EXHIBIT 10.38
 
 
 
 
MOBILE PET SYSTEMS, INC.
 
 
 
REGISTRATION RIGHTS AGREEMENT
 
 
July 31, 2002
 

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TABLE OF CONTENTS
 

         
Page

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1.
  
DEFINITIONS
  
1
2.
  
DEMAND REGISTRATIONS
  
2
    
2.1.        Requests for Registration
  
2
    
2.2.        Limitations on Demand Registrations
  
3
    
2.3.        Effective Registration Statement
  
3
    
2.4.        Priority on Demand Registrations
  
4
    
2.5.        Underwriting Requirements
  
4
    
2.6.        Multiple Registrations
  
4
3.
  
OTHER REGISTRATIONS
  
4
    
3.1.        Company Registration
  
4
    
3.2.        Form S-3 Registration
  
5
4.
  
OBLIGATIONS OF THE COMPANY
  
6
5.
  
COVENANTS OF THE HOLDER
  
8
6.
  
EXPENSES OF DEMAND AND S-3 REGISTRATION
  
8
7.
  
EXPENSES OF COMPANY REGISTRATION
  
9
8.
  
NO DELAY OF REGISTRATION
  
9
9.
  
INDEMNIFICATION
  
9
10.  
  
REQUIRED REPORTS AND PUBLIC INFORMATION
  
12
11.  
  
ASSIGNMENT OF REGISTRATION RIGHTS
  
12
12.  
  
LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS
  
13
    
12.1.      Termination of Registration Rights
  
13
13.  
  
MISCELLANEOUS
  
13
    
13.1.      Further Assurances
  
13
    
13.2.      Aggregation of Stock
  
13
    
13.3.      Construction and Titles
  
13
    
13.4.      Severability
  
13
    
13.5.      Notices
  
14
    
13.6.      Successors and Assigns
  
15
    
13.7.      Amendment
  
15
    
13.8.      Delays or Omissions
  
16
    
13.9.      Governing Law
  
16
    
13.10.    Attorney’s Fees
  
16
    
13.11.    Counterparts
  
16
    
13.12.    Entire Agreement
  
16

 

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MOBILE PET SYSTEMS, INC.
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of July     ,
2002 by and between Mobile PET Systems, Inc., a Delaware corporation (the
“Company”), and Dragon Nominees Limited, a United Kingdom Company with its
registered office at 10 Norwich Street, London EC4A 1BD (the “Investor”).
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in Section 1.
 
RECITALS
 
WHEREAS, pursuant to the Securities Purchase Agreement dated July 12, 2002 (the
“Purchase Agreement”), the Investor is purchasing an aggregate of 10,000,000
shares of the Company’s common stock, par value $0.0001 per share (the “Common
Stock”) and warrants to purchase up to an additional 3,000,000 shares of Common
Stock, subject to adjustment pursuant to the terms thereof, at an exercise price
of $0.448 per share (the “Warrants”); and
 
WHEREAS, it is a condition to the consummation of the transactions contemplated
by the Purchase Agreement that the Company and the Investor enter into this
Agreement whereby the Company shall grant, and the Investor shall obtain, the
rights relating to the registration of the Registrable Securities under the Act,
as set forth in this Agreement;
 
NOW, THEREFORE, the parties hereby agree as follows:
 
1.  DEFINITIONS.    For purposes of this Agreement:
 
(a)  The term “Act” shall mean the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations thereunder, all
as the same shall be in effect from time to time.
 
(b)  The term “Business Day” shall mean a day other than Saturday, Sunday or any
day on which banks in the State of New York are authorized or obligated to
close.
 
(c)  The term “Demand Registrations” shall have the meaning set forth in Section
2.1 hereof.
 
(d)  The term “Form S-3” shall mean such form under the Act as in effect on the
date hereof or any successor registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
 
(e)  The term “Holder” or “Holders” shall mean any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 11.

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(f)  The term “Investor” shall have the meaning set forth in the first paragraph
hereof.
 
(g)  The term “1934 Act” shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
 
(h)  The term “Person” shall mean any individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
 
(i)  The terms “register,” “registered,” and “registration” shall mean and refer
to a registration effected by preparing and filing a registration statement, or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
 
(j)  The term “Registrable Securities” shall mean (i) any shares of Common Stock
purchased by the Investor pursuant to the Purchase Agreement, (ii) any shares of
Common Stock issued or issuable upon exercise of the Warrants purchased by the
Investor pursuant to the Purchase Agreement and (iii) any securities issued or
issuable with respect to the Common Stock referred to in clause (i) or (ii) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have (x) been effectively
registered under the 1934 Act and disposed of in accordance with the
registration statement covering them or (y) been transferred pursuant to Rule
144 (or any similar rule then in force) under the Securities Act.
 
(k)  The number of shares of “Registrable Securities then outstanding” shall be
the number of shares of Common Stock outstanding plus the number of shares of
Common Stock issuable pursuant to then exercisable or convertible securities
which are Registrable Securities.
 
(l)  The term “SEC” shall mean the Securities and Exchange Commission.
 
2.  DEMAND REGISTRATIONS.
 
2.1.  Requests for Registration.    Subject to Section 2.2, at any time and from
time to time on or after the date hereof, the Holders of at least 25% of the
Registrable Securities then outstanding may request registration under the Act
of all or part of their Registrable Securities on Form S-1 or any similar
long-form registration (“Demand Registrations”). Thereafter, the Company will
use its commercially reasonable best efforts to promptly effect the registration
of such Registrable Securities under the Act on the form requested by the
Holders making such registration request. Upon receipt of a request for a Demand
Registration, the Company will give prompt written notice (in any event within
three (3) Business Days after its receipt of such request) of the request for a
Demand Registration to all Holders of Registrable

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Securities not making such request and will include in such Demand Registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within ten (10) days after the receipt of
the Company’s notice. The Holders of the Registrable Securities making any such
registration request may, at any time prior to the effective date of the
registration statement relating to any Demand Registration, revoke such Demand
Registration request by providing written notice to the Company.
 
2.2.  Limitations on Demand Registrations.    (a) The Holders of the Registrable
Securities shall be entitled to two Demand Registrations.
 
(a)  The Company shall be entitled to postpone for a reasonable period of time,
not to exceed sixty (60) days, the declaration of effectiveness by the SEC of
any Demand Registration otherwise required to be prepared and filed by the
Company if, at the time it receives a Demand Registration request or at any time
during the process of registration, prior to being declared effective by the
SEC, the Company shall furnish to the Holders a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Demand Registration to be effected at such
time. The Company shall be entitled to postpone filing of a Demand Registration
as provided in Section 4(a) below, provided, however, that the Company shall not
be entitled to postpone filing a registration statement in response to a Demand
Registration for the twelve (12) months following the expiration of such
sixty-day period; and provided further that should the Company postpone the
filing of a Registration Statement pursuant to Section 4(a) hereof, the Company
shall not be entitled to postpone effectiveness of such Registration Statement
pursuant to this Section 2.2(a). In the event the effectiveness of any
registration statement is postponed pursuant to this paragraph, the holder or
holders of the Registrable Securities making a registration request shall have
the right to withdraw such Demand Registration request by giving written notice
to the Company within twenty (20) days after receipt of the notice of
postponement (and, in the event of such withdrawal, the right of the holders of
the Registrable Securities to such Demand Registration shall be reinstated).
 
2.3.  Effective Registration Statement.    (a) A Demand Registration requested
pursuant to Section 2.1 of this Agreement shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason, and the
Registrable Securities covered thereby have not been sold, or (iii) if the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied by
reason of (x) a failure by or inability of the Company to satisfy any condition
thereof, or (y) the occurrence of an event outside the control of the Holders of
Registrable Securities.
 
(a)  A Demand Registration requested pursuant to Section 2.1 of this Agreement
shall not be deemed to have been effected if Holders of Registrable Securities
are not able to register and sell at least 66- 2/3% of the amount of Registrable
Securities requested to be included in such registration.

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2.4.  Priority on Demand Registrations.    The Company will not include in any
Demand Registration any securities which are not Registrable Securities without
the written consent of the Holders, not to be unreasonably withheld or delayed;
provided, however, that the Company shall be entitled to include in any Demand
Registration the securities identified in Exhibit A hereto, the holders of which
possess registration rights as set forth therein.
 
2.5.  Underwriting Requirements.    If the Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2.1 and the Company shall include such information in the written notice
referred to in Section 2.1. The underwriter shall be selected by a majority in
interest of the Holders and shall be reasonably acceptable to the Company. In
such event, the right of any Holder to include its Registrable Securities in
such registration shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Holders, including such Holder) to the extent provided herein. All Holders and
other holders of securities of the Company proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in Section 4(e)) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 2.5, if the underwriter
advises the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated among all Holders thereof in
proportion (as nearly as practical) to the amount of Registrable Securities
owned by each Holder; provided that the number of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
sought to be included by the Company and held by all other holders are first
entirely excluded from such underwriting.
 
2.6.  Multiple Registrations.    Except for (a) registration statements solely
for the sale of securities to participants in a Company stock or option plan or
arrangement, (b) registrations relating to corporate reorganizations or other
transactions under Rule 145 of the Act, and (c) registration statements filed by
the Company at the request of Person(s) that possess the registration rights
identified in Exhibit A hereto, the Company will not, without the written
consent of the Holders, file any other registration statement under the Act with
respect to its securities, whether for its own account or that of other
stockholders, from the date of receipt of a notice from requesting Holders
pursuant to Section 2.1 until the completion of the period of distribution of
the registration contemplated thereby.
 
3.  OTHER REGISTRATIONS.
 
3.1.  Company Registration.
 
(a)  Notice.    If the Company proposes to register (including for this purpose
a registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities

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(other than a registration relating solely to the sale of securities to
participants in a Company stock or option plan or arrangement or a registration
relating to a corporate reorganization or other transaction under Rule 145 of
the Act), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within 20 days after mailing of such notice by the Company, the Company shall,
subject to the provisions of Section 3.1(b), cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
 
(b)  Underwriting Requirements.    In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be
required under this Section 3.1 to include any of the Holders’ securities in
such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters) and enter into an underwriting
agreement in customary form with such underwriters, and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
Registrable Securities requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the success
of the offering in view of market conditions, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, that the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the securities so included to
be apportioned pro rata among the selling stockholders, including the Holders,
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders).
 
3.2.  Form S-3 Registration.    In case the Company is at the time eligible for
the use of Form S-3, and shall receive from the Holders a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holders, the Company shall:
 
(a)  Notice.    Promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders.
 
(b)  Qualifications.    As soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder’s
or Holders’ Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 20 days after receipt of such written notice from the Company; provided
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 3.2:
 
(i)  if Form S-3 is not available for such offering by the Holders;

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(ii)  if the Company shall furnish to the Holders a certificate signed by the
Chief Executive Officer of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than 30
days after receipt of the request of the Holder or Holders under this Section
3.2; provided that the Company shall not utilize this right more than once in
any twelve (12) month period.
 
(iii)  if the Company has, within the 12 month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders pursuant
to this Section 3.2;
 
(iv)  in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction; or
 
(v)  within 180 days after the effective date of a registration statement
previously filed by the Company, provided that the Company shall use its
reasonable best efforts to achieve effectiveness of a registration requested
hereunder promptly following such 180-day period if such request is made during
such 180-day period.
 
(c)  Registration.    Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as is reasonably practicable after receipt
of the request or requests of the Holders. Registrations effected pursuant to
this Section 3.2 shall not be counted as requests for registration effected
pursuant to Section 2.1.
 
4.    OBLIGATIONS OF THE COMPANY.    Whenever required under Sections 2 or 3
hereof to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
 
(a)  Registration Statement.    Prepare and file with the SEC as expeditiously
as possible and, in the case of a Demand Registration, within 30 days of
receiving a request under Section 2, a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective as quickly as possible, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to 180 days or
until the distribution contemplated in the Registration Statement has been
completed, whichever is shorter; provided that such 180-day period shall be
extended for a period equal to the period the Holders refrain from selling any
securities included in such registration (i) at the request of an underwriter of
Common Stock (or other securities) of the Company or (ii) as a result of the
provisions of Section 5(b). Notwithstanding the preceding sentence, the Company
shall be entitled to postpone for a reasonable period of time, not to exceed
sixty (60) days, the filing of

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the Registration Statement with respect to the Registrable Securities, at the
time it receives a Demand Registration request or at any time prior to the
Registration Statement being filed with the SEC, the Company shall furnish to
the Holders a certificate signed by the Chief Executive Officer of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed at such time; provided, however,
that the Company shall not be entitled to postpone filing a registration
statement hereunder for the twelve (12) months following the expiration of such
sixty-day period; and provided further that should the Company postpone the
filing of a Registration Statement pursuant to this Section 4(a), the Company
shall not be entitled to postpone effectiveness of such Registration Statement
pursuant to Section 2.2(b).
 
(b)  Amendments.    Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to keep such registration
statement effective for a period not in excess of 180 days and to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
 
(c)  Prospectus.    Furnish to the Holders such numbers of copies of a
prospectus, including a prospectus subject to completion and all amendments and
supplements thereto, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
 
(d)  Blue Sky Qualifications.    Use its commercially reasonable best efforts to
register and qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
 
(e)  Underwriting Agreement.    In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering.
 
(f)  Disclosures.    Notify each Holder of Registrable Securities covered by
such registration statement (i) at any time when a prospectus relating thereto
is required to be delivered under the Act or (ii) of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
 
(g)  Listing.    Cause all such Registrable Securities registered pursuant to
this Agreement to be listed on each securities exchange or quotation service, if
any, on which similar securities issued by the Company are then listed.

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(h)  Transfer Agent.    Provide a transfer agent and registrar for all
Registrable Securities registered pursuant to this Agreement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration.
 
(i)  Additional Deliveries.    Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to Sections 2 or 3 hereof, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to such sections, if such
securities are being sold through underwriters, or on the effective date of the
registration statement, if there are no underwriters, (1) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in substantially the form as is customarily given to the
underwriters in a public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (2) a
“comfort” letter, dated such date, from the independent certified public
accountants of the Company, in substantially the form as is customarily given by
independent certified public accountants to underwriters in a public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
 
(j)  Access to Information.    Provide one representative of the Holders of a
majority of the Registrable Securities being sold, any underwriter participating
in any distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such Holders or underwriter, reasonable
access to all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company’s officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
 
5.    COVENANTS OF THE HOLDER.    (a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2 and 3
hereof with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder’s
Registrable Securities.
 
(a)  Upon receipt by a Holder of the notification from the Company described in
Section 4(f)(ii), such Holder will not proceed with any sales of Registrable
Securities covered by the prospectus described in such notification pending an
amendment or supplement to such prospectus, which amendment or supplement will
be filed by the Company with the SEC as quickly as possible.
 
6.    EXPENSES OF DEMAND AND S-3 REGISTRATION.    All expenses other than
underwriting discounts and selling commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 2.1 and 3.2,
including, without limitation, all registration, filing and qualification fees,
state blue sky fees and expenses, printers’ and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them shall be
borne by the Company; provided that the Company shall not be required to pay for
the fees and disbursements of Holders’ counsel in connection with any
registration proceeding begun pursuant to Section 2.1

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if the registration request is subsequently withdrawn at the request of the
Holders (in which case all participating Holders shall bear such expenses),
unless, (i) the registration is withdrawn following any deferral of the
registration by the Company pursuant to Section 2.2(b); (ii) the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
Demand Registration; or (iii) that if at the time of such withdrawal the Holders
have learned of a material adverse change in the business, condition or
prospects of the Company that was not known to the Holders at the time of their
initial request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such change, then the Holders shall not
be required to pay any such expenses and shall retain their rights to such
registration (except as to clause (ii) above) pursuant to Section 2.1.
 
7.    EXPENSES OF COMPANY REGISTRATION.    The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
3.1 for each Holder (which right may be assigned as provided in Section 11),
including (without limitation) all registration, filing, and qualification fees,
state blue sky fees and expenses, printers and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements of counsel for
the Company and one counsel for the selling Holders selected by them, but
excluding underwriting discounts and selling commissions relating to Registrable
Securities; provided that the Company shall not be required to pay for the fees
and disbursements of Holders’ counsel in connection with any registration
proceeding begun pursuant to Section 3.1 if a majority of the selling Holders
withdraw their Registrable Securities from such registration (in which case all
participating Holders shall bear such expenses), unless at the time of such
withdrawal the Holders have learned of a material adverse change in the
business, condition or prospects of the Company that was not known to the
Holders at the time of their initial receipt of notice from the Company pursuant
to Section 3.1 and have withdrawn the request with reasonable promptness
following disclosure by the Company of such change, then the Holders shall not
be required to pay any such expenses.
 
8.    NO DELAY OF REGISTRATION.    No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of Sections 2 or 3 hereof.
 
9.    INDEMNIFICATION.    In the event any Registrable Securities are included
in a registration statement pursuant to this Agreement:
 
(a)  Indemnification by Company.    To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the officers, directors, partners,
members and stockholders of each Holder, legal counsel and accountants for each
Holder, any underwriter (as defined in the Act) for such Holder and each Person,
if any, who controls such Holder or underwriter within the meaning of the Act or
the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state securities laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
“Violation”): (i) any untrue statement or

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alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, any offering circular or other
related registration statement or notification incident to any such
registration, (ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act, any state securities laws or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities laws; and the
Company will pay, as incurred (subject to submission of supporting documentation
in reasonable detail), to each such Holder, the officers, directors, partners,
members and stockholders of such Holder, legal counsel (which shall be one
counsel for all such Holders absent a bona fide conflict of interest) and
accountants for each such Holder and each underwriter or controlling person, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided that the indemnity agreement contained in this Section 9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person; provided further, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Holder or underwriter, or any person controlling such Holder or
underwriter, from whom the person asserting any such losses, claims, damages or
liabilities purchased shares in the offering, if a copy of the prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such Holder or
underwriter to such person, if required by law to have been so delivered, at or
prior to the written confirmation of the sale of the shares to such person, and
if the prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability.
 
(b)  Indemnification by Holders.    To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each Person, if any,
who controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and the officers, directors, partners,
members and stockholders of such Holder and any controlling person of any such
underwriter or other Holder, severally and not jointly, against any losses,
claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state securities law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any such person intended to be indemnified pursuant to this Section 9(b) in
connection with investigating or defending any such loss, claim, damage,
liability or action;

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provided that the indemnity agreement contained in this subsection 9(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld); provided further that
the liability of each Holder hereunder shall be limited to the proportion of
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the shares sold by such Holder under such
registration statement bears to the total public offering price of all
securities sold thereunder and, in no event shall any indemnity under this
subsection 9(b) exceed the net proceeds from the offering received by such
Holder.
 
(c)  Procedures.    Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided that an indemnified party (together with
all other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the indemnified party under
this Section 9 except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice.
 
(d)  Contribution.    If the indemnification provided for in this Section 9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations; provided that in no event shall any Holder’s cumulative,
aggregate liability under this Section 9(d), or under Section 9(b), or under
such Sections together, exceed the net proceeds from the offering received by
such Holder. Notwithstanding anything to the contrary herein, no party shall be
liable for contribution under this Section 9(d) except to the extent and under
the circumstances as such party would have been liable to indemnify under
Section 9(a) or Section 9(b), as the case may be, if such indemnification were
enforceable under applicable law. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. In any event, no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of

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the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
 
(e)  Conflicts with Underwriting Agreement.    Notwithstanding the foregoing, to
the extent that the provisions on indemnification and contribution contained in
the underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall control.
 
(f)  Survival.    The obligations of the Company and Holders under this Section
9 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
 
10.    REQUIRED REPORTS AND PUBLIC INFORMATION.
 
The Company covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available other information), and it will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemption provided by (i) Rule 144 or Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
 
11.    ASSIGNMENT OF REGISTRATION RIGHTS.    The rights to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities that (i) is an “accredited investor” as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act, and (ii) that (A) is a
subsidiary, parent, affiliate (as that term is defined in Rule 405 promulgated
by the SEC under the Act and which term shall be deemed to include IHM or any
affiliate of IHM), partner, limited partner, retired partner or stockholder of a
Holder, (B) is a Holder’s family member or trust for the benefit of an
individual Holder or, (C) is a Holder, provided that: (a) the Company is, within
30 days prior to such transfer, furnished with written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned; and (b) such assignment shall be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Act. For
the purposes of determining the number of shares of Registrable Securities held
by a transferee or assignee of a holder of Registrable Securities (x) the
holdings of affiliated partnerships, limited liability companies, investment
funds and other entities, and their current or former constituent partners or
members and any entities for which any such party serves as general partner, and
(y) the holdings of spouses, ancestors, lineal descendants and siblings who
acquire Registrable Securities by gift, will or intestate succession, shall in
each case be aggregated together.

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12.    LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS.    From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the Registrable Securities, not to be unreasonably
withheld or delayed, enter into any agreement with any holder or prospective
holder of any securities of the Company that would (i) allow such holder or
prospective holder to include such securities in any registration filed under
Section 2.1 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of such securities will not reduce the amount of
the Registrable Securities of the Holders that are included, (ii) allow such
holder or prospective holder to demand registration of their securities, or
(iii) provide such holder or prospective holder with registration rights
pursuant to Section 3 hereof which are more favorable than, or in any way
conflict with, the rights of Holders hereunder; provided, that the preceding
provisions of this Section 12 shall not apply to registration rights, if any,
granted by the Company in connection with the repurchase transaction
contemplated by Section 5.01(c) of the Purchase Agreement.
 
12.1.  Termination of Registration Rights.    The right of a Holder to request
any registration or inclusion pursuant to this Agreement shall terminate, as to
any Holder, at such time when all Registrable Securities held by such Holder
(and any affiliate of the Holder with whom such Holder must aggregate its sales
under Rule 144) can be sold in any three-month period without registration
pursuant to Rule 144 of the Act; provided that at such time the Company’s Common
Stock is traded on the OTC Bulletin Board, the NASDAQ National Market or a
national securities exchange.
 
13.    MISCELLANEOUS.
 
13.1.  Further Assurances.    Each of the parties hereto shall execute and
deliver such instruments and take such other actions as the other parties may
reasonably request in order to carry out the intent of this Agreement.
 
13.2.  Aggregation of Stock.    All shares of capital stock held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
 
13.3.  Construction and Titles.    This Agreement has been negotiated between
the parties hereto, and the language hereof shall not be construed for or
against any party. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. A reference herein to any section shall be deemed to include a
reference to every subsection thereof. All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as to the identity of the parties hereto may
require.
 
13.4.  Severability.    If any provision of this Agreement is held to be
unenforceable under applicable law, it shall be interpreted, to the extent
possible, to enhance its enforceability in order to achieve the intent of the
parties to this Agreement. If no reasonable construction would save the
provision, the parties agree to renegotiate such provision in good faith. In the
event that the parties cannot reach a mutually agreeable and enforceable
replacement for such

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provision, its invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement; rather this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein; provided that no such severability shall be effective if it materially
changes the economic benefit of this Agreement to any party. The invalidity of
any provision of this Agreement as applied to certain circumstances shall not
affect the validity or enforceability of such provision as applied to other
circumstances or any other provisions of this Agreement.
 
13.5.  Notices.    All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
 
If to the Company, to:
 
2150 West Washington Street
Suite 110
San Diego, California 92110
Attention: Chief Executive Officer
Fax number: 619-226-6738
 
with a copy to:
 
Evan Mead Stone, Esq.
12348 High Bluff Drive
Suite 210
San Diego, California 92130
Fax number: 858-350-1953
 
and
 
Seltzer Caplan McMahon Vitek
750 B Street, Suite 2100
San Diego, California 92101
Attn: Kirk G. Ellis, Esq.
Fax number: 619-685-3100
 
if to the Investor, to:
 
Beechwood Hall
Kingsmead Road
High Wycombe
Bucks HP11 1JL
Fax number: 011-44-01494 560056

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with a copy to:
 
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attention: Neil Gold, Esq.
Fax Number: 212-318-3400
 
and
 
Macfarlanes
10 Norwich Street
London EC4A 1BD
United Kingdom
Attention: Simon Martin, Esq.
Fax number: 011-44-207-831-9607
 
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
 
13.6.  Successors and Assigns.    The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of Registrable
Securities), except as expressly limited in this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
 
13.7.  Amendment.    Unless otherwise specified in a particular section, any
provision of this Agreement may be amended or the observance thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the written consent of the Company and the Holders of a
majority of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this Section 13.7 shall be binding upon each Holder
and the Company; provided that no amendment of this Agreement shall materially
and adversely affect the rights of a Holder in a manner that discriminates
against a Holder vis a vis other holders of the same class or series of stock,
without such Holder’s written consent. By acceptance of any benefits under this
Agreement, all parties to this Agreement

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hereby agree to be bound by the provisions of this Agreement as the same may be
hereafter amended or waived pursuant to this Section 13.7.
 
13.8.  Delays or Omissions.    No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
 
13.9.  Governing Law.    This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto are to be governed
by and construed and enforced in accordance with the laws of California, without
giving effect to any of its choice of law rules. Section 7.10 of the Purchase
Agreement is incorporated by reference herein and made applicable hereto.
 
13.10.  Attorney’s Fees.    If any action at law or in equity is instituted to
enforce or interpret the terms of the Agreements, the prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
 
13.11.  Counterparts.    This Agreement may be executed in two or more
counterparts, including by facsimile, each of which shall be deemed an original
and all of which together shall constitute one and the same instrument.
 
13.12.  Entire Agreement.    This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.

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The parties have executed this Registration Rights Agreement as of the date
first written above by the undersigned, who have been duly authorized to do so.
 
 
MOBILE PET SYSTEMS, INC.
By:
 
/s/    PAUL J. CROWE        

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Name: Paul J. Crowe              
   
Title: Chairman, President, CEO

 
 
DRAGON NOMINEES LIMITED
By:
 
/s/    John A. Thores

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Name: John A. Thores
   
Title: Director
   
Address: 10 Norwich St.
         London  EC4A1BD
         UK

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