shares of common stock. The first dividend payment on the mandatory convertible preferred stock, if declared, will be made on October 1, 2014. Each share of the mandatory convertible preferred stock has a liquidation preference of $100, plus an amount equal to accrued and unpaid dividends. Each share of the mandatory convertible preferred stock will automatically convert on July 1, 2017 (subject to postponement in certain cases), into between 1.8141 and 2.2222 shares of common stock (the “minimum conversion rate” and “maximum conversion rate,” respectively), each subject to adjustment. The number of shares of common stock issuable on conversion will be determined based on the average volume weighted average price per share of our common stock over the 20 consecutive trading day period commencing on and including the 22nd scheduled trading day prior to July 1, 2017. At any time prior to July 1, 2017, holders may elect to convert all or a portion of their shares of mandatory convertible preferred stock into shares of common stock at the minimum conversion rate. If any holder elects to convert shares of mandatory convertible preferred stock during a specified period beginning on the effective date of a fundamental change, as defined in the Description of the Mandatory Convertible Preferred Stock (the "Preferred Stock Agreement"), the conversion rate will be adjusted under certain circumstances and such holder will also be entitled to a fundamental change dividend make-whole amount (as defined in the Preferred Stock Agreement).

The term loan matures on July 16, 2021 and bears interest equal to, at the Company’s option, the alternative base rate as defined in the agreement, (“ABR”) plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, with a LIBOR floor of 0.75%, or a combination thereof (3.75% on July 16, 2014). The new revolving credit facility, matures on July 16, 2019, permits the Company to borrow up to $300,000,000, at an interest rate equal to, at the Company’s option, the ABR plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, or a combination thereof; and provides for a fee of 0.375% of unused commitments. In accordance with the terms of the senior secured credit facility, principle payments are required quarterly in installments of an amount equal to 0.25% of the aggregate initial principle amount of the term loan. The Company has the option to increase borrowings under the new senior secured credit facility by an aggregate amount not to exceed the greater of $300,000,000 and an unlimited amount as long as certain financial covenants are met and lender approval is obtained. The new senior credit facility contains certain covenants relating to the ratio of debt to operating performance measurements and interest coverage ratios and is secured by a pledge of the stock of the Company’s wholly-owned subsidiaries and the Company’s partnership and membership interests in the limited partnerships and limited liability companies.

The 2022 Senior Unsecured Notes are general unsecured obligations of the Company and are guaranteed by the Company and existing and subsequently acquired or organized wholly-owned domestic subsidiaries (the “Guarantors”). The 2022 Senior Unsecured Notes are pari passu in right of payment with all the existing and future senior debt of the Company and senior to all existing and future subordinated debt of the Company. Interest on the 2022 Senior Unsecured Notes accrues at the rate of 5.625% per annum and is payable semi-annually in arrears on January 15 and July 15, beginning on January 15, 2015, and ending on the maturity date of July 15, 2022.

Prior to July 15, 2017, the Company may redeem up to 35% of the aggregate principal amount of the 2022 Senior Unsecured Notes at a redemption price of 105.625% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, using proceeds of one or more equity offerings. On or after July 15, 2017, the Company may redeem the 2022 Senior Unsecured Notes in whole or in part. The redemption price for such a redemption (expressed as percentages of principal amount) is set forth below, plus accrued and unpaid interest and liquidated damages, if any, if redeemed during the twelve-month period beginning on July 15 of the years indicated below:



Period	Redemption Price
2017	104.219	%
2018	102.813	%
2019	101.406	%
2020 and thereafter	100.000	%

The 2022 Senior Unsecured Notes contain certain covenants which, among other things, limit, but may not restrict the Company’s ability to enter into or guarantee additional borrowings, sell preferred stock, pay dividends and repurchase stock. Based on the terms of the 2022 Notes, the Company has adequate ability to meet its obligations to pay dividends as required under the terms of the mandatory preferred stock previously discussed.

In connection with the issuance of the 2022 Senior Unsecured Notes, the Company entered into a registration rights agreement, dated July 16, 2014 (the “Registration Rights Agreement”). Under the terms of the Registration Rights Agreement, the Company and the Guarantors will use their commercially reasonable efforts to file an exchange offer registration statement with respect to the 2022 Senior Unsecured Notes with the Securities and Exchange Commission within 270 days from the date of the agreement. If the registration does not become effective within the allotted period, the Company would be obligated to pay certain liquidated damages, not to exceed a maximum amount of 1.0% per annum.

The net proceeds from the senior credit facility, the 2022 Senior Unsecured Notes offering, common stock offering, 5.25% mandatory convertible preferred stock offering, and cash on hand, were used to finance the cash consideration paid to consummate the Sheridan transaction, as well as repay borrowings under the Company's and Sheridan’s existing credit and term loan facilities, repay the outstanding balance of the Company's senior secured notes due 2020 and pay fees and expenses related to the Sheridan transaction. Fees and expenses associated with the Sheridan transaction, which includes fees incurred related to the Company's equity issuances and debt financings, is expected to be approximately $130,000,000, of which, we expect approximately 60% will be capitalized. However, the Company is still evaluating these fees and expenses to determine a final allocation between that which will be capitalized and amortized over the life of the financings, charged against the proceeds of the equity offerings or expensed immediately as a cost of the transaction.

The initial accounting for the acquisition of Sheridan is currently incomplete. The Company is in the process of obtaining initial information relative to the fair values of assets acquired, liabilities assumed and any noncontrolling interests in the transaction. The valuation of the acquired assets and assumed liabilities will include, but not be limited to, fixed assets, licenses, intangible assets and potential contingencies. The valuations will consist of physical inspections and appraisal reports, discounted cash flow analyses, or other appropriate valuation techniques to determine the fair value of the assets acquired or liabilities assumed.