REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of June 3, 2008 by and among SYMBION, INC., a Delaware corporation (the “ Company ”), each of the guarantors listed in Schedule A attached hereto (the “ Guarantors ”) and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, BANC OF AMERICA SECURITIES LLC and GREENWICH CAPITAL MARKETS, INC. (collectively, the “ Initial Purchasers ”).

 

This Agreement is made pursuant to the Purchase Agreement, dated as of May 29, 2008, by and among the Company, the Guarantors and the Initial Purchasers (the “ Purchase Agreement ”), which provides for, among other things, the sale by the Company to the Initial Purchasers of an aggregate of $179,937,000 principal amount of the Company’s 11%/11¾% Senior PIK Toggle Notes due 2015 (the “ Notes ”). The Notes are issued under an indenture, dated as of the date hereof between the Company, the Guarantors and U.S. Bank National Association, as trustee (the “ Trustee ”) (the “ Indenture ”).  Pursuant to the Purchase Agreement and the Indenture, the Guarantors are required to guarantee (collectively, the “ Guarantees ”) the Issuer’s obligations under the Notes and the Indenture.  References to the “ Securities ” shall mean, collectively, the Notes and, when issued, the Guarantees.  References to the “ Issuer ” refer to the Company.  In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuer has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Securities.  The execution and delivery of this Agreement is a condition to the Initial Purchasers’ obligations under the Purchase Agreement.

 

In consideration of the foregoing, the parties hereto agree as follows:

 

1.          Definitions .

 

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

 

“ 1933 Act ” shall mean the Securities Act of 1933, as amended from time to time.

 

“ 1934 Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

“ Closing Date ” shall mean the day of the Closing Time as defined in the Purchase Agreement.

 

“ Company ” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

 

“ Depositary ” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however , that such depositary must have an address in the Borough of Manhattan, in the City of New York.

 

 

“ Exchange Offer ” shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Registrable Securities pursuant to Section 2.1 hereof.

 

“ Exchange Offer Registration ” shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

 

“ Exchange Offer Registration Statement ” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.  For the avoidance of doubt, all guarantors in respect of the Securities (regardless of whether each such person is a Guarantor on the date hereof) shall be included as registrants in any Exchange Offer Registration Statement.

 

“ Exchange Period ” shall have the meaning set forth in Section 2.1 hereof.

 

“ Exchange Securities ” shall mean the 11%/11¾% Senior PIK Toggle Notes due 2015, issued by the Company under the Indenture containing terms identical to the Securities in all material respects (except that the additional interest rate, restrictions on transfers and restrictive legends provisions thereof shall be eliminated), to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

 

“ Free Writing Prospectus ” shall mean each free writing prospectus (as defined in Rule 405 under the 1933 Act) prepared by or on behalf of the Issuer (or any of its agents or representatives) or used or referred to by the Issuer (or any of its agents or representatives) in connection with the sale of the Securities or the Exchange Securities.

 

“ Holder ” shall mean an Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

 

“ Indenture ” shall have the meaning set forth in the preamble.

 

“ Initial Purchaser ” or “ Initial Purchasers ” shall have the meaning set forth in the preamble.

 

“ Issuer ” shall have the meaning set forth in the preamble.

 

“ Majority Holders ” shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company, the Guarantors and any other guarantors of the Securities or any Affiliate (as defined in the Indenture) of the Company or the Guarantors (or any

 

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other guarantor of the Securities) shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

 

“ Participating Broker-Dealer ” shall mean any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC, Greenwich Capital Markets, Inc. and any other broker-dealer, in each case, which makes a market in the Securities and exchanges Registrable Securities in the Exchange Offer for Exchange Securities.

 

“ Person ” shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

 

“ Private Exchange ” shall have the meaning set forth in Section 2.1 hereof.

 

“ Private Exchange Securities ” shall have the meaning set forth in Section 2.1 hereof.

 

“ Prospectus ” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

 

“ Purchase Agreement ” shall have the meaning set forth in the preamble.

 

“ Registrable Securities ” shall mean the Securities and, if issued, the Private Exchange Securities; provided, however , that Securities and, if issued, the Private Exchange Securities, shall cease to be Registrable Securities when (i) a Registration Statement with respect to such Securities or Private Exchange Securities shall have been declared effective under the 1933 Act and such Securities or Private Exchange Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities or Private Exchange Securities shall have ceased to be outstanding or (iii) the Exchange Offer is consummated (except in the case of Private Exchange Securities and Securities purchased from the Issuer and continued to be held by the Initial Purchasers).

 

“ Registration Expenses ” shall mean any and all expenses incident to or incurred in connection with the performance by the Issuer of, or compliance by the Issuer with, this Agreement, including without limitation:  (i) all SEC, stock exchange or Financial Industry Regulatory Authority (“ FINRA ”) registration and filing fees, including, if applicable, the fees and expenses of any “qualified independent underwriter” (and its counsel) that is required to be retained by any holder of Registrable Securities in accordance with the rules and regulations of FINRA, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws and compliance with the rules of FINRA (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities and any filings with

 

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FINRA), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Issuer and of the independent public accountants of the Issuer, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one special counsel (and any reasonably requested local counsel) representing the Holders of Registrable Securities (which counsel shall be elected by the Majority Holders and which counsel may also be the counsel for the Initial Purchasers) and (ix) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and shall be reasonably acceptable to the Company) and (x) the fees and expenses of any special experts retained by the Issuer in connection with any Shelf Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

 

“ Registration Statement ” shall mean any registration statement of the Issuer which covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

 

“ SEC ” shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

 

“ Shelf Registration ” shall mean a registration effected pursuant to Section 2.2 hereof.

 

“ Shelf Registration Statement ” shall mean a “shelf” registration statement of the Issuer pursuant to the provisions of Section 2.2 of this Agreement which covers all of the Registrable Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.  For the avoidance of doubt, all guarantors in respect of the Securities (regardless of whether each such person is a Guarantor on the date hereof) shall be included as registrants in any Shelf Registration Statement.

 

“ Trustee ” shall mean the trustee with respect to the Securities under the Indenture.

 

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2.          Registration Under the 1933 Act .

 

2.1.  Exchange Offer .  The Issuer shall, for the benefit of the Holders, at the Issuer’s cost, (A) prepare and file with the SEC not later than 180 days after the date hereof an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Registrable Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use its commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act not later than 270 days after the date hereof, (C) use its commercially reasonable efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use its commercially reasonable efforts to cause the Exchange Offer to be consummated not later than 300 days after the date hereof, and (E) upon the effectiveness of the Exchange Offer Registration Statement, promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Registrable Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Issuer within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering Registrable Securities acquired directly from the Company for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder’s business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

 

In connection with the Exchange Offer, the Issuer shall:

 

(a)                                   mail as promptly as reasonably practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

 

(b)                                  keep the Exchange Offer open for acceptance for a period of not less than 20 business days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the “ Exchange Period ”);

 

(c)                                   utilize the services of the Depositary for the Exchange Offer;

 

(d)                                  permit Holders to withdraw tendered Registrable Securities at any time prior to 5:00 p.m. (Eastern time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder’s election to have such Securities exchanged;

 

(e)                                   notify each Holder that any Registrable Security not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

 

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(f)                                     otherwise comply in all respects with all applicable laws relating to the Exchange Offer.

 

A Holder that wishes to exchange Registrable Securities in the Exchange Offer shall be required (a) to represent that (i) all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and (ii) at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities and (b) make such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations.

 

If such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, such broker-dealer will be required to acknowledge that it will deliver a Prospectus in connection with any resale of the Exchange Securities (and the Issuer hereby agrees and undertake to provide any such broker-dealer with such number of Prospectuses as such broker-dealer may reasonably request for such purpose).

 

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Issuer upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the “ Private Exchange ”) for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Issuer on a senior basis, that are identical to the Exchange Securities, except that such securities shall bear appropriate transfer restrictions (the “ Private Exchange Securities ”).

 

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the “ TIA ”), or is exempt from such qualification and shall provide that the Exchange Securities shall not be subject to the transfer restrictions or “Additional Interest” provisions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions.  The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter.  The Private Exchange Securities shall be of the same series as and the Issuer shall use all commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities.  The Issuer shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

 

As soon as reasonably practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Issuer shall:

 

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(i)                    accept for exchange all Registrable Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement and the letter of transmittal which shall be an exhibit thereto;

 

(ii)                 accept for exchange all Securities properly tendered pursuant to the Private Exchange;

 

(iii)              deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities so accepted for exchange; and

 

(iv)             cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Registrable Securities so accepted for exchange in a principal amount equal to the principal amount of the Registrable Securities of such Holder so accepted for exchange.

 

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Registrable Securities surrendered in exchange therefor or, if no interest has been paid on the Registrable Securities, from the date of original issuance.  The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Registrable Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Registrable Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the Issuer’s judgment, would reasonably be expected to impair the ability of the Issuer to proceed with the Exchange Offer or the Private Exchange and may also include other conditions customarily included in exchange offers of this type.

 

2.2.  Shelf Registration .  (i) If, because of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Issuer is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not consummated on or prior to 300 days after the date hereof, (iii) upon the request of any of the Initial Purchasers that hold Securities or (iv) if a Holder is not permitted to participate in the Exchange Offer or does not receive fully tradable Exchange Securities pursuant to the Exchange Offer, then in case of each of clauses (i) through (iv) the Issuer shall, at its cost:

 

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(a)                                   (i) As promptly as practicable, file with the SEC a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time and (ii) thereafter shall use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective not later than the later of (x) 180 days after being required or requested to file such a Shelf Registration Statement and (ii) 300 days after the date hereof.

 

(b)                                  Use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of one year from the date the Shelf Registration Statement is declared effective by the SEC, or for such shorter period that will terminate when all Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Registrable Securities (the “ Effectiveness Period ”).

 

(c)                                   Notwithstanding any other provisions hereof, use its commercially reasonable efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

 

The Issuer agrees, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

 

2.3.  Expenses .  The Issuer shall pay all Registration Expenses in connection with the registration pursuant to Section 2.1 or 2.2.  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

 

2.4.  Effectiveness .  An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however , that if, after it has been declared effective, the offering of Registrable Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.

 

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2.5.  Additional Interest .  The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed with the SEC on or prior to 180 days after the date hereof, (b) the Exchange Offer Registration Statement has not been declared effective on or prior to 270 days after the date hereof or (c) the Exchange Offer is not consummated and a Shelf Registration Statement is not declared effective, in both cases, on or prior to 300 days after the date hereof (each such event referred to in clauses (a) through (c) above, a “ Registration Default ”), the interest rate borne by the Securities shall be increased (“ Additional Interest ”) by 0.25% per annum upon the occurrence of each Registration Default, which rate will increase by 25 basis points per annum each three month period that such Additional Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed 50 basis points per annum.  Following the cure of all Registration Defaults the accrual of Additional Interest will cease and the interest rate will revert to the original rate.  The Company will not be obligated to pay Additional Interest in respect of more than one default at a time.

 

If the Shelf Registration Statement is unusable by the Holders for any reason, and the aggregate number of days in any consecutive twelve-month period for which the Shelf Registration Statement shall not be usable exceeds 90 days in the aggregate, then the interest rate borne by the Securities will be increased by 25 basis points per annum of the principal amount of the Securities for the first three month period (or portion thereof) beginning on the 90th such date that such Shelf Registration Statement ceases to be usable in such twelve-month period, which rate shall be increased by an additional 25 basis points per annum of the principal amount of the Securities at the beginning of each subsequent three month period, provided that the maximum aggregate increase in the interest rate will in no event exceed 50 basis points per annum.  Any amounts payable under this paragraph shall also be deemed “Additional Interest” for purposes of this Agreement.  Upon the Shelf Registration Statement once again becoming usable, the interest rate borne by the Securities will be reduced to the original interest rate if the Issuer is otherwise in compliance with this Agreement at such time.  Additional Interest shall be computed based on the actual number of days elapsed in each three month period in which the Shelf Registration Statement is unusable.

 

The Issuer shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an “ Event Date ”).  Additional Interest will be payable in cash or in the form of PIK interest in the same proportion the Issuer has elected to pay PIK interest with respect to the applicable interest period.  The Additional Interest due shall be payable on each interest payment date to the record Holder of Registrable Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture.  Each obligation to pay Additional Interest shall be deemed to accrue from and including the day following the applicable Event Date.

 

3.          Registration Procedures .

 

In connection with the obligations of the Issuer with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Issuer shall:

 

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(a)                                   prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Issuer, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference