Surgery Partners, Inc. (NASDAQ:SGRY) Files An 8-K Entry into a Material Definitive Agreement

Item1.01

On May9, 2017, Surgery Partners, Inc., a Delaware corporation
(Surgery Partners or the Company), entered into a series of
transactions to which the Company agreed (i)to acquire NSH
Holdco, Inc., a Delaware corporation (NSH), through a merger of
SP Merger Sub, Inc., a wholly owned subsidiary of the Company
(Merger Sub), with and into NSH (the Merger), to an Agreement and
Plan of Merger, by and among the Company, Merger Sub, NSH, and
IPC / NSH, L.P., solely in its capacity as sellers representative
(the Merger Agreement) and (ii)to issue to BCPE Seminole Holdings
LP, a Delaware limited partnership (Bain Capital), an affiliate
of Bain Capital Private Equity, up to 320,000 shares of preferred
stock, par value $0.01 per share, of the Company, to be created
out of the authorized and unissued shares of preferred stock of
the Company and designated as 10.00% Series A Convertible
Perpetual Participating Preferred Stock (the Series A Preferred
Stock) at a purchase price per share of $1,000 (the Preferred
Private Placement). In connection with the Merger and the
Preferred Private Placement, the Company also entered into (i)a
Stock Purchase Agreement, by and among the Company, H.I.G.
Surgery Centers, LLC (H.I.G.), H.I.G. Bayside Debt LBO Fund II
L.P. (for the purposes stated therein) and Bain Capital, to which
H.I.G. has agreed to sell 26,455,651 shares of common stock, par
value $0.01 per share (the Common Stock), of the Company (the
Purchased Shares), to Bain Capital at a purchase price per share
of $19.00 in cash (the Private Sale and, together with the Merger
and the Preferred Private Placement, the Transactions) and (ii)an
amendment to that certain Income Tax Receivable Agreement, dated
September 30, 2015, by and between the Company, H.I.G. (in its
capacity as the Stockholders Representative) and the other
parties referred to therein. Following the consummation of the
Transactions, NSH will be a wholly-owned subsidiary of the
Company, and Bain Capital will be the controlling stockholder of
the Company.

A copy of the press release announcing the entry into the
Transactions is attached as Exhibit 99.1 hereto.

Merger Agreement

On May9, 2017, Surgery Partners entered into the Merger Agreement
to which, on the terms and subject to the conditions set forth
therein, Merger Sub will merge with and into NSH, after which
Merger Sub will cease to exist and NSH will become an indirect
wholly-owned subsidiary of the Company. NSH will continue as the
surviving company of the Merger (the Surviving Corporation). The
respective boards of directors of Surgery Partners, Merger Sub
and NSH have approved the Merger Agreement and the transactions
contemplated thereby. In order to finance a portion of the
Merger, the Company intends to issue new senior unsecured notes
and raise additional senior secured term loan financing, and the
Company has entered into customary commitment and engagement
letters in connection therewith.

At the effective time of the Merger (the Effective Time), each
issued and outstanding share of common stock of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be
converted into and become a validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
In addition, at the Effective Time: (i)each share of series A
preferred stock of NSH, par value $0.01, issued and outstanding
immediately prior to the Effective Time, other than shares to be
canceled or dissenting shares, shall be converted into the right
to receive the Liquidation Value, as defined and described in the
Merger Agreement; (ii)each share of common stock of NSH shall be
converted into the right to receive the Per Share Merger
Consideration as defined and described in the Merger Agreement;
(iii)each in-the-money NSH option shall be converted into the
right to receive the excess (if any) of the Per Share Merger
Consideration, as defined and described in the Merger Agreement,
over the exercise price of such option; and (iv)all other NSH
options shall be cancelled without consideration therefore.

The Merger Agreement contains customary representations,
warranties and covenants in respect of each of NSH, the Company
and Merger Sub. Further, the completion of the Merger is subject
to various conditions, including, among others: (i)the approval
by written consent of the majority stockholder of NSH, which has
already been provided; (ii)the expiration of the applicable
waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act (the HSR Act) applicable to the Merger, the
Preferred Private Placement and the Private Sale; (iii)the
receipt of certain regulatory approvals and consents; and
(iv)subject to certain materiality exceptions, the accuracy of
the representations and warranties made by each of NSH, the
Company and Merger Sub and the compliance by each of NSH, the
Company and Merger Sub with their respective obligations under
the Merger Agreement.

The Merger Agreement may be terminated under certain
circumstances. Upon the termination of the Merger Agreement,
under specified circumstances, the Company will be required to
pay to NSH a termination fee of $45,600,000 (the Termination
Fee). The Merger is expected to close during 2017 (subject to
satisfaction of applicable closing conditions).

The foregoing summary of the Merger Agreement and the Merger does
not purport to be complete and is subject to, and qualified in
its entirety by, the full text of the Merger Agreement, a copy of
which is filed as Exhibit 2.1 to the Current Report on Form 8-K
and incorporated into this Item 1.01 by reference herein.

The Merger Agreement has been included to provide investors with
information regarding its terms. It is not intended to provide
any other factual information about the Company. The
representations, warranties and covenants contained in the Merger
Agreement were made only for purposes of the Merger Agreement as
of the specific dates therein, were solely for the benefit of the
parties to the Merger Agreement, may be subject to limitations
agreed upon by the contracting parties, including being qualified
by confidential disclosures made for the purposes of allocating
contractual risk between the parties to the Merger Agreement
instead of establishing these matters as facts, and may be
subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Investors
are not third-party beneficiaries under the Merger Agreement and
should not rely on the representations, warranties and covenants
or any descriptions thereof as characterizations of the actual
state of facts or condition of the parties thereto or any of
their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of representations and
warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in
the Companys public disclosures.

Preferred Securities Purchase Agreement and Series A
Preferred Stock

On May9, 2017, Surgery Partners entered into a Securities
Purchase Agreement (the Preferred Stock Purchase Agreement) with
Bain Capital, to which, on the terms and subject to the
conditions set forth therein, Bain Capital will acquire and the
Company will issue, up to 320,000 shares of Series A Preferred
Stock, at a price per share of $1,000.00. Upon the closing of the
Preferred Private Placement, Bain Capital and its affiliates will
own all of the outstanding preferred stock of Surgery Partners,
which, assuming an issuance of 320,000 shares of Series A
Preferred Stock and calculated based on the number of shares of
Common Stock of the Company outstanding on May10, 2017, would
represent approximately 26% of the voting power of all classes of
capital stock of Surgery Partners. A copy of the Preferred Stock
Purchase Agreement is attached hereto as Exhibit 10.1 and is
incorporated by reference herein.

The Preferred Stock Purchase Agreement contains customary
representations, warranties and covenants in respect of each of
the Company and Bain Capital. Further, the completion of the
Preferred Private Placement is subject to the Merger occurring
substantially concurrently, as well as various other conditions,
including, among others: (i)the expiration of the applicable
waiting periods under the HSR Act; (ii)the receipt of certain
regulatory approvals and consents, including with respect to the
issuance of the Series A Preferred Stock; (iii)the satisfaction
of all NASDAQ listing requirements; (iv)the filing of an Amended
and Restated Certificate of Incorporation of the Company and the
Certificate of Designations, Preferences, Rights and Limitations
of the 10.00% Series A Convertible Perpetual Participating
Preferred Stock of Surgery Partners, Inc. (the Series A
Certificate of Designation); (v) no material adverse effect on
the Company; (vi)the receipt of the approval of the Companys
stockholders to the Transactions; and (vii)subject to certain
materiality exceptions, the accuracy of the representations and
warranties made by the Company and Bain Capital and the
compliance by each of the Company and Bain Capital with their
respective obligations under the Preferred Stock Purchase
Agreement. The Preferred Stock Purchase Agreement also provides
that in the event that the Termination Fee is payable by the
Company to NSH to the Merger Agreement, in certain circumstances,
subject to the terms and conditions of the Preferred Stock
Purchase Agreement, Bain Capital shall reimburse the Company for
the full amount, or one half of the amount, of the Termination
Fee and certain related fees and expenses.

The Series A Preferred Stock will rank senior to the Common Stock
and any other capital stock of the Company, with respect to
dividends, redemption and any other rights upon the liquidation,
dissolution or winding up of the Company, and the holders thereof
are entitled to vote with the holders of Common Stock, together
as a single class, on all matters submitted to a vote of the
Companys stockholders. In addition to any dividends that may be
declared with respect to the Common Stock, each share of Series A
Preferred Stock will accrue dividends daily at a

dividend rate of 10%, compounding quarterly, and in any given
quarter, subject to certain conditions, the Board of Directors of
the Company (the Board) may declare a cash dividend in an amount
up to 50% of the amount of such accrued and accumulated dividend
through the end of such quarter, and any quarterly dividend paid
in cash shall not compound on the applicable date and shall not
be included in the accrued value of the Series A Preferred Stock.
The Company cannot redeem the Series A Preferred Stock prior to
the fifth anniversary of its issuance and thereafter, may redeem
all, but not less than all, of the Series A Preferred Stock for
cash to and subject to the terms and conditions of the Series A
Certificate of Designation. The Series A Preferred Stock may also
be redeemed by the holder thereof upon the occurrence of certain
change of control transactions of the Company or the Common Stock
ceasing to be listed or quoted on a trading market.

The Series A Preferred Stock will initially be convertible into
shares of Common Stock at a price per share of Common Stock equal
to $19.00, subject to adjustments as provided in the Series A
Certificate of Designation, at any time at the option of such
holder. In addition, subject to the terms and conditions of the
Series A Certificate of Designation, the Company may require the
conversion of all, but not less than all, of the Series A
Preferred Stock, after the second anniversary of the date of
issuance, if the volume weighted average closing price of the
Common Stock for any twenty out of thirty consecutive trading
days prior to such date, equals or exceeds $42.00 per share. For
as long as the Sponsor Entities continue to own the Required
Percentage, the Company has agreed to not take certain actions
without the prior approval of the holders of a majority of the
then-outstanding shares of Series A Preferred Stock.

In addition, subject to the terms and conditions of the Series A
Certificate of Designation and the closing of the transactions
contemplated by the Preferred Private Placement, on or following
the date on which Bain Capital, or Bain Capital and H.I.G.,
collectively, as applicable (the Sponsor Entities), cease to
collectively hold fifty percent (50%) or more of the outstanding
voting stock of the Company, but continue to hold 50percent (50%)
or more of the shares of Preferred Stock acquired to the
Preferred Stock Purchase Agreement (the Required Percentage), the
holders of at least a majority of the then-outstanding shares of
Series A Preferred Stock held by the Sponsor Entities, voting as
a separate class, shall be entitled to elect two (2)directors to
the Board; provided that, if the Sponsor Entities continue to own
more than 50% of the Required Percentage but less than 50% of the
Required Percentage, the holders of at least a majority of the
then-outstanding shares of Series A Preferred Stock held by the
Sponsor Entities, voting as a separate class, shall be entitled
to elect one (1)director to the Board.

The foregoing summary of the Preferred Stock Purchase Agreement
and the Series A Preferred Stock does not purport to be complete
and is subject to, and qualified in its entirety by, the full
text of the Preferred Stock Purchase Agreement (including the
exhibits thereto), a copy of which is filed as Exhibit 10.1 to
this Current Report on Form 8-K and incorporated into this Item
1.01 by reference herein, and the form of Series A Certificate of
Designation filed as Exhibit E to the Preferred Stock Purchase
Agreement.

The Preferred Stock Purchase Agreement has been included to
provide investors with information regarding its terms. It is not
intended to provide any other factual information about the
Company. The representations, warranties and covenants contained
in the Preferred Stock Purchase Agreement were made only for
purposes of the Preferred Stock Purchase Agreement as of the
specific dates therein, were solely for the benefit of the
parties to the Preferred Stock Purchase Agreement, may be subject
to limitations agreed upon by the contracting parties, including
being qualified by confidential disclosures made for the purposes
of allocating contractual risk between the parties to the
Preferred Stock Purchase Agreement instead of establishing these
matters as facts, and may be subject to standards of materiality
applicable to the contracting parties that differ from those
applicable to investors. Investors are not third-party
beneficiaries under the Preferred Stock Purchase Agreement and
should not rely on the representations, warranties and covenants
or any descriptions thereof as characterizations of the actual
state of facts or condition of the parties thereto or any of
their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of representations and
warranties may change after the date of the Preferred Stock
Purchase Agreement, which subsequent information may or may not
be fully reflected in the Companys public disclosures.

Common Stock Purchase Agreement

On May9, 2017, H.I.G., H.I.G. Bayside Debt LBO Fund II L.P., Bain
Capital and the Company entered a Stock Purchase Agreement (the
SPA), to which Bain Capital agreed to purchase all of the
26,455,651 shares of Common Stock beneficially owned by H.I.G. at
a purchase price per share of $19.00 for an aggregate purchase
price of $502,657,369 in cash. As of May10, 2017, the Purchased
Shares represented approximately 54% of the outstanding Common
Stock of the Company. Bain Capital will fund the Private Sale
through an equity financing/equity commitment letter. Upon the
closing of the Private Sale, H.I.G. will no longer own any equity
interests in Surgery Partners. Upon the closing of the Private
Sale and the Preferred Private Placement, assuming an issuance of
320,000 shares of Series A Preferred Stock and calculated based
on the number of shares of Common Stock of the Company
outstanding on May10, 2017, the Series A Preferred Stock and the
Common Stock acquired by Bain Capital and its affiliates in the
Transactions will represent approximately 66% of the voting power
of all classes of capital stock of Surgery Partners.

The SPA contains customary representations, warranties and
covenants in respect of each of H.I.G., Bain Capital and the
Company. The completion of the Private Sale is subject to the
prior completion of the Merger and various other conditions,
including, among others: (i)the approval by written consent of
the stockholders of the Company; (ii)the expiration of the
applicable waiting periods under the HSR Act; (iii)the receipt of
certain regulatory approvals and consents; (iv)the satisfaction
of all NASDAQ listing requirements; (v)no material adverse effect
on the Company; (vi)execution of Amendment No.1 to the Income Tax
Receivable Agreement, by and between the Company and H.I.G. (in
its capacity as the stockholders representative), dated May9,
2017; and (vii)subject to certain materiality exceptions, the
accuracy of the representations and warranties made by H.I.G.,
Bain Capital and the Company and the compliance by each of
H.I.G., Bain Capital and the Company with their respective
obligations under the SPA. Upon the satisfaction of all
conditions to H.I.G.s obligations to complete the Private Sale,
H.I.G. has agreed to grant Bain Capital its proxy with respect to
the Purchased Shares and appoint Bain Capital or its designee as
its proxy, attorney-in-fact and agent to
vote the Purchased Shares in any circumstances in which
stockholder vote, consent or other approval is sought.